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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission File Number 001-13718
MDC PARTNERS INC.
(Exact Name of Registrant as Specified in Its Charter)
CanadaANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2022
or
98-0364441TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 001-13718
stgw-20221231_g1.jpg
Stagwell Inc.
(Exact name of registrant as specified in its charter)
Delaware86-1390679
(State or Other Jurisdictionother jurisdiction of
Incorporationincorporation or Organization)organization)
(IRS Employer Identification No.)
One World Trade Center, Floor 65
New York,New York10007
(I.R.S. Employer
Identification Number)
Address of principal executive offices)
(Zip Code)
One World Trade Center, Floor 65, New York, New York 10007
(646) 429-1800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Classeach classTrading SymbolsSymbol(s)Name of Each Exchangeeach exchange on Which Registeredwhich registered
Class A Subordinate Voting Shares, noCommon Stock, par value $0.001 per shareMDCASTGWNASDAQ

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   ý   No   o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer Table of Contents
o
Accelerated filer ý Non-accelerated filer o Smaller reporting company Emerging growth company
Large accelerated Filer Accelerated Filer
Non-accelerated Filer Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management'smanagement’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ý

The aggregate market value of the shares of all classes of voting and non-voting common stock of the registrant held by non-affiliates as of June 30, 2020,2022, the last business day of the Registrant’sregistrant’s most recently completed second fiscal quarter, was approximately $120.0$410.1 million, computed upon the basis of the closing sales price $2.08$5.43 of the Class A subordinate voting sharesCommon Stock on that date.
AsThe number of shares of common stock outstanding as of February 25, 2021, there were 73,722,720 outstanding28, 2023 was 131,605,852 shares of Class A subordinate voting shares without par value, and 3,743 outstandingCommon Stock, 2,271 shares of Class B multiple votingCommon Stock, and 160,909,058 shares without par value, of the registrant.Class C Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to the 20212023 Annual General Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K where indicated.

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.

EXPLANATORY NOTE

On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into an agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”) (the “Transaction Agreement”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing” or “SMG”) and its direct and indirect subsidiaries.
On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.
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ReferencesThe Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the change in our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Annual Report on Form 10-K to “MDC Partners,” “MDC,”(this “Form 10-K”) for events occurring or periods ending before August 2, 2021 does not reflect the “Company,” “we,” “us”impact of the Transactions or the financial results of MDC and “our” refer to MDC Partners Inc. and, unless the context otherwise requiresmay not be comparable with historical information for events occurring or otherwise is expressly stated, its subsidiaries. periods ending on or after August 2, 2021.
References in this Annual Report on Form 10-K to “Partner Firms” generally“Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to the Company’s subsidiary agencies.events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.
All dollar amounts are stated in U.S. dollars unless otherwise stated.
FORWARD-LOOKING STATEMENTS
Forward-Looking Statements
This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company’s beliefs and expectations, recentfuture financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.
Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients, including as a result of the novel coronavirus pandemic (“COVID-19”);clients;
the effectscontinued impact of the outbreakcoronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 including the measures to reduce its spread, and the impact on the economy and demand for ourthe Company’s services, which may precipitate or exacerbate other risks and uncertainties;
an inabilityinflation and actions taken by central banks to realize expected benefits of the proposed redomiciliation of the Company from the federal jurisdiction of Canada to the State of Delaware (the “Redomiciliation”) and the subsequent combination of the Company’s business with the business of the subsidiaries of Stagwell Media LP (“Stagwell”) that own and operate a portfolio of marketing services companies (the “Business Combination” and, together with the Redomiciliation, the “Proposed Transactions”) or the occurrence of difficulties in connection with the Proposed Transaction;
adverse tax consequences in connection with the Proposed Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its tax attributes may result in increased tax costs;
the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Proposed Transactions;
the impact of uncertainty associated with the Proposed Transactions on the Company’s businesses;
direct or indirect costs associated with the Proposed Transactions, which could be greater than expected;
the risk that a condition to completion of the Proposed Transactions may not be satisfied and the Proposed Transactions may not be completed;
the risk of parties challenging the Proposed Transactions or the impact of the Proposed Transactions on the Company’s debt arrangements;counter inflation;
the Company’s ability to attract new clients and retain existing clients;
the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
financial failure of the Company’s clients;
the Company’s ability to retain and attract key employees;
the Company’s ability to compete in the markets in which it operates;
the Company’s ability to achieve the full amount of its stated cost saving initiatives;
the Company’s implementation of strategic initiatives;
the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; and
foreign currency fluctuations.
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the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company’s business capabilities;
the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
an inability to realize expected benefits of the combination of the Company’s business with the business of MDC;
adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;
the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;
the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;
the Company’s ability to protect client data from security incidents or cyberattacks;
economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;
stock price volatility; and
foreign currency fluctuations.
Investors should carefully consider these risk factors, and the additional risk factors outlined in more detailunder the caption “Risk Factors” in this Annual Report on Form 10-K, under Item 1A. Risk Factors, elsewhere in this report, and in the Company’s other SEC filings.filings with the Securities and Exchange Commission (the “SEC”) which are accessible on the SEC’s website at www.sec.gov.

SUPPLEMENTARY FINANCIAL INFORMATION

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, the Company has included certain non-GAAP financial measures and ratios, which it believes, provide useful information to both management and readers of this report in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other titled measures determined in accordance with GAAP.

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PART I

Item 1. Business
About Us
Stagwell Inc. is the challenger network built to transform marketing. Stagwell delivers scaled creative performance for some of the world’s most ambitious brands, connecting creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, as of December 31, 2022 we employed more than 12,000 people in more than 34 countries across the globe who drive effectiveness and improve business results for our more than 4,000 blue-chip customers. In addition, our affiliate network adds coverage in over 30 additional countries.
Stagwell offers the capabilities marketers need in the digital age: Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. Our global scale allows us to compete for many of the largest marketing contracts available, including multi-regional contracts with annual fees of more than $10 million. Stagwell operates in a highly competitive and fragmented industry, but we believe have a distinct advantage given our digital composition and its alignment with the broader marketplace. Additionally, the Stagwell Marketing Cloud, our proprietary suite of software-as-a-service (“SaaS”) and data-as-a-service (“DaaS”) technology solutions for in-house marketers, spans research and insights, communications technology, specialty media (including augmented reality), and media studios. Stagwell provides a suite of marketing services that serve marketers’ needs as well as tech-driven solutions for in-house marketers. Through the Stagwell Marketing Cloud, Stagwell is investing in the frontiers of marketing, with technology products that fuel augmented reality (“AR”) experiences for stadium goers and live events, and artificial intelligence (“AI”) for content creation and for communications professionals. This is a key part of the future strategy for the company.
Stagwell has grown through a combination of organic growth and investment. Beginning with a single company in 2015, Stagwell focused on the fastest-growing area of marketing: digital services. Between 2015 and 2021, we acquired companies including digital transformation and digital media groups like Code and Theory and ForwardPMX. In 2019, Stagwell Media made a $100 million investment into MDC, the parent company of creative powerhouses including 72andSunny, Anomaly, Crispin, Porter & Bogusky, Doner and Forsman & Bodenfors. Recognizing the potential of those companies, Stagwell’s
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PART I
Item 1. Business
reorganization and careful management of the portfolio turned MDC PARTNERS INC.
MDC is a corporation governed by the Canada Business Corporations Act. MDC’s registered address is located at 33 Draper Street, Toronto, Ontario, M5V 2M3, and its head office address is located at One World Trade Center, Floor 65, New York, New York 10017. MDC is not a “foreign private issuer” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Recent Developments
On December 21, 2020, MDC andaround. In August 2021, Stagwell Media LP,completed the Transactions with MDC to become Stagwell Inc.
Stagwell’s unified corporate team is the foundation of a Delaware limited partnership (“Stagwell”), announced that they entered into a definitive transaction agreement (the “Transaction Agreement”) providing for the combination of MDC with the subsidiaries of Stagwell that own and operate apowerful value creation platform focused on scaling our portfolio of marketing services companies (the “Stagwell Entities”). Under the termsfirms, which we refer to as Brands, and driving continual network evolution. We plan to invest in our core digital platforms, continue developing our suite of the Transaction Agreement, the combination between MDC anddigital products in the Stagwell Entities will be effected using an “Up-C” partnership structure. Through a series of stepsMarketing Cloud, increase our technology leadership through investment and transactions (collectively, the “Transactions”), including the domestication of MDC to a Delaware corporation and the merger of MDC Delaware with one of its indirect wholly owned subsidiaries (the “MDC Merger”), MDC Delaware will become a direct subsidiary (from and after the merger, “OpCo”) of a newly-formed, Delaware-organized, NASDAQ-listed corporation (“New MDC”). Following the MDC Merger, (i) OpCo will convert into a limited liability company that will hold MDC’s operating assets and to which Stagwell will contribute the equity interests of the Stagwell Entities (the “Stagwell Contribution”) in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) Stagwell will contribute to New MDC an aggregate amount of cash equal to $100 in exchange for shares of a new Class C series of voting-only common stock (the “New MDC Class C Stock”) equal in number to the Stagwell OpCo Units. On a pro forma basis, without giving effect to any outstanding preference shares of MDC, the existing holders of MDC’s Class A and Class B shares would receive interests equal to approximately 26% of the combined company and Stagwell would be issued New MDC Class C Stock equivalent to approximately 74% of the voting rights of the combined company and exchangeable, together with Stagwell OpCo Units, into Class A shares of New MDC on a one-for-one basis at Stagwell’s election. The number of Stagwell OpCo Units and shares of New MDC Class C Stock that Stagwell will receive in the Transactions, and the percentage of the combined company that Stagwell will hold following the consummation of the Transactions, will be reduced, and the percentage of the combined company that existing MDC shareholders will hold will be proportionally increased, if Stagwell is unable to effect certain restructuring transactions prior to the closing of the Transactions.
On December 21, 2020, MDC and Broad Street Principal Investments, L.L.C., an affiliate of Goldman Sachs (“Broad Street”), entered into a letter agreement, pursuant to which Broad Street consented to the Transactions subject to entry with MDC into a definitive agreement reflecting revised terms of MDC’s issued and outstanding Series 4 convertible preference shares (the “Goldman Letter Agreement”). The revised terms of the Series 4 convertible preference shares would (subject to the closing of the Transactions) reduce the conversion price from $7.42 to $5.00 and extend accretion for two years beyond the date on which accretion would have otherwise ceased, at a reduced rate of 6%. In connection with the closing of the Transactions, Broad Street will have the right to redeem up to $30 million of its preference shares in exchange for a $25 million subordinated note or loan with a 3-year maturity (i.e., exchange at an approximately 17% discount to face value). The $25 million note or loan will accrue interest at 8.0% per annum and is, pre-payable any time at par without penalty.

On December 21, 2020, MDC entered into consent and support agreements (the “Consent and Support Agreements”) with holders of more than 50% of the aggregate principal amount of its Senior Notes to consent to the consummation of the combination of MDC with the Stagwell Entities. Pursuant to the Consent and Support Agreements, MDC agreed to increase the interest rate on the Senior Notes by 1% per annum effective as of the date of the Consent and Support Agreements and to pay a consent fee of 2% to all holders of Notes upon a successful consent solicitation, or 3% if a supplemental indenture with the waivers and amendments is executed and becomes operative and the combination of MDC with the Stagwell Entities is consummated. On February 5, 2021, MDC announced it had received and accepted consents from holders of at least a majority in principal amount of the Senior Notes, and on February 8, 2021, MDC entered into a supplemental indenture providing for waivers and amendments in connection with the combination of MDC with the Stagwell Entities.

On February 8, 2021, MDC filed a proxy statement/prospectus on Form S-4, which describes the Transaction Agreement, the Transactions, and ancillary agreements related thereto in more detail.
About Us
MDC Partners is a leading global marketing and communications network, providing marketing and business solutions that realize the potential of combining data and creativity. Through its network of agencies, MDC delivers a broad range of client services, including (1) global advertising and marketing, (2) data analytics and insights, (3) mobile and technology experiences, (4) media buying, planning and optimization, (5) direct marketing, (6) database and customer relationship management, (7)
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business consulting, (8) sales promotion, (9) corporate communications, (10) market research, (11) corporate identity, design and branding services, (12) social media strategy and communications, (13) product and service innovation, and (14) e-commerce management. These marketing, communications,further expand our international footprint both organically and consulting agencies (or “Partner Firms”) provide a wide range of service offerings both domestically and globally. While in some cases the firms provide the same or similar service offerings, the core or principal service offering is the key factor that distinguishes the Partner Firms from one another.
Market Strategy
MDC’s strategy isvia our Global Affiliate Network to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. MDC’s differentiation lies in its best-in-class creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. To be the modern marketing company of choice, MDC leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
The MDC model is driven by:
Data + Creativity.  MDC creates solutions that aim to realize the potential of data and creativity, bringing the network’s award-winning creativity to modern solutions in mobile, digital experiences, and all methods of marketing communications. This is reinforced by MDC's horizontal data offering, the venture investments the Company makes in technology solutions, and the proprietary technologies, solutions, and digital products the Company builds from the ground up.
Talent + Entrepreneurialism.  The entrepreneurial spirit of both MDC and its firms is optimized through (1) its model that incentivizes senior-level ambition, including the creation of multi-agency networks that enable proven leaders to steward increasingly scaled platforms and provide growth opportunities for talent at all levels, (2) best-in-class shared resources within the corporate group that allow individual firms to focus on client business and company growth, and (3) the formation of the Global Affiliates program, which fosters partnerships with like-minded agencies in key international markets to scale the creative, performance, media and technology capabilities that brands need to thrive in today's global economy.
Collaboration. MDC values collaboration as manifested through (1) MDC’s creation of customized solutions for clients across disciplines that foster the integration of complementary disciplines, driving better results for clients, and in turn, growth for its firms, (2) the growing Integrated Client Solutions group at MDC corporate that operationalizes these cross-discipline offerings, and (3) the creation of multi-agency networks that drive greater opportunity for individual firms to benefit from the scale of the holding company as well as resources of like-minded agencies within the group, and create fewer cost centers.
Impact of COVID-19
The novel coronavirus (“COVID-19”) is a pandemic that has altered how society interacts across the world. The outbreak of COVID-19 and the measures put in place to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted the global economy. We took various actions to address the pandemic. The Company implemented comprehensive controls and procedures to protect our employees, families, clients, and their communities. This included implementing a world-wide work-from-home policy and stress-testing our infrastructure to ensure that all employees had the tools and resources to work virtually. Our leadership and business continuity teams also proactively took thorough measures to ensure the highest level of continued service and partnershipvalue for our clients. clients, employees, and shareholders.
Our Partner Firms altered how they work and respond to client challenges around the world, generating impactful creative work, rapid pivots, and inventive business solutions for brands in every sector. Early in 2020, the Company aligned operating expenses with changes in revenue. We implemented freezes on hiring, staff reductions, furloughs, salary reductions, benefit reductions and a significant reduction in discretionary spending. In addition to expense reductions, we tightened capital expenditures where possible to preserve our cash flow.Market
We discuss the actions taken by the Company in response to COVID-19 and the negative impact on our results of operations, financial position and cash flows in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reporting Segments
MDC has three reportable segments as of December 31, 2020. These reportable segments are as follows:
“Integrated Networks - Group A,” “Integrated Networks - Group B” and the “Media & Data Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described in Note 2 of the Notes to the Consolidated Financial Statements included herein.
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The Integrated Networks - Group A reportable segment is comprised of the Anomaly Alliance (Anomaly, Concentric Partners, Hunter, Mono, Y Media Labs) and Colle McVoy operating segments.
The Integrated Networks - Group B reportable segment is comprised of the Constellation (72andSunny, CPB, Instrument and Redscout) and Doner Partner Network (6degrees, Doner, KWT, Union, Veritas and Yamamoto) operating segments.
The operating segments aggregated within the Integrated Networks - Group A and B reportable segments provide a range of services for their clients, primarily including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast) as well as public relations and communications services, experiential, social media and influencer marketing. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments compete with each other for new business and from time to time have business move between them. While the operating segments are similar in nature, the distinction between the Integrated Networks - Group A and B is the aggregation of operating segments that have the most similar historical average long-term profitability.

The Media & Data Network reportable segment is comprised of a single operating segment that combines media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast) with technology and data capabilities.
All Other consists of the Company’s remaining operating segments that provide a range of services including advertising, public relations and marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. The All Other category includes Allison & Partners, Bruce Mau, Forsman & Bodenfors, Hello, Team and Vitro.
Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.
For further information relating to the Company’s segments, including financial information, see Note 20 of the Notes to the Consolidated Financial Statements and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Ownership Information
MDC maintains a majority or 100% ownership position in substantially all of its Partner Firms with management of the Partner Firms owning the remaining equity.  MDC generally has rights to increase ownership of non-wholly owned subsidiaries to 100% over a defined period of time. Below are the companies reflecting our reporting structure.
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MDC PARTNERS INC. AND SUBSIDIARIES
SCHEDULE OF REPORTING COMPANIES
Year of Initial
CompanyInvestmentLocations
Integrated Networks - Group A:
Anomaly Alliance:
Anomaly2011New York, Los Angeles, Venice, CA, Playa Vista, Netherlands, Canada, UK, China, Germany
Concentric Partners2011New York
Hunter2014New York
Mono Advertising2004Minneapolis
Y Media Labs2015Redwood City, India, Indianapolis, Atlanta
Colle Network:
Colle McVoy1999Minneapolis
Integrated Networks - Group B:
Constellation:
72andSunny2010Los Angeles, New York, Netherlands, Australia, Singapore
Crispin Porter + Bogusky2001Boulder, Santa Monica, UK, Brazil
Instrument2018Portland, New York
Redscout2007New York, San Francisco, Los Angeles
Doner Network:
6degrees Communications1993Canada
Doner2012Detroit, Southfield, Los Angeles, Norwalk, Atlanta, Cleveland, Pennsylvania
KWT Global2010New York, UK
Union2013Canada
Veritas1993Canada
Yamamoto2000Minneapolis, Chicago
Media & Data:
Gale Partners2014Canada, New York, India
Kenna2010Canada
MDC Media Partners2010New York, Los Angeles, Century City, Austin
Northstar Research Partners1998Canada, UK
All Other:
Allison & Partners2010Los Angeles, San Francisco, San Diego, New York, Washington, Arizona, Atlanta, Boston, Portland, Dallas, Seattle, China, Singapore, Thailand, UK, Japan, Germany
Bruce Mau Design2004Canada
Forsman & Bodenfors2016Sweden, New York, Canada, China, Singapore
Hello Design2004Los Angeles
TEAM2010Ft. Lauderdale, Miramar
Vitro2004San Diego, Austin
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Competition
MDC operates in a highly competitive and fragmented industry. MDC Partner Firms compete for business and talent with the operating subsidiaries of large global holding companies such as Omnicom Group Inc., Interpublic Group of Companies, Inc., WPP plc, Publicis Groupe SA, Dentsu Inc. and Havas SA, as well as with numerous independent agencies that operate in multiple markets. Our Partner Firms also face competition from consultancies, like Accenture and Deloitte, tech platforms, media companies and other services firms that offer related services. MDC’s Partner Firms must compete with all of these other companies to maintain and grow existing client relationships and to obtain new clients and assignments.
MDC’s Partner Firms compete at this level by providing clients with innovative marketing solutions that leverage the full power of data, technology, and superior creativity. MDC also benefits from cooperation among its entrepreneurial Partner Firms, which enables MDC to service the full range of global clients’ varied marketing needs through custom integrated solutions. Additionally, MDC’s maintenance of separate, independent operating companies enables MDC to effectively manage potential conflicts of interest by representing competing clients across its network.
Industry Trends
ThereThe digital revolution has changed where and how brands relate to consumers and created an entirely new, highly complex content and commerce ecosystem. Historically, marketing was characterized by television and brand advertising targeted to broad audiences: everyone saw the same advertisement at the same time. Over the last 15 years, digital innovation has created new, personalized ways to reach targeted consumers and spurred a fundamental shift in the marketing services landscape. Growth now comes primarily from digital marketing, helping brands meet customers across the entire online ecosystem. We believe every company today at its core is a digital marketing company.
Five key trends describe the industry today:
First, online advertising now accounts for more than half of global advertising spend with the shift further accelerating as new media channels like connected television and platforms like Snap diversify the digital channels dominating content and commerce. Online now means virtually everywhere: website, mobile, social media, television, out-of-home, and immersive in-person experiences.
Second, advertising is commerce. Digital platforms provide ways for brands to reach consumers directly through e-commerce. Platforms as diverse as TikTok and LinkedIn have created new ways for brands to interact with their customers. Brands can sell their products directly on their sites, via digital platforms such as Amazon or through interactive experiences enabled by social media. Digital platforms also allow advocacy groups and political campaigns to reach constituents to mobilize support or raise funds online. Retail media networks add complexity and opportunity to brands’ consumer engagement approaches.
Third, data is everywhere. Platform and channel growth has created an explosion of addressable data that can be used to better understand consumer desires, habits, and needs in real-time, allowing the delivery of content that consumers want, when they want it, and where they want it. New sources of online data include web, mobile, email, social, and connected TV – in addition to emerging products, apps and wearables that enhance day-to-day experiences. The emergence of vast amounts of data spans behavioral, transactional, demographic, psychographic and geographic categories. As connectivity grows, the value of raw data declines – but we believe the ability to derive actionable insights from the data, as Stagwell businesses do, increases.
Fourth, frontier technology such as AI and AR are several recent economicgaining critical foothold among mass consumers, reshaping how businesses connect. Both technologies have evolved past initial niche or enterprise use cases and industry trendsare now reaching lay consumers, and businesses now are investing in making them widely accessible to consumer audiences, as seen with generative AI tools like ChatGPT and Stagwell Marketing Cloud’s ARound. Stagwell is at the forefront of this technology, implementing these innovations across our client work, and incubating original and proprietary technology that affect or may be expected to affectdrives business results and sits on the Company’s resultsnext frontier of marketing.
Finally, marketing technology is transforming the industry. SaaS and DaaS products are increasing the efficiency of marketing campaigns and in-house marketing operations, most notably theutilizing cutting edge technologies such as AI and automated media modeling, scaled consumer insights, campaign and asset management, brand reputation tracking, and more.
Competitive Landscape
Stagwell operates in a highly competitive and fragmented industry. Stagwell’s Brands compete for business and consumer behavior changes driven bytalent with the COVID-19 pandemic. Historically, advertising has been the primary service provided by the marketing communications industry. However,operating subsidiaries of large global holding companies such as clients aim to establish one-to-one relationships with customers,Omnicom Group Inc., Interpublic Group of Companies, Inc., WPP plc, Publicis Groupe SA, Dentsu Inc. and more accurately measure the effectiveness of their marketing expenditures, specialized and digital communications servicesHavas SA, as well as with numerous independent agencies that operate in multiple markets. Our Brands also face competition from consultancies, like Accenture and Deloitte, tech platforms, media companies and other services firms that offer related services. Stagwell’s Brands must compete with these other companies to maintain and grow existing client relationships and to obtain new clients and assignments. Individual products within the Stagwell Marketing Cloud also typically compete with offerings that may be provided within broader service offerings at large global holding companies or provided on a standalone basis by technology startups or other industry participants such as Infosys, Wipro and Cognizant.
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During the decades when marketing was dominated by television, the marketing services industry experienced significant consolidation as legacy advertising holding companies built substantial portfolios of often overlapping creative, communications, PR, and media businesses to achieve financial efficiencies by centralizing administrative operations. These holding companies grew significantly in size and market share.
The rapid rise of digital channels, convergence of advertising and commerce, explosion in addressable data and marketing technology created a paradigm shift in the industry. While legacy models still accounted for a significant share of the market in 2021, we believe they are largely underexposed to the digital areas of the market experiencing the highest levels of client demand growth. In recent years, a number of large consulting firms with information technology implementation backgrounds have entered the marketing services market and, collectively, achieved significant market share. However, we believe these firms’ lack of creative and media expertise limits their long-term growth potential as true challengers to the legacy marketing holding companies.
With a combination of talent and technology, we believe that Stagwell is well positioned to take advantage of the continued transformation sweeping the marketing ecosystem and to disrupt the marketing services landscape. Stagwell was born digital and now has a global network of entrepreneurial companies that deliver the right combination of creativity and technology for the modern, digital marketer through a model that emphasizes flexibility and integration.
Our Offering
Principal Capabilities
Stagwell’s Brands provide differentiated, digital-first marketing and related services to a diverse client base across many industries.
Our principal capabilities fall into four categories: 1) Digital Transformation, 2) Performance Media & Data, 3) Consumer Insights & Strategy, and 4) Creativity & Communications. Taken together, these capabilities provide an integrated suite of marketing services for our blue-chip customer base.

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Digital Transformation. We design and build digital platforms and experiences that support the delivery of content, commerce, services and sales. We create websites, mobile applications, back-end systems, content and data management systems, and other digital environments enabling clients to engage with consumers across the digital ecosystem. We design and implement technology and data strategies to support digital services needed for our clients. We also implement technology and strategies for utilizing digital channels to mobilize and raise funds from proponents and constituents to support political candidates, non-profit groups and issue organizations in the public arena. Lastly, we develop proprietary, in-house software and related technology products, including AI-based communications technology, cookie-less data platforms for advanced audience
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targeting and activation, software tools for e-commerce applications, specialty media solutions in the fast-growing augmented reality space, and innovative applications of text messaging for consumer engagement, which we license to clients using subscription-based SaaS and DaaS models.
Performance Media & Data. We develop omnichannel media strategies and provide coordinated execution for the placement of advertisements across the media funnel including digital channels, performance marketing and analog placements globally. Unlike legacy holding companies that own large amounts of television inventory and therefore must sell it, we take a media-agnostic approach leveraging digital technologies and media in addition to analog advertising. Our media services include media solutions such as audience analysis, and media buying and planning, ranging across the platforms a modern marketer needs to engage consumers.
Consumer Insights & Strategy. We perform large-scale online surveys, specialized research, and data analytics across the consumer journey to provide strategic insights and guidance that informs business content, product, communications and media strategies for many of the world’s largest companies, including numerous Fortune 100 clients. We have differentiated specialization in brand and corporate reputation tracking, theatrical and streaming content and strategy, and technology product design and marketing, and we believe our Brands are at the forefront of innovation in the field.
Creativity & Communications. We develop holistic, creativity-based content strategies and campaigns from concept to execution through to optimization. These services are consuminginclude strategy development, advertising creation, live events, immersive digital experiences, cross platform engagement, and social media content. We also provide strategic communications, public relations and public affairs services including media relations, thought leadership, investor and financial relations, social media, executive positioning and visibility.
We group our Brands into these principal capability categories based on the source of most of their revenue. We also classify Digital Transformation, Performance Media & Data, and Consumer Insights & Strategy as “Digital” though Brands categorized as Creativity & Communications generate a growingsignificant portion of revenue from creativity and content delivered on digital channels and some, such as 72andSunny and Anomaly, do meaningful amounts of digital work that fluctuates as a percentage of revenue. We believe our concentration of digital capabilities today provides a competitive advantage in the marketplace and positions us to benefit from continued digital disruption in the marketing dollars. Overservices industry. We plan to continue to invest in our core digital platforms as well as emerging technologies to effectively support marketing transformation for our clients.
Network Structure & Reportable Segments
Stagwell maintains a 100% ownership position in substantially all of its Brands, and the last year, digital transformationremainder are majority owned with management of the Brands owning the remaining equity. Stagwell generally has been meaningfully accelerated, with businesses across all categories relying on the strengthrights to increase ownership of their e-commerce and digital experiences. non-wholly owned subsidiaries to 100% over a defined period of time.
The Company believes these accelerated changes inorganizes its Brands into three reportable segments: “Integrated Agencies Network,” “Brand Performance Network” and the way consumers interact with media and brands are increasing the demand for a broader range of non-advertising marketing communications services (i.e., user experience design, digital products, Artificial Intelligence, Augmented Reality, product innovation, direct marketing, sales promotion, interactive, mobile, strategic communications, research, and public relations), which we expect could have a positive impact on our results of operations.“Communications Network.” In addition, the riseCompany combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.”
The reportable segments are:
The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout (Brands), Constellation (72andSunny, Colle McVoy, Instrument, Redscout, Hello Design, Team Enterprises, and Harris Insights), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, Northstar, which is currently sunsetting, and Yamamoto (Brands)), Code and Theory and National Research Group.
These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business or have business move between them.
The Brand Performance Network (“BPN”), previously referred to as the “Media Network” reportable segment, is comprised of a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing
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sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and travel media experts Ink.

The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison & Partners SKDK (including Sloane & Company), and Targeted Victory brands.

All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud, including Maru and Epicenter, and products such as PRophet, ARound and Reputation Defender (which was sold in September 2021).
Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.
Go-To-Market Strategy
Our global go-to-market strategy is key to our objective of providing our clients with a balanced combination of leading-edge technology and data solutionscreative talent. We go to market in four main ways: as individual Brands, as networks where collaboration across services is needed, as Stagwell Global when we create multi-region, Stagwell-wide teams, and as the Stagwell Marketing Cloud, which delivers SaaS and DaaS products for in-house marketers.
Unlike legacy holding companies who have renderedfocused on achieving cost synergies by consolidating brands within their networks, Stagwell focuses on collaboration. We believe it is important for our Brands to maintain their individual identities to attract the highest quality talent within their capabilities of expertise. Maintaining strong brand identities within our integrated Brands and specialist networks provides a structure supporting both individual and joint go-to-market approaches. Maintaining separate Brands with flexibility to integrate also enables effective management of potential conflicts of interest. Go-to-market collaboration typically occurs on larger engagements requiring services across multiple capabilities or geographies.
To further support collaboration, Stagwell provides financial incentives for Brands to collaborate with one another through referrals and the sharing of both services and expertise. Network and Brand leaders have components of incentive compensation that are based on Stagwell’s overall performance and the overall performance of their integrated or specialist networks to incentivize go-to-market collaboration.
In addition to our owned Brands, we maintain a network of go-to-market alliances with like-minded independent brands, tech companies and marketing services firms in key markets around the world. These partners, which we refer to as Global Affiliates, enable us to increase our local-market reach and qualify for business opportunities that require enhanced capabilities in specific local markets without taking on additional costs. Launched in early 2021, by December 2022 the Global Affiliate Network had achieved its goal of growing to include more than 75 affiliates.
Our distinct Brand structure enables us to work with multiple clients within the same business sector, and many of our largest clients are served by multiple Brands or Brands in our portfolio. The Brands’ work is supported by a centralized marketing and new business team that fosters collaboration, sources new business opportunities and communicates across industries to drive awareness of our offerings. Additionally, a centralized corporate innovation team develops and invests in proprietary digital marketing products that are distributed by Brands across the network, further enhancing the value proposition Stagwell Brands are able to offer clients.
Our Strategy
The key components of the Stagwell strategy are Digital, Integrated, Global, and Strategic (“DIGS”). We believe the DIGS model gives us a sustainable, long-term path to significant growth and supports our primary objectives which are sustaining strong levels of organic growth, increasing our digital revenue mix, increasing international scale, less crucial than it once wasexpanding the average client relationship size, and maintaining strong margins and free cash flow. We believe pursuing these objectives will position us to increase value for our shareholders.
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Our strategy is focused around six specific initiatives: 1) Investing in Digital Capabilities, 2) Expanding Addressable Markets, 3) Effective Integration at Scale, 4) Strategic Value Creation Platform, 5) Maintaining a Highly Variable Cost Structure, and 6) Efficient Capital Allocation.
Investing in Digital Capabilities
Our digital businesses serve the areas where we expect the fastest growth in the marketing space and position us to lead the wave of transformation in the industry. By investing in our core digital platforms and introducing proprietary SaaS and DaaS marketing technology (“martech”) products, we aim to increase the digital proportion of our net revenue. We aim to expand our digital capabilities in three main ways:
First, we intend to continue to invest in our leading digital Brands like Code and Theory, Instrument and YML. This planned investment includes funding new capabilities and supporting cross-selling via our Integrated Agencies Network, which has already created additional opportunities.
Second, we intend to pursue complementary acquisition opportunities to bolster our existing assets in areas such as digital transformation and digital media buying. We have built a successful track record of “bolt-on” acquisitions such as TrueLogic Software, LLC, Ramenu S.A. and Polar Bear Development S.R.L., a Latin America engineering shop, and Kettle Solutions, LLC (“Kettle”), a content and digital design firm.
Third, we are investing in the Stagwell Marketing Cloud, a suite of technology products in development or early-stage commercialization spanning influencer marketing, audience segmentation, public relations, immersive experiences and brand insights. These products are licensed to our clients using subscription-based SaaS and DaaS models and distributed by Brands across our network. We believe the Stagwell Marketing Cloud positions us to serve in-house marketing departments and create recurring, high-value revenue streams in the future. We have also made strategic acquisitions for the Stagwell Marketing Cloud, including Epicenter Experience, an enterprise software company that leverages mobile and location data to map and sequence complex consumer behavior patterns, and Maru Group, a leading software experience and insights data platform.
Expanding Addressable Markets
We are focused on expanding our addressable markets through investments that increase our global footprint as well as adding emerging marketing technologies in areas expected to have strong secular growth. We believe increasing our geographic presence and breadth of capabilities will allow us to significantly grow our average client relationship size over time.
International Markets: Our strategy for growing our international operations is focused on expanding our media buying, creatingcontent creation and digital capabilities in new markets, which will improve our qualifications for large multi-regional contracts with the largest global marketers. For example, in April 2022, we acquired Brand New Galaxy, a scaled provider of end-to-end e-commerce services such as DTC strategy, digital content production, automation, and complex technology implementations. The acquisition bolsters Stagwell's broad e-commerce capabilities to service more global clients and provides significant opportunitiesscale in Europe.
We maintain a Global Affiliate network that enables us to deliver creative, performance, media and technology capabilities at the scale required to serve the world’s largest marketers. Our affiliates provide local talent and insights for agileregional engagements without requiring investment capital. We believe our Global Affiliates will be a valuable source for acquisitions, allowing Stagwell to vet companies before formal investment. Brand New Galaxy was our first affiliate and modern players.affiliate acquisition. As of December 31, 2022, we had over 75 Global marketers now demand breakthrough and integrated creative ideas, and no longer require traditional brick-and-mortar communicationsAffiliate partners in everyour network.
Emerging Marketing Technologies: In addition to the advertising and marketing services market, we believe our investments in the Stagwell Marketing Cloud will position us to optimizeaddress new, rapidly expanding market opportunities, including marketing data, campaign martech, the effectiveness of their marketing efforts. Combinedmetaverse, and AR and VR applications. For example, Stagwell’s shared AR product ARound has launched stadium-level experiences with professional sporting teams in Major League Baseball and the fragmentationNational Football League, namely the Minnesota Twins and the Los Angeles Rams.
Effective Integration at Scale
We expect to derive significant long-term operating efficiencies from the Transactions through initiatives that have been and continue to be rolled out over the 36 months following the completion of the media landscape, these factors provide new opportunities for small to mid-sized communications companies like thoseTransactions. We have made progress against our plan and anticipate the initial expected synergies will be realized over a period of 36 months from the time of the Transactions. We expect the synergies will come from implementation of shared services across the Company, elimination of redundancies in the MDCStagwell Brand Performance Network, scaling operational resources in lower cost markets, and third-party spend recapture, among other cost-saving initiatives.
Within our client-facing integrated and specialist networks we see further opportunity to achieve operating efficiencies by increasing our non-U.S. based engineering footprint. We are focused on scaling our development capabilities in lower cost
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markets, specifically Latin America, India, and Southeast Asia. Our engineering talent is primarily focused on building and designing digital platforms, applications, tools, and experiences for our clients and are typically more highly concentrated in our Brands categorized within our Digital Transformation primary capability. We believe we already have a substantial engineering presence globally – more than 1,500 engineers total as of December 31, 2022 – and have developed the necessary skills to support hiring, training and managing large teams outside the United States. We believe these markets offer a significant supply of quality technical talent to meet increasing client demand for high-speed delivery of digital transformation and production services.
Stagwell Value Creation Platform
We believe our engaged, unified corporate team provides a growth platform for value creation through both revenue and cost synergies for our existing Brands and prospective investments. We are led by a management team with deep industry expertise and a track record of growing and managing marketing services businesses. The Stagwell platform provides a foundation to support efficient, accretive scaling of our global network and our high-growth digital transformation and digital media capabilities. Our corporate objective is to accelerate the growth and improve the profitability of our Brands, and we believe Brands see strategic value in being part of the Stagwell network.
Our value creation platform has three layers: Client Services, Growth Investment and Shared Services.
Our Client Services layer aims to facilitate revenue growth through go-to-market support. Our Global Solutions team provides a single point of contact for key clients, coordinating our go-to-market strategies for large, multi-regional contracts or business opportunities requiring cross-Brand, cross-capability or cross-market services. Our Global Growth team provides prospecting and new business services to our Brands, working in partnership with our Brand team which supports messaging and communications efforts. At the network level, the Stagwell Brand Performance Network provides a corporate structure to cost-effectively coordinate our global media placement capabilities, while our Global Affiliate Network positions our Brands to pitch for and win opportunities requiring capabilities in specific local markets.
Our Growth Investment layer is designed to drive continual network evolution and bolsters competitive advantages in key markets, capabilities, and emerging technologies and consists of two teams: centralized investment and innovation. Our central investment team, which has a strong track record of accretive investments, provides expertise in sourcing, negotiating and structuring investments in close partnership with our Brand leadership, to drive efficient scaling of our networks and accelerate growth. In addition marketers now require even greater speed-to-market to driveour investment team, a centralized innovation team provides development capabilities for the Stagwell Marketing Cloud and bespoke client needs.
Our Shared Services layer provides unified back-office systems via Stagwell CORE (“CORE”), the Company’s newly formed platform that focuses on transitioning away from disparate teams, processes and systems and establishing a standardized platform. CORE provides centralized services across back office operational functions, including information technology (“IT”), accounts payable and receivable, real estate, enterprise-level contract administration, and accounting services. With a focus on driving shareholder value by optimizing cost structures and facilitating efficient integration of acquired businesses, CORE’s services are highly standardized with an emphasis on scalability to support Stagwell’s growth.
Maintaining a Highly Variable Cost Structure
We are focused on maintaining a business model that has attractive cash flow, revenue growth and margin expansion and plan to maintain a highly variable cost structure that allows us to be nimble. We aim to focus our investments on people-based businesses that operate with a high percentage of variable costs. Our at-will employment structure positions us to respond rapidly to changing market conditions in order to maintain margins. We also strive to diligently deploy low capital investment strategies. For example, we believe our Global Affiliate Network strategy for expanding international capabilities positions us to maintain a high level of flexibility through macroeconomic cycles.
Our management team has successfully demonstrated an ability to efficiently operate, manage and grow a profitable portfolio of diverse advertising businesses through periods of dramatic changes in consumer behavior, technological advancement and economic cycles. The team has a successful track record of investing, acquisition execution and integration as well as recruiting and retaining the key talent that drives our operating businesses.
Efficient Capital Allocation
We are focused on delivering continued strong organic growth and free cash flow to support efficient capital allocation that generates value for our shareholders. Our primary use of capital is expected to be funding diligently structured, highly accretive investment in businesses we believe will support sustainable future growth by increasing the breadth and depth of our capabilities. We also expect more modest capital allocation towards minimizing shareholder dilution, reducing leverage in order to provide increased financial returns on their marketingflexibility, and media investment, causing them to turn to more nimble, entrepreneurialfunding development of proprietary technology and collaborative communications firms like MDC’s Partner Firms.products for the Stagwell Marketing Cloud.
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Our Clients
MDC serves a large baseAs of December 31, 2022 Stagwell served over 4,000 clients across a wide range of sectors, representing some of the full spectrum of industry verticals.world’s most recognized brands including: Google, Amazon, Diageo, Nike, Apple, P&G, Novo Nordisk, United Airlines, Salesforce and more. In many cases, we serve the same clients in various geographic locations, across multiple disciplines, and through multiple Partner Firms.Stagwell Brands. Representation of a client rarely means that MDCStagwell handles marketing communications for all brands or product lines of the client in every geographical location. During 2020, 2019In 2022, net revenue from our top 100 clients’ increased by over 15% year-over-year as we saw record new business and 2018, the Company did not have aincreasing interest in both specific Brand capabilities as well as cross-Brand, integrated solutions that address multi-discipline client that accounted for 5% or more of revenues. In addition, MDC’s ten largest clients (measured by revenue generated) accounted for approximately 21%, 23% and 23% of revenue for the years ended December 31, 2020, 2019 and 2018, respectively.needs.
MDC’s agenciesStagwell’s Brands have written contracts with many of their clients. As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview” for a further discussion of MDC’sStagwell’s arrangements with its clients.

Sources of Revenue
5Stagwell provides a broad range of services to a large base of clients across a wide spectrum of verticals globally. Stagwell has historically been largely focused in North America where the Company was founded, as well as the United Kingdom, but has expanded its global footprint to support clients globally and has a presence in more than 34 countries, and an additional more than 30 countries through our Global Affiliate Network, in each case as of December 31, 2022. The primary source of revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Stagwell’s Brands have written contracts with many of their clients. As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview” for a further discussion of Stagwell’s arrangements with its clients.



Seasonality
Table of ContentsHistorically, we have typically generated the highest quarterly revenue during the fourth quarter in each year due to consumer marketing increases from the back-to-school and holiday seasons. In addition, we have typically seen an increase in revenue in the third and fourth quarters during even years because our advocacy business has higher revenue during the biannual U.S. election cycle.

EmployeesHuman Capital
As of December 31, 2020,2022, we employed 4,866 people worldwide.approximately 11,100 full-time employees and approximately 1,050 contractors. The following table provides a breakdown of full timethe approximate number of full-time employees and contractors across MDC’sStagwell’s three reportable segments, the All Other category, and Corporate:
SegmentTotal
Integrated Networks - Group AAgencies Network1,5295,800 
Integrated Networks - Group BBrand Performance Network1,5064,650 
Media & DataCommunications Network7031,100 
All Other1,060300 
Corporate68300 
Total4,86612,150 
Because of the personal service characternature of the marketing and communications business, our personnel aretalent is of critical importance to our success. Human capital management strategies are developed by senior management, including the management teams of our Partner Firms,Brands, and are overseen at the holding companycorporate level.
Our human capital management priorities include providing competitive wagesbenefits & compensation, attracting and benefits, professionalretaining talent, supporting learning & development across the network, promoting diversityDiversity & Inclusion, increasing employee engagement, and inclusion and implementing codes of conduct and business ethics throughout the Company.ensuring workplace safety. At the corporate center,level, centralized human capital management processes include development of human resources governance and policy, executive compensation for senior leaders, across the Company, benefits programs, and succession planning focusing on the performance, development and retention of key senior executives.
Benefits & Compensation
Stagwell provides a full range of competitive benefits including medical, dental, vision, employer-funded HSAs, commuter assistance, 401k, employee stock programs and more. Health benefits are offered to full-time employees and their dependents, inclusive of domestic and/or same-sex partners. We offer flexible paid time off as well as accommodation for civic duties,
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bereavement, and leaves of absence. Stagwell participates in industry-wide salary surveys and utilizes AI-powered compensation software to obtain real-time compensation survey data and analytics and ensure all compensation decisions are data-driven. In addition, we have various stock ownership programs for eligible Stagwell employees.
Attracting & Retaining Talent
Hiring and retaining transformative talent is key to Stagwell’s mission. We supplement agency-led recruiting with central recruiting support. Leveraging our scale, we have developed a broad database of global talent that further enhances our recruiting activities. In addition to utilizing central resources and technology, Brand-level recruiting activities include partnerships with colleges/universities, internship programs, referral programs and diversity, equity and inclusion specific pipelining programs. Stagwell’s internal transfer policy and career portal on our intranet, The Hive, also enables employees to explore new positions with other Brands at the Company’s senior-most executivesCompany to support retention of talent within the broader network.
We have regular learning and key rolestalent events so employees across our network can feel connected to the broader portfolio of Stagwell companies and enhance collaboration.
Learning & Development
At the corporate level, Stagwell invests in both our senior leadership and up-and-coming leaders through a professional development partnership with a globally recognized leadership development organization. The program is designed to align individual growth with organizational strategy to help achieve success across both.  Furthermore, Stagwell provides eligible employees with an annual, flexible professional development budget to utilize if they want to explore more opportunities within their field, acquire new skills, and enhance their contributions to their department and the Partner Firms.organization.  In addition, each Brand maintains its own policies and development programs suitable to its workforce and leadership goals.
SeasonalityDiversity & Inclusion
Historically,We believe the cultures of Stagwell’s individual Brands are what sets working at Stagwell apart; however, the connective tissue that unites us is our vision for our Brands and people to work collaboratively across disciplines in an inclusive environment.
Stagwell supports its Brands through access to high-quality education, resources and technology, which they can use to bring inclusion to life based on their organization’s needs. In addition to providing annual harassment prevention and ethics training globally, we actively collect data modeled after equal employment opportunity classifications with some exceptions, we generate the highest quarterly revenues duringgoal of ensuring our employee demographics better reflect the fourth quarter in each year. The fourth quarter has historically beendiversity of the period in the yearcommunities in which our workforce operates and is hired from and to identify areas for improvement through corporate engagement and initiatives. In addition, Stagwell aims to continue to grow successful partnerships with diverse vendors, suppliers, contractors, and consultants.
We believe doubling down on creating an inclusive environment, from building internal and external partnerships, fostering the highest volumescollaboration amongst our Brands, to trying out ideas and programs from our teams and Brands, will attract and retain a diverse workforce and that the diversity of media placementsthought creates impact for our clients globally.
Employee Engagement
Regular communication is a commitment at Stagwell. We have quarterly global Town Halls to ensure staff are engaged with and retail-related consumer marketing occur. See Note 21organizational goals are shared. And with in-person events returning in earnest, our Brand and Talent teams collaborate to host a variety of experiential, wellness, and professional development/thought leadership programs at our New York City “HUB” locations at the World Trade Center and in other offices around the world. Our global CEO sends out regular emails to all staff with key updates ranging from new business wins to client work. In addition, the Hive intranet serves as a resource portal for all Stagwell employees. We additionally maintain several global communities organized around discrete disciplines (“Technology,” “Growth,” “Communications,” etc.) to foster collaboration and engagement with the center of the Notescompany.
Significant Factors Affecting our Business and Results of Operations
The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. We believe the Consolidated Financial Statements included hereintwo most significant factors are (i) our clients’ desire to change marketing communication firms and (ii) the digital and data-driven products that our Brands offer. A client may choose to change marketing communication firms for information relatingseveral reasons, such as a change in leadership where new management wants to retain a firm that it may have previously worked with. In addition, if the Company’s quarterly results.client is merged or acquired by another company, the marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.
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Regulatory Environment
The marketing and communications services that our agenciesBrands provide are subject to laws and regulations in all of the jurisdictions in which we operate. These include laws and regulations that affect the form and content of marketing and communications activities that we produce for our clients and, for our digital services, laws and regulations concerning user privacy, use of personal information, data protection and online tracking technologies. We are also subject to laws and regulations that govern whether and how we can receive, transfer or process data that we use in our operations, including data shared between countries in which we operate. Our international operations are also subject to broad anti-corruption laws. While these laws and regulations could impact our operations, we believe compliance in the normal course of the Company’s business didhas not significantly impactimpacted the services we provide and did not haveor had a material effect on our business, results of operations or financial position. Additional information regarding the impact of laws and regulations on our business is included in Item 1A. Risk Factors under the heading “MDC is subject to regulations and litigation risk that could restrict our activities or negatively impact our revenues.”Factors.
Available Information
Information regarding theStagwell Inc.’s Internet website address is www.stagwellglobal.com. The Company’s Annual ReportReports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to thesethose reports filed or furnished pursuant to the Exchange Act, will be made available free of charge atthrough the Company’s website at https://www.mdc-partners.com, as soon as reasonably practicablepractical after those reports are electronically filed with, or furnished to, the SEC. The Company announces material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, and its website. The Company uses these channels, as well as social media, including its Twitter account (@stagwell) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, electronically filesits products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information the Company makes public in these locations, as such reports with or furnishes theminformation could be deemed to the Securities and Exchange Commission (the “SEC”).be material information. The information found on, or otherwise accessible through, the Company’s website is for information purposes onlynot incorporated into, and is included as andoes not form a part of, this Form 10-K, and the inclusion of the Company’s website address and social media channels are inactive textual reference. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K. The Company’s filings are also available to the public from the SEC’s website at https://www.sec.gov.references only.


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Item 1A. Risk Factors
You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our consolidated financial statements and related notes. This Form 10-K contains forward-looking statements that involve risks and uncertainties. Any of the following risks could materially and adversely affect our business, results of operations, financial condition, orcash flows, projected results of operations.and future prospects. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, results of operations, financial condition, orcash flows, projected results of operations. The following risk factorsand future prospects. These risks are not necessarily presentedexclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in order“Management’s Discussion and Analysis of relative importanceFinancial Condition and should not be considered to represent a complete setResults of all potential risksOperations” in this Form 10-K.
Risk Factor Summary
Some of the factors that could materially and adversely affect our business, financial condition, or results of operation.operations and cash flows include, but are not limited to, the following:
as a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions and future economic conditions could adversely impact our financial condition and results;
our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations;
our business could be adversely affected if we fail to retain our existing clients;
we face significant competition, and a failure to compete successfully in the markets we serve could harm our business;
maintaining and enhancing our and our Brands’ brands and reputation is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel;
our existing client relationships could impair our ability to generate new business or attract and retain qualified personnel;
if we are unable to adapt and expand our services and solutions in response to ongoing changes in technology and offerings by new entrants, our results of operations and ability to grow could be impaired;
if we do not successfully manage and develop our relationships with our Global Affiliate partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected;
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we are making investments in new product offerings and technologies and may increase such investments in the future. These new ventures are inherently risky, and we may never realize any expected benefits from them;
as a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects;
we are exposed to the risk of client defaults, and in an economic downturn, the risk of a material loss related to such client defaults could significantly increase;
if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges;
natural disasters, terrorist attacks, war, civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations;
we are consolidating our real estate footprint and may incur significant costs in doing so;
seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results;
we may not realize the benefits we expect from past acquisitions, including the Transactions;
we have allocated significant management time and resources to, and expect to incur non-recurring costs for, our ongoing integration efforts in connection with the Transactions;
in the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume resources that are necessary to sustain our business;
our business is highly dependent on the services of Mark Penn, our CEO and Chairman;
if we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected;
some of our Brands rely upon signatory service companies to employ union performers in commercials, and any inability to produce advertisements with union performers could impair our ability to serve our advertising clients and compete;
we face legal, reputational and financial risks from any failure to protect client data from security incidents or cyberattacks;
we are subject to extensive data privacy laws and regulations;
litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business;
we are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition;
we are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws. Compliance with these laws requires significant resources, and non-compliance may result in civil or criminal penalties and other remedial measures;
our business operations could suffer if we fail to adequately protect and enforce our intellectual property and other proprietary rights;
if we infringe, misappropriate or otherwise violate the intellectual property rights of third parties or are subject to an intellectual property infringement or misappropriation claim, our ability to grow our business may be severely limited and our business could be adversely affected;
our products and services use open source software, and any failure to comply with the terms of one or more applicable open source licenses could adversely affect our business, subject us to litigation, and create potential liability;
our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations under our indebtedness;
we may be unable to service all our indebtedness;
we 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;
if 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;
our Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement;
our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media in respect of certain tax benefits to which we may become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers;
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our results of operations are subject to currency fluctuation risks;
our goodwill, intangible assets and right-of-use assets may become impaired;
material weaknesses in our internal control over financial reporting were identified as of December 31 2021, and remain unremediated at December 31, 2022. If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price;
our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud;
if our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price;
we may be subject to adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax;
we may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions;
our stock price may be volatile;
if 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, par value $0.001 per share (the “Class A Common Stock”), may decline;
a significant portion of our Class A Common Stock is restricted from immediate resale but may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock;
we are a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, qualify for exemptions from certain corporate governance requirements. Our stockholders will not have the same protections afforded to stockholders of companies that are not controlled companies, and the interests of our controlling stockholder may differ from the interests of other stockholders;
there is no guarantee that an active and liquid public market for our securities will be sustained;
we do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the Class A Common Stock;
we may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares;
some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A Common Stock;
our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims; and
the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers.

Risks RelatingRelated to Our Business and OperationsIndustry
MDC competesAs a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions and future economic conditions could adversely impact our financial condition and results.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty, increased interest rates, as well as specific budgeting levels and buying patterns. Adverse developments such as inflation or heightened economic uncertainty could reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects. For example, inflation rates, particularly in highly competitive industries.the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital. In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks. In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses. This pattern may recur in the future and could have a material adverse effect on our revenue, results of operations, cash flows and financial condition.
The Company operates
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Turmoil in the credit markets or a highly competitive environmentcontraction in an industry characterizedthe availability of credit would make it more difficult for businesses to meet their capital requirements and could lead clients to change their financial relationship with their vendors, including us, which could negatively affect our working capital. In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements, which may not be available on favorable terms or at all, including as a result of Federal Reserve interest rate increases. Even if we take action to respond to adverse economic conditions, reductions in revenue and disruptions in the credit markets by aligning our cost structure and more efficiently managing our working capital, such actions may not be effective.
Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations.
Our revenue and profitability depend on the demand for our services and favorable margins, which could be negatively affected by numerous advertisingfactors, many of which are beyond our control and marketing agenciesunrelated to our work product. To increase our revenues and achieve favorable margins, we will need to attract additional clients or generate demand for additional services and products from existing clients, and such demand will depend on factors including clients’ and potential clients’ requirements, pre-existing vendor relationships, financial condition, strategic plans, internal resources and satisfaction with our work product and services, as well as broader economic conditions, competition and the quality of varying sizes, with no single advertisingour Brands’ employees, services and marketing agencyreputation and the breadth of our services. As described above, volatile, negative or group of agencies having a dominant positionuncertain global economic and political conditions can adversely affect client demand for our services and solutions. In addition, developments in the marketplace. MDC is, however, smaller than severalmarkets we serve, which may be rapid, could shift demand to services and solutions where we are less competitive, or might require significant investment by us to upgrade, enhance or expand our services and solutions to meet that demand. Companies in the markets we serve sometimes seek to achieve economies of scale and other synergies by combining with or acquiring other companies. If one of our current clients merges or consolidates with a company that relies on another provider for its larger industry competitors. Competitive factors include creative reputation, management, personal relationships, qualitymarketing and reliability of servicerelated services, we may lose work from that client or lose the opportunity to gain additional work if we are not successful in generating new opportunities from the merger or consolidation. To the extent that we are unable generate sufficient and expertise in particular niche areas of the marketplace. In addition, because an agency’s principal asset is its people, barriers to entry are minimal, and relatively small agencies are, on occasion, able to take all or some portion of a client’sprofitable new business from new and existing clients, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a larger competitor.material adverse effect on our business, results of operations, financial condition and prospects.
While manyOur business could be adversely affected if we fail to retain our existing clients.
Our clients may terminate or reduce the scope of MDC’stheir relationships with us on short notice. As a services business, our ability to attract and retain clients is an important aspect of our competitiveness, and client relationships areloss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions, or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects. Many companies, including companies with which we have long-standing companiesrelationships, put their advertising and marketing services businessescommunications business up for competitive review from time to time, including at times when clients enter into strategic transactions or experience senior management changes. Toand we have lost client accounts in the extent that the Company fails to maintain existing clients or attract new clients, MDC’s business, financial condition, operating results, and cash flows may be affected in a materially adverse manner.
MDC’s business could be adversely affected if it loses key clients.
MDC’s strategy has been to acquire ownership stakes in diverse marketing communications businesses to minimize the effects that might arise from the loss of any one client. The loss of one or more clients could materially affect the results of the individual agencies and MDCpast as a whole.result of such reviews. Our clients may choose to terminate their contracts, or reduce their relationships with us, on a relatively short time frame and for any reason, including as a result of such competitive reviews, external factors such as economic conditions or their own financial distress, competition from other marketing services providers or clients’ dissatisfaction with our services, reputation or personnel.
OurA relatively small number of clients contributes a significant portion of our revenue, which magnifies this risk. In the aggregate, our top ten largest clients (measured bybased on revenue generated) accounted for approximately 21%20% of our revenue for the three-year periodyear ended December 31, 2020. 2022, and historically, client concentration has increased during election years due to the cyclical nature of our advocacy Brands. A substantial decline in a large client’s advertising and marketing spending, or the loss of a significant part of their business, could have a material adverse effect on our business, prospects, and results of operations.
In addition, many of our contracts are less than twelve months in duration, and often contain termination provisions requiring only limited notice. If a client is dissatisfied with our services and we are unable to effectively respond to its needs, the client might terminate existing contracts, or reduce or eliminate spending on the services and solutions we provide. Additionally, a client could choose not to retain our Brands for additional stages of a project, try to renegotiate the terms of its contract or cancel or delay additional planned work. When contracts are terminated or not renewed, we lose the anticipated revenues, and it may take significant time to replace the lost revenues or we may be unsuccessful in our attempt to recover such revenues. Consequently, our results of operations in subsequent periods could be materially lower than expected. The specific business or financial condition of a client, changes in management and changes in a client’s strategy are also factors that can result in terminations, cancellations or delays, and in pressure to reduce costs.
A significant reduction in spending on our services by our largest clients, or the loss of several of our largest clients, could have a material and adverse effect on our business, results of operations and financial position.
MDC’s ability to generate new business from new and existing clients may be limited.
To increase its revenues, MDC needs to obtain additional clients or generate demand for additional services from existing clients. MDC’s ability to generate initial demand for its services from new clients and additional demand from existing clients is subject to such clients’ and potential clients’ requirements, pre-existing vendor relationships, financial conditions, strategic plans and internal resources, as well as the quality of MDC’s employees, services and reputation and the breadth of its services. To the extent MDC cannot generate new business from new and existing clients due to these limitations, MDC’s ability to grow its business and to increase its revenues will be limited.
MDC’s business and results of operations have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.
The COVID-19 pandemic is adversely impacting, and is expected to continue to adversely impact, our business and results of operations.
As part of efforts to contain the spread of COVID-19, governmental authorities have imposed various restrictions, such as travel bans, stay-at-home orders and quarantines, social distancing measures and temporary business closures. COVID-19 and the actions taken by governments, businesses and individuals in response to the pandemic have resulted in, and are expected to continue to result in, a substantial curtailment of business activities, weakened economic conditions, and significant economic uncertainty.
Many clients have responded to weak economic and financial conditions by reducing their marketing budgets, thereby decreasing the market and demand for our services. This is adversely impacting and is expected to continue to adversely impact our business and results of operations.
We are also facing increased operational challenges as we take measures to support and protect employee health and safety, including limiting employee travel, closing offices, and implementing work-from-home policies for employees. In particular, our remote work arrangements, coupled with stay-at-home orders and quarantines, pose new challenges for our employees and our IT systems and extended periods of remote work arrangements could strain our business continuity plans and introduce operational risk, including but not limited to cybersecurity and IT systems management risks.condition.
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We face significant competition, and a failure to compete successfully in the markets we serve could harm our business.
The effectsadvertising and marketing services business is highly competitive and constantly changing. We compete on the basis of many factors, including the quality (and clients’ perceptions of the COVID-19 pandemicquality) of our work, our ability to protect the confidentiality of clients’ and their customers’ data, our relationships with key client personnel, our expertise in particular niche areas or disciplines and our ability to provide integrated services at the scale clients require. Our Brands compete with a diverse and growing set of marketing services firms and consultancies to maintain existing client relationships and to win new business. Our competitors include not only other large multinational advertising and marketing communications companies, but also smaller entities that operate in local or regional markets as well as new forms of market participants. We are smaller than many of our larger industry competitors, and an agency’s ability to serve clients, particularly large international clients, on a broad geographic basis and across a range of services and technologies is an important competitive consideration. Our smaller size could impair our ability to compete for business, particularly with respect to significant business from large, global enterprises that require integrated global marketing solutions across geographies. We also compete with smaller advertising and marketing communications businesses, and because an agency’s principal asset is often its people, barriers to entry are minimal, and relatively small brands are, on occasion, able to take all or some portion of a client’s business from a larger competitor. We may also limitface greater competition due to consolidation of companies in our industry, including through strategic mergers or acquisitions. Consolidation activity may result in new competitors with greater scale, a broader footprint, or offerings that are more attractive than ours. This competition could have a negative effect on our ability to compete for new work and skilled professionals. Competitive challenges also arise from rapidly evolving and new technologies in the resources affordedmarketing and advertising space, which create opportunities for new and existing competitors and a need for continued significant investment in tools, technologies and process improvements. As data-driven marketing solutions become increasingly core to or delay the implementationsuccess of our strategic initiativesBrands, any failure to keep up with rapidly changing technologies and make it more difficult to develop and market innovative services. If our strategic initiatives are delayed or otherwise modified, such initiatives may not achieve some or all of the expected benefits, whichstandards in this space could adversely impactharm our competitive position,position.
In addition, our competitors may compete for client engagements by significantly discounting their services, whether as a short-term effort to win business, in exchange for a client’s promise to purchase other goods and services from the competitor, either concurrently or in the future, or as a result of developing and implementing methodologies that result in superior productivity and price reductions without adversely affecting their profit margins. Price competition could force us to choose between lowering our prices (and suffering reduced operating margins) or losing a client’s business. Any of these negative effects could significantly impair our results of operations and financial condition.
MDC’sOur future financial performance is largely dependent upon our ability to compete successfully in the markets we serve. If we are unable to compete successfully, we could lose market share and clients to competitors or be forced to accept engagements with unfavorable economic terms, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Maintaining and enhancing our and our Brands’ brands and reputations is critical to our business prospects, and harm to our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel.
We believe our and our Brands’ brand names and reputations are important corporate assets that help distinguish our services from those of our competitors and also contribute to our efforts to recruit and retain talented employees. However, our Brands’ corporate reputations are potentially susceptible to material damage by events such as disputes with clients, information technology security breaches or service outages, or other delivery failures. Similarly, our or our Brands’ reputation could be damaged by actions or statements of current or former clients, employees, competitors, vendors, as well as members of the investment community and the media. Such negative attention could adversely affected if it losesaffect our business, and damage to our reputations could be difficult and time-consuming to repair, could make potential or failsexisting clients reluctant to select us for new engagements or cause existing clients to terminate their relationships with us, resulting in a loss of business, and could adversely affect our recruitment and employee retention efforts. Damage to our or our Brands’ reputations could also reduce the value and effectiveness of the Stagwell brand name (or our Brands’ brand names) and could reduce investor confidence in us, which could have a material adverse effect on the trading price of our Class A Common Stock.
Our existing client relationships could impair our ability to generate new business or attract and retain qualified personnel.
As a marketing services company, we are susceptible to risks related to the clients we serve. Our ability to acquire new clients and retain existing clients is limited by clients’ perceptions of, or policies concerning, conflicts of interest arising from our other client relationships. For example, some companies maintain conflicts of interest policies that prohibit engaging marketing services firms that work with their competitors, and in some circumstances such policies have caused, and may in the future cause, our Brands to lose opportunities with potential clients or to lose existing clients. In addition, such policies may apply not just to a particular Brand but to an entire marketing services group. If we are unable to maintain multiple Brands to manage multiple client relationships and avoid potential conflicts of interests, our business, results of operations, financial condition and prospects may be adversely affected.
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In addition, we are subject to reputational risks relating to the clients we serve. In some cases, our Brands may provide services to clients that are subject to significant controversy and negative press coverage and commentary, including controversy over which we have no control and which may arise at any time. As a service provider to such clients, we may receive negative attention focused on such client relationships, which could damage our or our Brands’ reputation. Our association with controversial clients and related reputational harm could also impair our ability to attract new clients or retain key executives or employees.
Employees, including creative, research, analytics, media, technology development, accountexisting clients and practice group specialists, and their skills and relationships with clients, are among MDC’s most important assets. An important aspect of MDC’s competitiveness is itscould also harm our ability to retain key employee and management personnel. Compensation for these key employees is an essential factor in attracting and retaining them, and MDC may not offer a level of compensation sufficient to attract and retain qualified personnel. Any of these key employees. consequences could have a material adverse effect on our business, results of operations, financial condition and prospects.
If MDC failswe are unable to hireadapt and expand our services and solutions in response to ongoing changes in technology and offerings by new entrants, our results of operations and ability to grow could be impaired.
Our success depends in part upon our ability to continue to develop and implement services and solutions that anticipate and respond to rapid and continuing changes in marketing technology, consumer habits and industry developments, as well as offerings by new entrants, to serve the evolving needs of our clients. Current areas of significant change include search engine optimization, bots, search engine marketing, social media and influencer and affiliate marketing, email marketing, AR and VR applications, customer relationship and programmatic advertising, which involve the use of mobility-based software platforms, cloud computing, SaaS, and DaaS solutions, AI and generative AI content creation tools, machine learning and the processing and analyzing of large amounts of data. Technological developments such as these may materially affect the cost and use of technology by our clients and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, our ability to generate demand for our services, attract and retain clients, and our ability to develop and achieve a sufficient numbercompetitive advantage and continue to grow could be negatively affected.
In addition, we operate in a quickly evolving environment in which there currently are, and we expect will continue to be, numerous new technology entrants. New services or technologies offered by competitors or new entrants may make our offerings, such as the Stagwell Marketing Cloud and other DaaS and SaaS martech products, less differentiated or less competitive, when compared to other alternatives, which may adversely affect our ability to attract and retain clients. Any of these key employees, itconsequences could have a material adverse effect on our business, results of operations, financial condition and prospects.
If we do not successfully manage and develop our relationships with our Global Affiliate partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected.
Our growth strategy has included partnering with independent marketing services agencies, which we refer to as Global Affiliates, in certain jurisdictions, rather than operating in those markets independently. A portion of our revenue is derived from client engagements that involve services by our Global Affiliates, and we believe our Global Affiliates program is a critical element of our strategy to compete with large incumbent marketing services companies and provide scaled global marketing services to our clients. If we are unable to maintain our relationships with current Global Affiliates partners and identify new and emerging partners to expand our Global Affiliates network of alliance partners, we may not be able to provide the kinds of scaled global services that we believe clients require or compete effectively. Management succession ateffectively in the market. Our strategy of leveraging our operating units is very importantGlobal Affiliates partners could fail, and the business that we conduct through such partnerships could decrease or fail to grow, for a variety of reasons, including operational difficulties and cultural differences that impair our ability to leverage such partnerships effectively, lack of control over Global Affiliates’ work product and services or clients’ unwillingness to entrust their marketing efforts to numerous entities that are not part of the ongoingsame marketing group.
In addition, our Global Affiliates partnerships involve significant risks that are outside of our control. We are not represented on the management teams, boards of directors or other governing bodies of our Global Affiliates, and therefore do not participate in the day-to-day management of such entities. Because we do not control our Global Affiliates, they may take actions with which we or our clients disagree, which could expose us to reputational damage or impair our ability to attract and retain clients and generate demand for our services and solutions. Moreover, our Global Affiliates may not be subject to or follow the same requirements regarding compliance, internal controls and internal control over financial reporting that we follow. To the extent control issues arise within the Global Affiliate partners’ business, it could lead to further reputational and operational damage to our business. Additionally, our Global Affiliates are generally not prohibited from competing with us or forming closer or preferred arrangements with our competitors and may expand their own offerings and geographic presence, which could lead them to compete with us in various markets around the world. Our business, financial condition, results of MDC because, as in any service business, the success of a particular agency is dependent upon the leadership of key executivesoperations and management. If key executives were to leave our operating units, the relationships that MDC has with its clientsprospects could be adversely affected by such competition.
If we do not obtain the expected benefits from our Global Affiliates program for any reason, we may be less competitive, and our ability to offer attractive solutions to our clients may be negatively affected, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
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We are making investments in new product offerings and technologies and may increase such investments in the future. These new ventures are inherently risky, and we may never realize any expected benefits from them.
We have made investments to develop new marketing services products and technologies, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR applications, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings. If we do not spend our development budget efficiently or effectively on commercially successful and innovative technologies, or if we encounter significant technical or other challenges with respect to the development of our anticipated product offerings, we may not realize the expected benefits of our strategy. Our new initiatives also have a high degree of risk, as each involves development of new software platforms or other product offerings, unproven business strategies and technologies with which we may have limited prior development or operating experience. Because such offerings and technologies are new, they may involve additional claims and liabilities (including, but not limited to, intellectual property claims), expenses, regulatory challenges, and other risks that we do not currently anticipate.
There can be no assurance that client demand for new products, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR martech applications, will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments. It is also possible that products and offerings developed by others will render our products and offerings noncompetitive or obsolete. Further, our development efforts with respect to new products, offerings and technologies could distract management from current operations, and will divert capital and other resources from our more established products, offerings and technologies. Even if we are successful in developing new products, offerings or technologies, regulatory authorities may subject us to new rules or restrictions in response to our innovations that could increase our expenses or prevent us from successfully commercializing new products, offerings or technologies. If we do not realize the expected benefits of our investments, our business, financial condition, results of operations and prospects may be harmed.
As a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects.
We are a global business, with Brands operating in more than 34 countries as of December 31, 2022. Operations outside the United States represent a significant portion of our revenues and represented approximately 17% of our revenues in 2022. The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and staff, political conditions, differing regulatory environments and other issues associated with extensive international operations. Conducting our business internationally, particularly in developing markets in which we have limited experience, subjects us to risks that we do not face to the same degree in the United States. These risks include, among others:
operational and compliance challenges caused by distance, language, and cultural differences, including, in some markets, longer billing collection cycles;
the resources required to adapt our operations to local practices, laws, and regulations and any changes in such practices, laws, and regulations;
laws and regulations that may be more restrictive than those in the United States, including commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed, laws governing competition, pricing, payment methods, Internet activities, real estate tenancy laws, tax and social security laws, employment and labor laws, email messaging, privacy, location services, collection, use, processing, or sharing of personal information, ownership of intellectual property, and other activities important to our business;
competition with companies or other services that understand local markets better than we do or that have pre-existing relationships with potential clients in those markets;
differing levels of social acceptance of our brand, products, and offerings;
differing levels of local demand for our digital marketing services or the prevalence of e-commerce;
exposure to business cultures in which improper business practices may be prevalent;
difficulties in managing, growing, and staffing international operations, including in countries in which foreign employees may become part of labor unions, employee representative bodies, or collective bargaining agreements, and challenges relating to work stoppages or slowdowns;
fluctuations in currency exchange rates;
inflation and actions taken by central banks to counter inflation;
adverse tax consequences, including the complexities of foreign value added tax systems, and restrictions on the repatriation of earnings;
increased financial accounting and reporting burdens, and complexities associated with implementing and maintaining adequate internal controls;
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difficulties in implementing and maintaining the financial systems and processes needed to enable compliance across multiple jurisdictions;
import and export restrictions, changes in trade regulation and economic sanctions compliance;
public health concerns or emergencies, such as pandemics or other outbreaks of communicable disease, which have
occurred in parts of the world in which we operate;
war, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns; and
reduced or varied protection for intellectual property rights in some markets.
These risks could adversely affect our international operations, which could in turn adversely affect our business, financial condition, results of operations and prospects. In addition, in developing countries or regions, we may face further risks, such as slower receipt of payments, nationalization, social and economic instability, currency repatriation restrictions and undeveloped or inconsistently enforced commercial laws. For example, we have exited our operations in Russia. However, despite our efforts taken to ensure compliance with applicable law, it is difficult to anticipate the effect sanctions and other laws and regulations may have on us, and compliance with any sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may have an adverse effect on our operations. These risks may limit our ability to grow our business and effectively manage our operations in the countries that are affected.
MDC isWe are exposed to the risk of client defaults.defaults, and in an economic downturn, the risk of a material loss related to such client defaults could significantly increase.
MDC’s agenciesCertain of our Brands often enter into contractual commitments with media providers and production companies and incur expenses on behalf of theirour clients for productions and in order to secure a variety of media time and space, in exchange for which they receive a fee. The difference between the gross production costs and media purchases and the revenue earned by us can be significant. significant, and primarily affects our levels of accounts receivable, expenditures billable to clients, accounts payable and accrued liabilities.
While MDC takeswe take precautions against default on payment for these services (such as credit analysis, advance billing of clients, and in some cases acting as an agent for a disclosed principal), such precautions may fail to mitigate our exposure to clients’ credit risk, and has historically had a very low incidence of default, MDC is still exposed to the risk ofwe may experience significant uncollectible receivables from our clients. TheIn addition, in periods of severe economic downturn, our methods of managing the risk of payment default may be less available or unavailable and the risk of a material loss could significantly increase in periods of severe economic downturn.increase. Such a loss could have a material adverse effect on our results of operations, cash flows and financial position.condition.
MDCRecovery of client financing and timely collection of client balances also depends upon our ability to complete our contractual commitments and bill and collect our contracted revenues. We are generally paid in arrears for our services, and if we are unable to meet our contractual requirements, we may experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cash flows could be adversely affected.
If we are unable to collect our receivables or unbilled services, our business, results of operations, financial condition and cash flows could be materially and adversely affected.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.
We have experienced significant growth in recent periods, including as a result of the Transactions, and we intend to continue to expand our business in the future. This growth has placed, and any future growth may continue to place, a significant strain on our management, operational and financial infrastructure. Our management will also be required to maintain and expand our relationships with clients, Global Affiliates partners and other third parties and attract new clients, as well as to manage multiple geographic locations.
In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure, including additional costs for the expansion of our employee base and our global operations and partnerships as well as marketing and branding costs. Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new marketing services or product offerings or other operational difficulties. Any failure to effectively manage growth could adversely affect our business and reputation.
Natural disasters, terrorist attacks, war civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations.
Our corporate headquarters is subjectlocated in New York City, which has experienced terrorist attacks, civil disturbance, natural disasters and extreme weather events including hurricanes, floods and fires, and critical resources shortages and infrastructure
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disruptions, such as localized extended outages of critical utilities or transportation systems. If any such natural disaster or other disturbance or interruption, such as terrorist attacks or war, were to regulationsoccur, such event could prevent us from using all or a significant portion of our headquarters or other facilities, damaged critical infrastructure or otherwise disrupt our operations, which could make it difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time and litigation riskcould require us to make capital expenditures even though we may not have sufficient available resources at such time. Additionally, the proceeds available from our insurance policies may be insufficient to cover any such capital expenditures or other related costs, and our insurance coverage and available resources may not be adequate to cover our losses in any particular case. Any of these occurrences could significantly disrupt our and our Brands’ ability to deliver solutions and services and operate our and their businesses and could, in consequence, have a material adverse effect on our business, results of operations and financial condition.
In addition, our key technology systems may also be damaged or disrupted as a result of technical disruptions such as electricity or infrastructure breakdowns, including damage to telecommunications cables, computer glitches, power failures and electronic viruses or human-caused events such as protests, riots, labor unrest, terrorist attacks, war and private or state-sponsored cyberattacks. Such events, or any natural or weather-related disaster, could lead to the disruption of information systems and telecommunication services for sustained periods. Any significant failure, damage or destruction of our equipment or systems, or any major disruptions to basic infrastructure such as power and telecommunications systems in the areas in which we operate, could impede our ability to provide solutions to our clients and thus adversely affect their businesses, have a negative impact on our reputation and may cause us to incur substantial additional expenses to repair or replace damaged equipment, internet server connections or information technology systems. Damage or destruction that interrupts our provision of services could restrictadversely affect our activitiesreputation, our relationships with our clients, our ability to administer and supervise our business or negatively impactit may cause us to incur substantial additional expenditure to repair or replace damaged equipment or sites. Even if our revenues.operations are unaffected or recover quickly from any such events, if our clients cannot timely resume their own operations due to a catastrophic event, they may reduce or cancel their use of our services and products, which may adversely affect our results of operations. Any of these events, their consequences or the costs related to mitigation or remediation could have a material adverse effect on our business, results of operations, financial condition and prospects.
AdvertisingOur insurance coverage may not be sufficient to guarantee costs of repairing the damage caused by such disruptive events and such events may not be covered under our policies. Prolonged disruption of our services and solutions, even if due to events beyond our control, could also entitle our clients to terminate their contracts with us or result in other brand and reputational damages, which would have a material adverse effect on our business, results of operations, financial condition and prospects.
We are consolidating our real estate footprint and may incur significant costs in doing so.
In 2020, we consolidated the real estate occupancy of our advertising and marketing agencies in New York City, in order to lower our leasing costs and improve collaboration among our Brands. In connection with this consolidation, many of our properties have been or will be subleased or abandoned, and we are exploring opportunities for real estate consolidation in other markets. We may not be able to sublease the vacated office spaces on expected terms or at all. If we fail to sublet the leased offices we vacate on the terms we anticipate, we may be required to pay additional rent or may become involved in costly litigation with our commercial landlords, and we may incur additional charges related to the sublease or abandonment of our leases, any of which consequences could have a material adverse effect on our cash flows, financial condition and results of operations.
Seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results.
Our revenue, cash flow, operating results and other key operating and performance metrics vary from quarter to quarter due to the seasonal nature of our clients’ spending on the services we provide. For example, clients tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending, and we typically generate our highest quarterly revenue during the fourth quarter in each year. Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and decrease during other periods. If our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period.
Risks Related to Strategic Transactions
We may not realize the benefits we expect from past acquisitions, including the Transactions.
We may be unable to realize the benefits we expect from our past strategic transactions, including the Transactions and other recent acquisitions, such as Brand New Galaxy, TMA Direct, Inc., Maru Group Limited, Wolfgang, LLC., and Epicenter Experience LLC., for a variety of reasons, including due to our failure to effectively integrate newly acquired businesses into our operations, because of errors in our forecasting or for numerous other reasons, including factors that we do not control, such as the reactions of existing and potential clients, employees, regulators and investors.
Our ongoing integration efforts following the Transactions are subject to government regulation, both domesticsignificant risks and foreign. There has been an increasing trend in the United States for advertisers to resort to litigation and self-regulatory bodies to challenge comparative advertising on the grounds that the advertising is false and deceptive. Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirementsuncertainties, including with respect to advertisingour ability to realize our anticipated synergies and cost savings, our ability to retain and attract executives, employees
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and clients, the diversion of management’s attention from other business concerns, and undisclosed, unknown or potential legal liabilities of the acquired company. Our failure to address these risks or other problems encountered in connection with the Transactions and any past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities and harm our business generally.
Even if we are able to integrate the combined businesses successfully, this integration may not result in the realization of the full benefits of the growth and other opportunities, or the synergies and cost savings, that we currently expect from the Transactions within the anticipated time frame, or at all. Furthermore, the anticipated benefits or value of our acquisitions and other strategic transactions, including the Transactions, may not be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with whom we do business and the reactions of investors. As a result of the Transactions, we have significantly more revenue, expenses, assets and employees than prior to the Transactions, and we assumed certain liabilities and other obligations of the pre-merger entities. The Company may not successfully or cost-effectively integrate the combined businesses.
We have allocated significant management time and resources to, and expect to incur non-recurring costs for, certain products. Proposalsour ongoing integration efforts in connection with the Transactions.
We and our management have allocated and continue to allocate time and resources to our ongoing integration efforts following the Transactions, including related and incidental activities. Integration of the legacy SMG and MDC businesses has been madeand is expected to bancontinue to be complex, costly and time-consuming, requires significant management attention and resources, may disrupt our business, and may ultimately be unsuccessful. Risks and difficulties of integration include, among others, the advertisingdiversion of management attention to integration matters, increased difficulty retaining existing clients and obtaining new customers, difficulties attracting and retaining employees and the added strain on our executives of managing the expanded operations of a significantly larger company, any of which could adversely impact the effectiveness of our management team, the effectiveness of our integration efforts and the future performance of our combined company, which could harm our business, prospects, results of operations and financial condition.
In addition, we have incurred or expect to incur a number of non-recurring costs associated with our integration efforts, including costs associated with our pursuit of synergies and cost efficiencies following the Transactions. While we expect the benefits of such efforts to offset these costs over time, this net benefit may not be achieved in the short term or at all, and the actual costs we incur in connection with our integration efforts could exceed our estimates. These combined factors could adversely affect our business, results of operations and financial condition.
In the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume resources that are necessary to sustain our business.
Our business strategy includes engaging in strategic mergers, acquisitions and investments to bolster our capabilities or expand our reach in particular areas. Through the acquisitions we pursue, we may seek opportunities to add to or enhance the services and solutions we provide, to enter new industries or expand our client base, or to strengthen our global presence and scale of operations. Negotiating these transactions can be time consuming, difficult and expensive, and our ability to complete these transactions may be subject to conditions or approvals that are beyond our control, including anti-takeover and antitrust laws in various jurisdictions. Consequently, these transactions, even if undertaken and announced, may not close. An acquisition, investment or new business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, services, products, personnel or operations of acquired companies, particularly if the key personnel of the acquired company choose not to work for us, the acquired company’s technology is not easily compatible with ours or we have difficulty retaining the clients of any acquired business due to changes in management or otherwise. In addition, we may not accurately forecast the financial impact of an acquisition transaction, including accounting charges.
Mergers or acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for the development of our business. Moreover, the anticipated benefits of any merger, acquisition, investment or similar partnership may not be realized or we may be exposed to unknown liabilities, including litigation against the companies we may acquire, for example from failure to identify all of the significant risks or liabilities associated with the target business. For one or more of those transactions, we may:
issue additional equity securities that would dilute our stockholders;
use cash that we may need in the future to operate our business;
incur debt that may place burdensome restrictions on our operations or cash flows;
incur large charges or substantial liabilities; or
become subject to adverse tax consequences, substantial depreciation or amortization expenses, impairment of goodwill and/or purchased long-lived assets, restructuring charges, deferred compensation or other acquisition-related accounting charges.
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Any of these risks could materially and adversely affect our business, financial condition, results of operations and prospects.
Risks Related to Our Employees and Human Resources
Our business is highly dependent on the services of Mark Penn, our CEO and Chairman.
We depend on the continued services and performance of our key personnel, including our CEO and Chairman, Mark Penn. Although we have entered into an employment agreement with Mr. Penn, the agreement has no specific productsduration and to impose taxes on or deny deductions for advertising which, if successful, mayconstitutes at-will employment. The loss of key personnel, including Mr. Penn, could disrupt our operations and have an adverse effect on advertising expendituresour business.
If we are unable to keep our supply of skills and consequently,resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
Employees, including creative, research and data acquisition, analytics and data science, media, technology development, content development, account and practice group specialists, and their skills and relationships with clients, are among our most important assets. Our success is dependent, in large part, on MDC’s revenues.our ability to keep our supply of marketing services skills and capabilities in balance with client demand around the world and our ability to attract and retain personnel with the knowledge and skills to lead our business globally. We must hire or reskill, retain and motivate appropriate numbers of talented people with diverse skills in order to serve clients across the globe, respond quickly to rapid and ongoing changes in demand, technology, industry and the macroeconomic environment, and continuously innovate to grow our business. For example, if we are unable to hire or retrain our employees to keep pace with the rapid and continuous changes in technology and the industries we serve, we may not be able to innovate and deliver new services and solutions to fulfill client demand. There is competition for scarce talent with market-leading skills and capabilities in new technologies, and our competitors have directly targeted our employees with these highly sought-after skills and will likely continue to do so. As a result, we may be unable to cost-effectively hire and retain employees with these market-leading skills, which may cause us to incur increased costs, or be unable to fulfill client demand for our services and solutions.
CertainWe are particularly dependent on retaining management and leadership of MDC’s agencies produce softwareour Brands with critical capabilities. Management succession at our Brands is very important to the ongoing results of our company because, as in any service business, the success of a particular Brand depends in part upon the leadership of key executives and e-commerce toolsmanagement. If we are unable to manage management succession at the Brand level, our ability to innovate, generate new business opportunities and effectively lead large and complex client relationships and marketing services projects could be jeopardized. We depend on identifying, developing and retaining top talent to innovate and lead our businesses. This includes developing talent and leadership capabilities in emerging markets, where the depth of skilled employees may be limited. Our ability to expand in our key markets depends, in large part, on our ability to attract, develop, retain and integrate both leaders for theirthe local business and people with critical capabilities.
Similarly, our profitability depends on our ability to effectively source and staff people with the right mix of skills and experience to perform services for our clients, including our ability to transition employees to new assignments on a timely basis. The costs associated with recruiting and training employees are significant. If we are unable to effectively deploy our employees globally and remotely on a timely basis to fulfill the needs of our clients, our profitability could suffer.
At certain times and in certain geographies, we have found and may continue to find it difficult to hire and retain a sufficient number of employees with the skills or backgrounds to meet current and/or future demand in a cost-effective manner. In these product offeringscases, we might need to redeploy existing personnel or increase our reliance on subcontractors to fill our labor needs, and if not done effectively, our profitability could be negatively impacted. Additionally, as demand for our services and solutions increases, we may be unable to hire and retain people with the skills necessary to meet demand, and we have become increasingly subjectin the past experienced and may continue to litigation basedexperience wage inflation and other increases to compensation expense, which puts upward pressure on allegations of patent infringement or other violations of intellectual property rights. Asour costs and may adversely affect our profitability if we expandare unable to recover these product offerings, the possibility of an intellectual property claim against MDC grows. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations.increased costs. If we are not successful in defending such claims, wethese initiatives, our business, results of operations, financial condition and prospects could be requiredadversely affected.
Some of our Brands rely upon signatory service companies to stop offeringemploy union performers in commercials, and any inability to produce advertisements with union performers could impair our ability to serve our advertising clients and compete.
Some of our creative services Brands have not entered into the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) Commercials Contract, an industry contract form for commercial advertising, and instead have generally contracted with signatory service companies, which are parties to the SAG-AFTRA Commercials Contract, to employ SAG-AFTRA union performers appearing in television, new media, and other commercials produced by those Brands. SAG-AFTRA has recently persuaded the principal signatory service companies to change the way such signatory service companies do business. These changes may make it more cumbersome and expensive for advertising agencies which have not
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entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in the production of commercials by certain of our Brands. Because SAG-AFTRA members comprise a significant proportion of performing talent available for commercials, any inability of our Brands to produce commercials using union performers could materially limit such Brands’ access to qualified performing talent, reduce the amount of business conducted by such Brands and impair their ability to compete with agencies that are able to employ union performers, which could in turn have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Related to Data Privacy and Cybersecurity
We face legal, reputational and financial risks from any failure to protect client data from security incidents or cyberattacks.
We and our third-party service providers, such as our cloud service providers that store, transmit and process data, rely on information technologies and infrastructure, which we use to manage our business, including digital storage of client marketing and advertising information and developing new business opportunities. Increased cybersecurity threats and attacks, such as security breaches, are becoming more sophisticated and pose a risk to our systems and networks. In addition, undiscovered vulnerabilities in our products or services could expose us or our clients to hackers or other unscrupulous third parties who develop and deploy viruses and other malicious software programs that could attack our products, services and business.
We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to communicate among our locations around the world and with our people, clients, Global Affiliates partners and vendors. As the breadth and complexity of this infrastructure continues to grow, including as a result of the increasing reliance on, and use of, mobile technologies, social media and cloud-based services, the risk of security incidents and cyberattacks (including state-sponsored cyberattacks) has increased. Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our clients, Global Affiliates partners and vendors, and unauthorized disclosure of sensitive or confidential information, including personal data and proprietary business information. Also, given the unpredictability of the timing, nature and scope of such cybersecurity threats and attacks, we may be unable to anticipate attempted security breaches and, in turn, implement adequate preventative measures. Our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance (including improper use of social media) and additional known and unknown threats. Furthermore, mitigating the risk of future cybersecurity threats or attacks could result in additional operating and capital costs in systems technology, personnel, monitoring and other investments. We have experienced, and may again experience, data security incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks. In addition, certain of our clients may experience breaches of systems and cloud-based services enabled by or provided by us.
In providing services and solutions to clients, we often manage, utilize and store sensitive or confidential client or other data, including personal data and proprietary information, and we expect these services, pay monetary damages, enter into royaltyactivities to increase, including through the use of AI, bots and cloud-based analytics. Security breaches, improper use of our systems and other types of unauthorized access to our systems, data, and information by employees and others may pose a risk that data may be exposed to unauthorized persons or licensing arrangements, or satisfy indemnificationto the public. We have access to sensitive data, personal data, and information that is subject to various data privacy laws and regulations, which have obligations that are triggered in the event of a breach. Unauthorized disclosure of, denial of access to, or other incidents involving sensitive or confidential client, vendor, Global Affiliates partner or our own data, whether through systems failure, employee negligence, fraud, misappropriation, or cybersecurity, ransomware or malware attacks, or other intentional or unintentional acts, could damage our reputation and our competitive positioning in the marketplace, disrupt our or our clients’ business, cause us to lose clients and result in significant financial exposure and legal liability. Similarly, unauthorized access to or through, denial of access to, or other incidents involving, our software and IT supply chain or SaaS providers, our service providers’ information systems or those we develop for our clients, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/or state-sponsored organizations, who continuously develop and deploy viruses, ransomware, malware or other malicious software programs or social engineering attacks, could result in negative publicity, significant remediation costs, legal liability, damage to our reputation and government sanctions and could have with somea material adverse effect on our results of our clients. Such arrangements may cause our operating marginsoperations. Cybersecurity threats are constantly expanding and evolving, becoming increasingly sophisticated and complex, increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols.
We are subject to decline.extensive data privacy laws and regulations.
In addition, laws and regulations related to consumer privacy, use of personal informationdata and digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the recently enacted California Consumer Privacy Act, as amended by the California Privacy Rights Act, or “CCPA”). Further in the United States, both Congress and
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state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data. At the federal level, while to date there has not been any successful efforts in enacting comprehensive data privacy legislation, if successfully introduced, such legislation would create additional regulatory and compliance obligations, legal risk exposure, and could significantly impact our business activities. At the state level, in California, updates to the CCPA took effect on January 1, 2023. The updates to the CCPA, include additional data privacy and protection obligations on covered companies and expanding rights for California residents, including with respect to certain sensitive personal data. The CCPA will now be enforced by a California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of covered businesses in the areas of data protection and security. Similar consumer data privacy laws have been passed in four other states, and more are continuing to be proposed in other states. As more privacy legislation continues to be introduced, the Company could be subject to such laws regardless of whether the Company has operations or a physical presence in the applicable state. We face increasing costs of compliance in an uncertain regulatory environment and any failure or perceived failure to comply with these legal requirements could result in regulatory penalties or other legal ability.liabilities. Also, any such laws may also have potentially conflicting requirements that would make compliance challenging, as well as potentially resulting in further uncertainty and requiring the Company to incur additional costs and expenses in an effort to comply. Furthermore, these laws and regulations may impact the efficacy and profitability of certain digital marketing and analytics services we provide to clients, making it difficult to achieve our clients’ goals. These and other related factors could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial position.condition.
Compliance with data privacy laws requires ongoing investment in systems, policies and personnel and will continue to impact our business in the future by increasing legal,, operational and compliance costs. While we have taken steps to comply with data privacy laws, we cannot guarantee that our efforts will meet the evolving standards imposed by governmental and regulatory agencies, including data protection authorities. In the event that we are found or suspected to have violated data privacy laws, we may be subject to additional potential private consumer, business partner or securities litigation, regulatory inquiries, governmental investigations and proceedings and we may incur damage to our reputation.Any such developments may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.

Risks Related to Litigation and Regulation
Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
From time to time, we have been and may in the future be party to various claims and litigation proceedings. We evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Although we are not currently party to any litigation that we consider material, actual outcomes or losses may differ materially from our assessments and estimates.
We and certain of our Brands produce software and e-commerce tools for clients, including the Stagwell Marketing Cloud and other martech products, and such types of software and e-commerce product offerings have become increasingly subject to litigation based on allegations of patent infringement or other violations of intellectual property rights. As we expand these product offerings, the possibility of an intellectual property claim against us grows.
In addition, securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements. We have been and may in the future be the target of securities and shareholder litigation.
Any such claims or other claims against us, with or without merit, could result in costly litigation and divert management from day-to-day operations and resources from our business. We cannot be certain that we would be successful in defending against any such claims. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed on appeal, or we may decide to settle lawsuits on similarly unfavorable terms. If we are not successful in defending such claims, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages or fines, enter into royalty or licensing arrangements, satisfy indemnification obligations that we have with some of our clients or make changes to our business practices, any of which could have an adverse effect on our business, reputation, results of operations, financial condition and prospects.
Even when these claims are not meritorious, the defense of these claims may divert our management’s attention and may result in significant expenses. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our financial condition, cash flows or results of operations. Any
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Some of MDC’s Partner Firms rely upon signatory service companies to employ union performers in commercials.
Some of MDC’s creative agencies that have not entered into the SAG-AFTRA Commercials Contract have traditionally used signatory service companies, which are parties to the SAG-AFTRA Commercials Contract, to employ SAG-AFTRA union performers appearing in television, new media,claims or litigation, even if fully indemnified or insured, could damage our reputation and other commercials produced by those agencies.SAG-AFTRA has recently persuaded the principal signatory service companies to change the way such signatory service companies do business.These changes will make it more cumbersomedifficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and expensiveamounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for advertising agenciesa variety of potential reasons, which have not entered intomay affect the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members,timing and, in some cases may precludeif the use of SAG-AFTRA members in a production.If a Partner Firm is unable to produce a commercial using a union performer, it may reduceinsurers prevail, the amount of business conducted by such Partner Firm.Accordingly, if SAG-AFTRA’s recentour recovery.
We are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition.
Our industry is subject to government regulation and other governmental action, both in the United States and internationally. We and our clients are subject to specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements applicable to advertising for certain products. Governmental entities, self-regulatory bodies and consumer groups may also challenge advertising through legislation, regulation, judicial actions or otherwise, for example on signatory service companies are not modified, itthe grounds that the advertising is false and deceptive or injurious to public welfare. Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products. Any regulatory or judicial action that affects our ability to meet our clients’ needs or reduces client spending on our services could have a material adverse effect on our business, results of operations, financial condition and financial position.prospects.
Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal information and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing. We rely extensivelyare subject to laws and regulations that govern whether and how we can transfer, process or receive certain data that we use in our operations. For example, federal laws and regulations governing privacy and security of consumer information generally apply to our clients and/or to us as a service provider. These laws and regulations include, but are not limited to, the federal Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and regulations implementing its information safeguarding requirements, the Junk Fax Prevention Act of 2005, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the Federal Trade Commission Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Risk-Based Pricing Rule, Red Flags Rule, and the CCPA. Laws of foreign jurisdictions, such as Canada’s Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and the GDPR similarly apply to our collection, processing, storage, use, and transmission of protected data. The European Union, for example, has recently tightened its rules on information technology systemsthe transferability of data to the United States. Collection, processing, and cybersecurity incidents could adversely affect us.
We rely on information technologies and infrastructure to manage our business, including digital storage of client marketingbiometric identifiers has come under increasing regulation and advertising informationis the subject of class action litigation. The costs of compliance with these laws and developingregulations may increase in the future as a result of the implementation of new business opportunities. Increased cybersecurity threatslaws or regulations, such as the GDPR and attacks, which are becoming more sophisticated, pose a risk to our systemsthe CCPA, or changes in interpretations of current ones, such as the interpretation of existing consumer protection laws as imposing restrictions on the online collection, storage and networks. Security breaches, improper use of our systemspersonal data. See “—Risks Related to Data Privacy and unauthorized accessCybersecurity—We are subject to ourextensive data and information by employees and others may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. We also have access to sensitive or personal data or information that is subject to privacy laws and regulations. Our systems” Any failure on our part to comply with these legal requirements, or their application in an unanticipated manner, could harm our business and processesresult in penalties or significant legal liability. The imposition of restrictions on certain technologies by private market participants in response to protect against, detect, prevent, respond to and mitigate cybersecurity incidents andprivacy concerns could also have a negative impact on our organizational training for employees to develop an understanding of cybersecurity risks and threats may bedigital business. If we are unable to prevent material security breaches, theft, modificationtransfer data between countries and regions in which we operate, or loss ofif we are prohibited from sharing data employee malfeasanceamong our products and additional known and unknown threats. In addition,services, it could affect the manner in which we use third-party service providers, including cloud providers, to store, transmit and process data. Any breakdownprovide our services or breach in our systems or data-protection policies, or those of our third-party service providers, could adversely affect our reputationfinancial results.
Legislators, agencies and other governmental entities, as well as consumer groups, may also continue to initiate proposals to ban the advertising of specific products, such as alcohol, tobacco or business.
MDC is consolidating its real estate footprintmarijuana products, and to impose taxes on or deny deductions for advertising, which, if successful, may incur significant costs in doing so.
In 2020, MDC consolidated the real estate occupancy of its advertisinghinder our ability to accomplish our clients’ goals and marketing agencies in New York City, in order to lower our leasing costs and improve collaboration among our agencies. In consolidation, many of MDC’s legacy properties will be or have been subleased or abandoned. In 2020, MDC incurred a charge of $22.7 million associated with the impairment of right-of-use lease assets and related leasehold improvements and the acceleration of variable lease expenses relating to these and similar actions. In addition, MDC is exploring opportunities for real estate consolidation in other markets.MDC may not be able to sublease its vacated office spaces on expected terms or at all. If we fail to sublet on expected terms the vacated leased offices, there could be a materialan adverse effect on advertising expenditures and, consequently, on our cash flows, financial conditionrevenues. Governmental action, including judicial rulings, on the relative responsibilities of clients and resultstheir marketing agencies for the content of operations.
Risks Relating to Our Financial Condition and Results
Future economic and financial conditions could adverselytheir marketing can also impact our financial condition and results.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, as well as specific budgeting levels and buying patterns. Adverse developments including heightened economic uncertaintyoperations. We could reduce the demand for our services, which could have a material adverse effect on our revenue, results of operations, cash flows and financial position.
a. As a marketing services company, our revenues are highly susceptible to declinesalso suffer reputational risk as a result of unfavorablegovernmental or legal action or from undertaking work that may be challenged by consumer groups or considered controversial.
We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic conditions.sanctions, the FCPA, and similar anti-corruption laws. Compliance with these laws requires significant resources, and non-compliance may result in civil or criminal penalties and other remedial measures.
Global economic conditions affect the advertisingWe are subject to many laws and marketing services industry more severely than other industries. In the past, some clientsregulations that restrict our international operations, including laws that prohibit activities involving restricted countries, organizations, entities and persons that have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary componentsbeen identified as unlawful actors or that are easiersubject to reduceU.S. sanctions. The U.S. Office of Foreign Assets Control (“OFAC”), and other international bodies have imposed sanctions that prohibit us from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals. For example, in February 2022, following Russia’s invasion of Ukraine and the short term than other operating expenses. This pattern may recur in the future. Decreases in our revenue would negatively affect our financial results, including a reductionimposition of our estimates of free cash flow from operations.
b. If our clients experience financial distress, their weakened financial position could negatively affect our own financial position and results.
We have a diverse client base, and at any given time, one or more of our clients may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions in the global economy could increase client financial difficulties resulting in reduced demand for our services, reduced revenues, delayed payments by clients, and increased write offs of accounts receivable.
c. Conditions in the credit markets could adversely impact our results of operations and financial position.sanctions
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Turmoiltargeting Russia by the United States and other countries, we exited our operations in Russia. Despite our efforts to ensure compliance with applicable law, it is difficult to anticipate the effect such sanctions may have on us, and compliance with any further sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may otherwise have an adverse effect on our operations.
We are also subject to the Foreign Corrupt Practices Act (“FCPA”) and anti-bribery and anti-corruption laws in other countries. The FCPA prohibits U.S. businesses and their representatives from offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. The FCPA also obligates companies whose securities are listed in the credit markets orUnited States to comply with accounting provisions requiring us to maintain books and records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation, including international subsidiaries, if any, and to devise and maintain a contractionsystem of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements. Globally, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the Anti-Graft and Corrupt Practices Act in the availabilityPhilippines and the U.K. Bribery Act 2010, all of credit would make it more difficultwhich prohibit companies and their intermediaries from bribing government officials for businessesthe purpose of obtaining or keeping business or otherwise obtaining favorable treatment. We operate in many parts of the world that have experienced government corruption to meet their capital requirementssome degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S. and other anti-bribery laws.
Our compliance program contains controls and procedures designed to procure our compliance with applicable anti-bribery, anti-corruption, economic sanctions, and other laws and regulations. The continuing implementation and ongoing development and monitoring of our compliance program is time consuming and expensive and could lead clientsresult in the discovery of compliance issues or violations by us or our employees, independent contractors, subcontractors or agents of which we were previously unaware. In addition, due to change their financial relationshipuncertainties and complexities in the regulatory environment and dynamic developments in the scope of such regulations (including with their vendors,respect to economic sanctions imposed by the United States and other jurisdictions targeting Russia), we cannot be sure that regulators will interpret laws and regulations the same way we do, or that we will be in full compliance with applicable laws and regulations.
Any violations of these or other laws, regulations and procedures by our employees, independent contractors, subcontractors and agents, including us. If that werethird parties we associate with or companies we acquire, could expose us to occur, itadministrative, civil or criminal penalties, fines or business restrictions, which could materially adversely impacthave a material and adverse effect on our results of operations and financial position.condition and would adversely affect our reputation and the market for shares of our Class A Common Stock.
Risks Related to Intellectual Property
Our business operations could suffer if we fail to adequately protect and enforce our intellectual property and other proprietary rights.
We rely on trademark, patent, copyright, trade secret and other intellectual property laws, as well as contractual provisions such as confidentiality clauses, to establish and protect our intellectual property and other proprietary rights, including in our Brands (and the trademark rights thereto) and our proprietary technologies. These laws are subject to change at any time and certain agreements may not be fully enforceable, which could restrict our ability to protect our intellectual property rights. Such means may also afford only limited protection of our intellectual property and may not: (i) prevent others from independently developing products or services similar to, or duplicative of, ours; (ii) prevent our competitors from gaining access to our proprietary information and technologies; or (iii) permit us to gain or maintain a competitive advantage. We cannot be sure that the actions we have taken to establish and protect our trademarks and other intellectual property rights will adequately protect us, and if our existing intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the intellectual property protections afforded our Brands, products and services would be impaired. Such impairment could impede our ability to market our products and services, negatively affect our competitive position, and harm our business and operating results. Even if we successfully maintain our intellectual property rights, we may be unable to enforce those rights against third parties.
We also rely on patents to protect our products, services and designs. We have applied for, and expect to continue to apply for, additional patent protection for proprietary aspects of existing and proposed processes, services and products. Our patent applications may not result in issued patents, and any patents issued as a result of our patent applications may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Additionally, we seek to maintain the confidentiality of certain trade secrets and other proprietary information to preserve our position in the market. We employ various methods to protect such intellectual property, such as entering into confidentiality agreements with certain third parties and our employees, and controlling access to, and distribution of, our proprietary information. However, our efforts may not be effective in controlling access to our proprietary information, and we may not have adequate remedies for the misappropriation of such information. Furthermore, even if we successfully maintain the confidentiality of our trade secrets and
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other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.
As we expand our service offerings and the geographic scope of our sales and marketing, we may face additional intellectual property challenges. Certain foreign countries do not protect intellectual property rights as fully as they are protected in the United States and, accordingly, intellectual property protection may be limited or unavailable in some foreign countries where we choose to do business. It may therefore be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries, which could diminish the value of our Brands, products or services and cause our competitive position and growth to suffer. Filing, prosecuting and defending our intellectual property in all countries throughout the world may be prohibitively expensive. The lack of adequate legal protections of intellectual property or failure of legal remedies for related actions in jurisdictions outside of the United States could have an adverse effect on our business, results of operations, and financial condition.
If we infringe, misappropriate or otherwise violate the intellectual property rights of third parties or are subject to an intellectual property infringement or misappropriation claim, our ability to grow our business may be severely limited and our business could be adversely affected.
We may in the future be the subject of patent or other litigation. Our products and services, including products and services that we may develop in the future, may infringe, or third parties may claim that they infringe, intellectual property rights covered by patents or patent applications under which we do not hold licenses or other rights. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us that would cause us to incur substantial expenses and, if successfully asserted against us, could cause us to pay substantial damages. Further, if a patent infringement or other intellectual property-related lawsuit were brought against us, we could be forced to stop or delay production or sales of the product that is the subject of the suit. From time to time, we may receive letters from third parties drawing our attention to their patent rights. While we take steps to ensure that we do not infringe upon, misappropriate or otherwise violate the rights of others, there may be other more pertinent rights of which we are currently unaware. The defense and prosecution of intellectual property lawsuits could result in substantial expense to us and significant diversion of effort by our technical and management personnel. An adverse determination of any litigation or interference proceeding to which we may become a party could subject us to significant liabilities. As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from the third party and be required to pay significant license fees, royalties or both. Licenses may not be available on commercially reasonable terms, or at all, in which event our business would be materially and adversely affected. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, if we are unable to obtain such licenses, we could be forced to cease some aspect of our business operations, which could harm our business significantly.
Our products and services use open source software, and any failure to comply with the terms of one or more applicable open source licenses could adversely affect our business, subject us to litigation, and create potential liability.
Some of our solutions use software made available under open source licenses, and we expect to continue to incorporate open source software in our solutions in the future. Open source software is typically freely available, development costs and speed up the development process, it may also present certain risks, that may be greater than those associated with the use of third-party commercial software. For example, open source software is generally provided without any warranties or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. We cannot guarantee we comply with all obligations under these licenses. If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations, may be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software. Any of these events could create liability for us, damage our reputation, and have an adverse effect on our revenue, and operations.
Risks Related to Our Capital Structure and Financing
Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations under our indebtedness.
We are highly leveraged. As of December 31, 2022, we had $1.2 billion of total consolidated indebtedness outstanding. Our outstanding credit agreement and notes are guaranteed by substantially all of our material domestic subsidiaries, and our outstanding credit agreement is secured by substantially all of the assets and stock of such subsidiaries. If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under our outstanding credit agreement could terminate their commitments to
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loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation, which could adversely affect our business, results of operations, financial condition and prospects.
Our high degree of leverage could have important consequences for us, including:
requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes;
increasing our vulnerability to adverse economic, industry, or competitive developments;
exposing us to the risk of increased interest rates because substantially all of our borrowings, other than the $1,100,000 aggregate principal amount of 5.625% senior notes due 2029 (the “5.625% Notes”), are at variable rates of interest;
making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and
limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
Our outstanding credit agreement is floating rate debt. If interest rates increase, our debt service obligations on such indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
We may also elect to enter into swaps to reduce our exposure to floating interest rates, but we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
In addition, we may be able to incur substantial additional indebtedness in the future. As of December 31, 2022, we had $375 million of availability under our revolving credit agreement. In addition, we will be permitted to add, under such credit agreement, incremental facilities, subject to certain conditions being satisfied. Although the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness as defined under our debt instruments. To the extent new debt is added to our current debt levels, the substantial leverage risks described above would increase.
We may be unable to service all our indebtedness.
Our ability to make scheduled payments on and to refinance all our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the banking and capital markets. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to service all our debt, to refinance all our debt or to fund our other liquidity needs.
If we are unable to meet all our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.
Moreover, in the event of a default, the holders or lenders of our indebtedness could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. The lenders under our outstanding credit agreement could also elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against their collateral, and we could be forced into bankruptcy or liquidation.
We 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.
As of December 31, 2022, we had unrestricted cash and cash equivalents totaling $221 million and a borrowing capacity under our credit facility of $500 million, with $375 million of unused capacity available. We intend to continue to make investments to support our business growth and may require additional funds if our capital is insufficient to pursue business opportunities and respond to business challenges. Accordingly, we may need to engage in equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt
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securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Class A Common Stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.
In addition, because credit ratings are an important factor influencing our ability to access capital and the terms of any new indebtedness, including covenants and interest rates, we could be adversely affected if our credit ratings were downgraded or if they were significantly weaker than those of our competitors. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of our debt. Any credit rating initially assigned to our debt that is subsequently lowered or withdrawn for any reason could harm our ability to raise additional capital at acceptable cost and as a result adversely affect our business, results of operations, financial condition and prospects. Our clients and vendors may also consider our credit profile when considering whether to contract with us or negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a further adverse effect on our business, prospects, results of operations and financial condition.
If 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.
MDC maintains a committed $211.5 million senior secured revolvingWe maintain our credit agreement, due February 3, 2022 (the “Credit Agreement”), together with cash flow from operations and proceeds from our recent notes financing, to fund itsour working capital needs and to fund the exercise of put option obligations and contingent deferred acquisition payments. If MDC is not able to renew or replace its Credit Agreement on favorable terms or at all, or if credit were otherwise unavailable or insufficient under the Credit Agreement, MDC’sour credit agreement, our liquidity could be adversely affected, and MDC’sour ability to fund itsour working capital needs and any contingent obligations with respect to put options or contingent deferred acquisition payments could be adversely affected. MDC hasWe have made acquisitions for which it haswe have deferred payment of a portion of the purchase price, with the deferred acquisition consideration generally payable based on achievement of certain thresholds of future earnings of the acquired company. In addition, a noncontrolling shareholderequityholder in an acquired business often has the right to require MDCthe us to purchase all or part of itssuch holder’s interest, either at specified dates or upon the termination of such shareholder’sholder’s employment with the subsidiary or death (put rights). Payments we are required to be made by the Companymake in respect of deferred acquisition consideration and noncontrolling shareholderequityholder put rights may be significantly higher than the amounts estimated by MDCwe estimate because the actual obligation adjusts based on the performance of the acquired businesses over time. If available liquidity is insufficient, we may be unable to fund contingent deferred acquisition payments.
MDC’s business strategy includes ongoing effortsOur Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to engagepay our taxes and expenses, including payments under the Tax Receivables Agreement.
As part of our umbrella partnership-C corporation (“Up-C”) structure, we are a holding company and our principal asset is our ownership of common units of our operating subsidiary, Stagwell Global LLC (“OpCo”). This structure is designed to enable us to obtain certain tax benefits, and 85% of such tax benefits are payable to Stagwell Media under our Tax Receivables Agreement with Stagwell Media and OpCo. However, we have no independent means of generating revenue or cash flow, and our ability to pay taxes and operating expenses, and to service our liabilities, is dependent upon the financial results and cash flows of OpCo and its subsidiaries, along with the distributions we receive from OpCo. OpCo intends to make payments to us out of available funds, and subject to limitations imposed under the agreements governing our indebtedness, and there can be no assurance that OpCo and its subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions will permit such distributions. Moreover, because of our Up-C structure, this financing arrangement can give rise to U.S. corporate income tax liabilities for us in acquisitionsrespect of ownershipthe formation of OpCo, and subsequently as OpCo makes cash distributions to us to the extent they are subject to certain technical regulations regarding disguised sales, subject to certain exceptions including for distributions of operating cash flows and leveraged distributions. In such an event, we would depend on further cash distributions from OpCo in order to enable us to pay such tax liabilities.
We also incur expenses related to our operations, which may be significant. We intend, as OpCo’s sole manager, to cause OpCo to make cash distributions to the owners of OpCo membership interests so that we receive (i) an amount sufficient to allow us to fund all of our tax obligations in respect of taxable income allocated to us and (ii) distributions to cover our operating expenses, including any obligations to make payments under the Tax Receivables Agreement. When OpCo makes distributions, Stagwell Media and the other members of OpCo besides us are and will be entitled to receive proportionate distributions based on their economic interests in entitiesOpCo’s common units at the time of such distributions. OpCo’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which OpCo is then a party, or any applicable law, or that would have the effect of rendering OpCo insolvent or exceed the amounts that OpCo is permitted to distribute under the agreements governing our indebtedness. If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow
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funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness. To the extent that we are unable to make payments under the Tax Receivables Agreement for any reason, such payments generally will be deferred and will accrue interest until paid, but nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivables Agreement and therefore accelerate payments due under the Tax Receivables Agreement. Any inability to pay tax or other liabilities or to fund our operations could have a material and adverse effect on our business, results of operations, financial condition and prospects.
Our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media in respect of certain tax benefits to which we may become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers.
In connection with the closing of the Transactions, we entered into the Tax Receivables Agreement with OpCo and Stagwell Media, pursuant to which we are 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 marketing communications services industrytax basis of OpCo’s assets resulting from redemptions or exchanges by the other holders of OpCo’s common units, together with a corresponding number of shares of our Class C Common Stock, par value $0.00001 per share (the “Class C Common Stock”), for shares of our Class A Common Stock or cash, as applicable, and (ii) certain other strategic transactions.tax benefits related to us making payments under the Tax Receivables Agreement. We expect the amount of the cash payments that we are required to make under the Tax Receivables 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.
The successactual increase in tax basis, as well as the amount and timing of acquisitionsany payments under the Tax Receivables Agreement, varies depending on a number of factors, including, but not limited to, the timing of any future redemptions or strategic investments dependsexchanges, the price of our Class A Common Stock at the time of such redemptions or exchanges, the extent to which redemptions or exchanges are taxable, the amount and timing of the taxable income that we generate in the future, the timing and amount of any earlier payments we make under the Tax Receivables Agreement itself, the tax rates then applicable and the portion of our payments under the Tax Receivables Agreement constituting imputed interest. We expect that, as a result of the increases in the tax basis of OpCo’s tangible and intangible assets attributable to the redeemed or exchanged OpCo common units, the payments that we may make to Stagwell Media could be substantial. The amounts we may be required to pay under the Tax Receivables Agreement will be calculated based in part on the effective integrationmarket value of newly acquired businesses into MDC’s current operations. Such integration isour Class A Common Stock at the time of redemption or exchange and the prevailing federal tax rates applicable to us over the life of the Tax Receivables Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on our ability to generate sufficient future taxable income to realize all of these tax savings.
Under its amended and restated operating agreement, subject to risksavailability of funds and uncertainties,limitations imposed under the agreements governing our indebtedness, OpCo is generally required from time to time to make distributions in cash to us in amounts that are intended to be sufficient to cover the taxes on our allocable share of the taxable income of OpCo, and OpCo is also required to make pro rata distributions at such time to the other holders of its common units, including realizationStagwell Media, without taking into account the tax savings realized by us that result in our obligations under the Tax Receivables Agreement. There is no guarantee that the amounts or timing of anticipated synergiessuch distributions will be sufficient to cover payments required under the Tax Receivables Agreement, including in the event payments under the Tax Receivables Agreement are due prior to the time that we realize the associated tax benefits. In particular, the Tax Receivables Agreement provides that in the case of a change in control, a material breach of our obligations under the Tax Receivables Agreement, or if, at any time, we elect an early termination of the Tax Receivables Agreement, then the Tax Receivables Agreement will terminate and cost savings,our obligations under the abilityTax Receivables Agreement would accelerate and become due and payable. In such a case, we would be required to make an immediate cash payment to Stagwell Media in an amount equal to the present value of all future payments (calculated using a discount rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 100 basis points) under the Tax Receivables Agreement, which payment would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivables Agreement and that Stagwell Media had exchanged any remaining outstanding common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock.
In addition, the distributions we receive from OpCo may at some times exceed our tax liabilities and our obligations to make payments under the Tax Receivables Agreement. In the event excess cash is distributed to us, our board of directors (our “Board”) will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment obligations under the Tax Receivables Agreement and the payment of other expenses. We have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. No adjustments to the redemption or exchange ratio of common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock or cash, as applicable, will be made as a result of either any cash distribution we receive from OpCo or
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any cash that we retain and attract executivesdo not distribute to our stockholders. To the extent that we do not utilize any excess cash to fund our other expenditures, the other members of OpCo would benefit from any value attributable to such cash balances as a result of their ownership of shares of our Class A Common Stock following a redemption or exchange of their common units of OpCo and clients,shares of our Class C Common Stock. Additionally, no adjustments to the diversionredemption or exchange ratio of management’s attentioncommon units of OpCo and shares of our Class C Common Stock for shares of our Class A Common Stock or cash will be made in the event that we incur liabilities or expenses but do not receive cash distributions from other business concerns,OpCo in sufficient amount to fund such liabilities or expenses.
Risks Related to Accounting and undisclosed or potential legal liabilities of the acquired company. MDC’s failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause MDC to fail to realize their anticipated benefits, incur unanticipated liabilities and harm MDC’s business generally. MDC’s acquisitions and other strategic transactions could also result in dilutive issuances of the Company’s equity securities, the incurrence of debt, contingent liabilities, amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm its financial condition or operating results. Furthermore, the anticipated benefits or value of MDC’s acquisitions and other strategic transactions may not materialize.Tax Issues
MDC’sOur results of operations are subject to currency fluctuation risks.
Although MDC’sour financial results are reported in U.S. dollars, a portion of itsour revenues and operating costs areis denominated in currencies other than the U.S. dollar.dollar, and the functional currency of our foreign operations is generally their respective local currency. As a result, fluctuations in the exchange rate between the U.S. dollar and other currencies, particularly the Canadian dollar, the Euro and the British Pound, may affect MDC’sour financial results and competitive position. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenues, operating income and the value of balance-sheet items, including intercompany payables and receivables, that are denominated in other currencies. These changes could cause our revenue and net income in U.S. dollars to be higher or lower than our results in local currency when compared against other periods.
Goodwill,In addition, certain of our expenses are incurred in currencies other than those in which we bill for the related services. An increase in the value of certain currencies, such as those listed above, could increase costs for delivery of services overseas by increasing labor and other costs that are denominated in local currency. Our contractual provisions or cost management efforts may not be able to offset their impact, and our currency hedging activities, which are designed to partially offset this impact, may not be successful. This could result in a decrease in the profitability of our contracts that are denominated in such currencies.
Our goodwill, intangible assets and right-of-use assets may become impaired.
We have recorded a significant amount of goodwill and, intangible assets in our consolidated financial statements in accordance with GAAP resulting from our acquisition activities, which principally represent the specialized know-how of the workforce at the agenciesand we have acquired.in the past recorded, and may in the future record, significant charges for impairment of goodwill and intangible assets. We also have recorded a significant amount of right-of-use lease assets in our consolidated financial statements and we have in the past recorded, and may in the future record charges for impairment of these assets. We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2 of the Notes to the Consolidated Financial Statements included herein.impairment. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. If MDC concludes that any intangible asset and goodwill values are impaired, any resulting non-cashFor example, in the year ended December 31, 2022, we recorded an impairment charge could have a material adverse effect on our results of operations and financial position.$116.7 million after concluding that the carrying value of eight reporting units exceeded their fair value. See Note 8 of the Notes to the Consolidated Financial Statements for details on goodwill and intangible asset impairment recorded in the twelve monthsyear ended December 31, 2020. 
In addition,2022. If we have recorded a significant amount of right-of-use assets in our consolidated financial statements in accordance with GAAPconclude that any further intangible asset and goodwill values are impaired, whether as a result of the adoption of Accounting Standards Codification, Leases (“ASC 842”). Uponunderperformance in one or more reporting units, a triggering event, we test the right-of-use assets forpotential recession or other disruption, interest rate increases or other factors, any resulting non-cash impairment as discussed in Note 2 of the Notes to the Consolidated Financial Statements included herein. If a right-of-use asset is impaired, the charge could have a material adverse effect on our business, results of operations and financial position. See Note 10condition.

Material weaknesses in our internal control over financial reporting were identified as of December 31 2021, and remain unremediated as of December 31, 2022. If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price.
As discussed in Item 9A. “Controls and Procedures” of this Form 10-K, management identified material weaknesses in our internal control over financial reporting for the fiscal year ended December 31, 2021 that remained unremediated as of December 31, 2022. Any failure to remediate the material weaknesses or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us, as and when required, conducted in accordance with Section 404 of the NotesSarbanes-Oxley Act (“Section 404”), or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal further deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. If we are unable to implement and maintain effective internal control over financial reporting, our ability to record, process and report financial information timely and accurately could be adversely affected. In addition, any such failure, or any misstatement or restatement of financial information, could also cause investors to lose confidence in the Consolidatedaccuracy and
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completeness of our reported financial information, which could negatively affect the market price of our Class A Common Stock.
Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud.
We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.
The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial StatementsCondition and Results of Operations,” the results of which form the basis for details on lease impairments recordedmaking judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A Common Stock. Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use assets. lease assets, and income taxes.
We may be subject to adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain.

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We and OpCo are a Canada-domiciled multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that jurisdictional tax authorities may take a contrary view, which may have a significant impact on our global provision for income taxes. Additionally, as a pass-through entity for U.S. tax purposes, OpCo is required to make periodic distributions to (i) us, to enable us to pay taxes allocable to our investment in OpCo, and (ii) the holders of OpCo’s common units and corresponding shares of our Class C Common Stock. If our or OpCo’s effective tax rate were to increase, such obligations to make tax distributions will correspondingly increase. See “—Risks Related to Our Capital Structure and Financing—Our Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement.”
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. recentlyFor example, the United States enacted significant tax reform, and certain provisions of the new law may adversely affect us. In addition, the Biden administration has proposed several corporate tax increases, including raising the U.S. corporate income tax rate and greater taxation of international income, which, if enacted, could adversely affect our tax liability, and governmental tax authorities are increasingly scrutinizing the tax positions of companies. The United States has also enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other changes, introduced a new 1% exercise tax on certain net share repurchases and equivalent redemptions.
Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development (the “OECD”), are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. In particular, the OECD has agreed to implement a global minimum tax rate of 15% which would operate by imposing a top-up tax on profits arising in a jurisdiction whenever the effective tax rate of a large multinational enterprise, determined on a jurisdictional basis, is below the 15% minimum rate (such minimum tax proposal, “Pillar Two”). In December 2022, the European Union member states formally adopted the European Commission’s proposal for a directive ensuring a 15% minimum effective tax rate for large multinational groups (the “Pillar Two Directive”). The Pillar Two Directive is expected to be implemented in the national law of the European Union
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member states by December 31, 2023. If Pillar Two is implemented in the European Union or any other jurisdictions in which we operate, we expect these rules would apply to our subsidiaries in those jurisdictions and could impact our consolidated effective corporate income tax rate as well as increase our tax compliance costs.
If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, as well as OpCo’s obligations to make tax distributions, and our business, financial condition or results of operations may be adversely impacted.
Risks Relating to Our Class A Shares
Future issuances of equity securities, which may include securities that would rank senior to our Class A shares, may cause dilution to our existing shareholders and adversely affect the market price of our Class A shares.
The market price of our Class A shares could decline as a result of sales of a large number of our Class A shares in the market, or the sale of securities convertible into a large number of our Class A shares. The perception that these sales could occur may also depress the market price of our Class A shares. On March 7, 2017, we issued 95,000 Series 4 convertible preference shares (the “Series 4 Preference Shares”) with an initial aggregate liquidation preference of $95.0 million, which will be convertible into Class A shares or our Series 5 convertible preference shares at a current conversion price of $7.42 per share. Pursuant to the Goldman Letter Agreement, the conversion price would (subject to the closing of the Transactions) be reduced to $5.00 per share, subject to entry into definitive documentation between MDC and the holder. On March 14, 2019, we issued 50,000 Series 6 convertible preference shares (the “Series 6 Preference Shares” and, together with the Series 4 Preference Shares, the “Preference Shares”) with an initial aggregate liquidation preference of $50.0 million, which will be convertible into Class A shares or our Series 7 convertible preference shares at an initial conversion price of $5.00 per share.  The terms of the Preference Shares provide that the conversion price may be reduced, which would result in the Preference Shares being convertible into additional Class A shares upon certain events, including distributions on our Class A shares or issuances of additional Class A shares or equity-linked securities, at a price less than the then-applicable conversion price. The issuance of Class A Shares upon conversion of the Preference Shares would result in immediate and substantial dilution to the interests of our Class A shareholders. In addition, the holders of the Preference Shares may ultimately receive and sell all of the shares issuable in connection with the conversion of such Preference Shares, which could result in a decline in the market price of our Class A shares.  The market price of our Class A shares may also be affected by factors, such as whether the market price is near or above the conversion price, that could make conversion of the Preference Shares more likely.
Further, the Preference Shares rank senior to the Class A shares, which could affect the value of the Class A shares on liquidation or, as a result of contractual provisions, on a change in control transaction. For example, pursuant to the related purchase agreements, the Company has agreed, with certain exceptions, not to become party to certain change in control transactions that are approved by the Board other than a qualifying transaction in which holders of Preference Shares are entitled to receive cash or qualifying listed securities with a value equal to the then-applicable liquidation preference plus accrued and unpaid dividends. See Note 15 of the Notes to the Consolidated Financial Statements for more information regarding the Series 4 Preference Shares and the Series 6 Preference Shares.
Additionally, any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our Class A shares, and may result in dilution to owners of our Class A shares. Because our decision to issue additional debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. Also, we cannot predict the effect, if any, of future issuances of our Class A shares on the market price of our Class A shares.
Our shares of common stock are thinly traded and our stock price may be volatile.
The market price of our Class A Shares has been subject to wide fluctuations, and this volatility may continue. Among the factors that could affect the price of our Class A Shares are the risks described in this “Risk Factors” section and other factors, including:
developments or announcements related to the Proposed Transactions;
quarterly variations in our operating results compared to market expectations;
changes in expectations as to our future financial performance;
a lack of liquidity in the market for our Class A Shares;
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actual or expected sales of our Class A Shares by our shareholders;
general market conditions; and
domestic and international economic, legal and regulatory factors, including the effect of COVID-19 on these factors.

Risks Relating to Our Indebtedness
The indenture governing the Senior Notes and the Credit Agreement governing our secured line of credit contain various covenants that limit our discretion in the operation of our business.
MDC has Senior Notes due 2024 outstanding in the aggregate principal amount of $870.3 million. The indenture governing the Senior Notes and the Credit Agreement governing our lines of credit contain various provisions that limit our discretion in the operation of our business by restricting our ability to:
sell assets;
pay dividends and make other distributions;
redeem or repurchase our capital stock;
incur additional debt and issue capital stock;
create liens;
consolidate, merge or sell substantially all of our assets;
enter into certain transactions with our affiliates;
make loans, investments or advances;
repay subordinated indebtedness;
undergo a change in control;
enter into certain transactions with our affiliates;
engage in new lines of business; and
enter into sale and leaseback transactions.
These restrictions on our ability to operate our business in our discretion could seriously harm our business by, among other things, limiting our ability to take advantage of financing, mergers and acquisitions and other corporate opportunities. The Credit Agreement is subject to various additional covenants, including a senior leverage ratio, a total leverage ratio, a fixed charge coverage ratio, and a minimum EBITDA level (as defined per the Credit Agreement). Events beyond our control could affect our ability to meet these financial tests, and we cannot assure you that they will be met.
Our substantial indebtedness could adversely affect our cash flow and prevent us from fulfilling our obligations, including the Senior Notes.
The net carrying value of MDC’s indebtedness was $843.2 million, net of debt issuance costs, as of December 31, 2020. In addition, we expect to make additional drawings under the Credit Agreement from time to time. As a holding company, our ability to pay principal and interest on our indebtedness is dependent on the generation of cash flow by and distributions from our subsidiaries. Our subsidiaries’ business may not generate sufficient cash flow from operations to meet MDC’s debt service and other obligations. If we are unable to meet our expenses and debt service obligations, we may need to obtain additional debt, refinance all or a portion of our indebtedness on or before maturity, sell assets or raise equity. We may not be able to obtain additional debt, refinance any of our indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to default on our obligations and impair our liquidity. Our inability to generate sufficient cash flow to satisfy our debt obligations, to obtain additional debt or to refinance our obligations on commercially reasonable terms would have a material adverse effect on our business, financial condition and results of operations.
Further, we currently receive senior unsecured and long-term debt and corporate quality ratings from Standard & Poor’s Rating Services and Moody’s Investor Service Inc. Our ratings are subject to periodic review, and we cannot assure you that we will be able to retain our current or any future ratings. If our ratings are reduced from their current levels, this could further adversely affect our liquidity and our business, financial condition and results of operation.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under the Credit Agreement could terminate their commitments to loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation. Our level of indebtedness could have important consequences. For example, it could:
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make it more difficult for us to satisfy our obligations with respect to the Senior Notes;
make it difficult for us to meet our obligations with respect to our contingent deferred acquisition payments;
limit our ability to increase our ownership stake in our Partner Firms;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other activities;
limit our flexibility in planning for, or reacting to, changes in our business and the advertising industry, which may place us at a competitive disadvantage compared to our competitors that have less debt; and
limit, particularly in concert with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds or take other actions.
Despite our current debt levels, we may be able to incur substantially more indebtedness, which could further increase the risks associated with our leverage.
We may incur substantial additional indebtedness in the future. The terms of our Credit Agreement and the indenture governing the 7.50% Notes permit us and our subsidiaries to incur additional indebtedness subject to certain limitations. If we or our subsidiaries incur additional indebtedness, the related risks that we face could increase.
We are a holding company dependent on our subsidiaries for our ability to service our debt.
MDC is a holding company with no operations of our own. Consequently, our ability to service our debt is dependent upon the earnings from the businesses conducted by our subsidiaries. Our subsidiaries are separate and distinct legal entities. Although our operating subsidiaries have generally agreed to allow us to consolidate and “sweep” cash, subject to the timing of payments due to noncontrolling interest holders, any distribution of earnings to us from our subsidiaries is contingent upon the subsidiaries’ earnings and various other business considerations. Also, our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of common stock to participate in those assets, will be structurally subordinated to the claims of that subsidiary’s creditors. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
Risks Relating to the Proposed Transactions
The Proposed Transactions may give rise to taxable income in the United States for the Company and its subsidiaries, and there can be no assurances that material adverse tax consequences will not resultresulting from the Proposed Transactions or related transactions in Canada, the U.S.,United States or other jurisdictions. Any such adverse tax consequences could adversely affect
In connection with the Combined Company or its share price, following completion of the Proposed Transactions.
TheTransactions, MDC completed a redomiciliation from the federal jurisdiction of Canada to the State of Delaware (the “Redomiciliation”). We believe that the Redomiciliation should qualifyqualifies as a “reorganization” under section 368(a) of the Internal Revenue Code. Specifically, the Redomiciliation should beCode (the “Code”) and treated, for U.S. federal income tax purposes, as if the CompanyMDC (i) transferred all of its assets and liabilities to a new U.S. corporation (MDC Delaware)(“New MDC”) in exchange for all of thesuch new corporation’s outstanding stock of MDC Delaware and (ii) then distributed the stock of New MDC Delaware that the Companyit received in the transaction to the Company’sits shareholders in liquidation of MDC. Additionally, we believe the Company. Additionally, the Company expects the Business Combination toTransactions should be treated for tax purposes as a deemed transfer by New MDC of its assets to OpCo and an assumption of New MDC’s liabilities by OpCo in a transaction intended to qualify as a contribution to OpCo in exchange for OpCo Common UnitsOpCo’s common units or OpCo Preferred Unitspreferred units under section 721 of the Internal Revenue Code, of 1986, as amended, and any successor provision of U.S. federal law (the “Code”), and that Stagwell’s contributionsStagwell Media’s contribution of its businesses to OpCo is similarly intended to be subject to section 721 of the Code. Certain elements of the structure can be expected to give rise to corporate taxable income for the Combined Company. Additionally, because setting up the Up-C structure in the Business Combination involves a contribution by New MDC of its assets to OpCo, and an assumption by OpCo of New MDC’s liabilities, the flexibility of the Company, MDC Delaware, New MDC and OpCo to incur certain liabilities or fund certain expenses outside of the ordinary course of their businesses prior to effecting the Proposed Transactions will be significantly limited, including certain liabilities incurred in connection with implementing the Proposed Transactions, as such liabilities could trigger unanticipated tax costs for New MDC in connection with the implementation of the Proposed Transactions. To the extent that liabilities assumed by OpCo as part of the Proposed Transactions are viewed as non-ordinary course liabilities, such assumption
We may give rise to U.S. corporate taxable income for New MDC resulting from the assumption. Additionally, to the extent OpCo is treated as assuming such a liability, under relevant U.S. tax rules a portion of OpCo’s other liabilities may also be recharacterized and give rise to additional corporate taxable income for New MDC.
There can be no assurances thatface material additional adverse U.S. tax consequences will notas a result fromof the Proposed Transactions, and there can be no assurance that the Internal Revenue Service willmay not agree with or notmay otherwise challenge the Company’sour position on the tax treatment of the Proposed Transactions or of internal restructuring transactions undertaken prior
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to, after, or in connection with the Proposed Transactions, which could result in higher U.S. federal tax costs for the Combined Company than currently anticipated,we anticipate, including a reduction in the net operating loss carryforwards of Maxxcom Inc. (which will become tax attributescertain of the Combined Company as a result of the Proposed Transactions).
The Company hasour subsidiaries. We have not applied for a ruling related to the Proposed Transactions and doesdo not intend to do so. Any adverse tax consequences resulting from the Proposed Transactions or theour operations as a combined company could have an adverse effect on our business, results of the Combined Company after the Proposed Transactions could adversely affect the Combined Company or its share price following the completion of the Proposed Transactions.operations, financial condition and cash flows. Moreover, U.S. tax laws significantly limit the Combined Company’sour ability to redomicile outside of the U.S. once the Proposed Transactions are complete.United States.
The Redomiciliation may give rise to significant Canadian corporate tax.
AsIn addition, as a result of the Redomiciliation, the Company expects to incurwe incurred a significant Canadian corporate tax liability and recorded a tax receivable of $12 million included in the amount of approximately $21 million. However, such amount is only an estimate and the actual amount of Canadian corporate tax liability may be significantly higher than the Company’s estimate.
Other Assets in our consolidated financial statements. For purposes of the Canadian Tax Act, the Company’sMDC’s taxation year will bewas deemed to have ended immediately prior to it ceasing to be a resident of Canada as a result of the Redomiciliation. Immediately prior to the time of this deemed year end, the Company will beMDC was deemed to have disposed of each of its properties for proceeds of disposition equal to the fair market value of such properties at that time and will bewas deemed to have reacquired such properties for a cost amount equal to that fair market value. The Company will beMDC was subject to income tax under Part I of the Canadian Tax Act on any income and net taxable capital gains which arise as a result of this deemed disposition (after the utilization of any available capital losses or non-capital losses). The Company will and was also be subject to “emigration tax” under Part XIV of the Canadian Tax Act on the amount by which the fair market value, immediately before the Company’sMDC’s deemed year end, of all of its properties exceedsexceeded the total of certain of its liabilities and the paid-up capital, determined for purposes of that emigration tax, of all the issued and outstanding shares of the CompanyMDC immediately before such deemed year end.
The quantum of Canadian federal income tax payable by the CompanyMDC as a result of the Redomiciliation will dependdepends upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S. dollar exchange rate, itsMDC’s shareholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the time the Redomiciliation becomes effective on the Redomiciliation Effective Date (the “Redomiciliation Effective Time”). Prior to the Redomiciliation Effective Time, there is no certainty that the fair market value of the properties of the Company will not increase, and there is no certainty that the estimated fair market value of the properties of the Company or the amounts of its relevant tax attributes will be accepted by Canadian federal tax authorities, which may result in additional taxes payable as a resulttime of the Redomiciliation. The Company hasWe have not applied to the Canadian federal tax authorities for an advancea tax ruling relating to the Redomiciliation and doesdo not intend to do so. Additionally, it is possible that valuationsso, and implied valuationsthe Canadian federal tax authorities may not agree with or may otherwise challenge our position on the tax treatment of the Company’s property are made availableRedomiciliation, which may be relevantcould result in assessing the potentialhigher Canadian corporate tax costs of the Redomiciliation. As a result, the quantum of Canadian tax payable by the Company may significantly exceed the Company’s estimates that are reflected in the Form S-4.liabilities than we anticipate. Any such adverse tax consequences could adversely affect our business, results of operation, financial condition and cash flows.
Risks Related to Ownership of Our Class A Common Stock and Our Status as a Public Company
Our stock price may be volatile.
The trading price of our Class A Common Stock may fluctuate substantially and may be lower than its current price. This may be especially true for companies like ours with a small public float. If an active market for our securities develops and continues, the Combined Companytrading price of our securities could be volatile and its share price.
Ifsubject to wide fluctuations. The trading price of our securities depends on many factors, including those described elsewhere in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our securities since you might be unable to sell them at or above the IRS does not agree with the Company’s determinationprice you paid for them. Any of the “all earnings and profits amount” attributable to the Company’s shares, certain U.S. Holders may owe a higher than anticipated amount of U.S. federal income taxes as a result of the Proposed Transactions (and specifically, the Redomiciliation).
Subject to the potential application of the passive foreign investment company (as defined under Section 1297 of the Code) rules, certain beneficial owners of the Company’s Class A Shares or Class B Shares that are, for U.S. federal income tax purposes, (i) individual citizens or residents of the United States; (ii) corporations created or organized in the United States or in any state thereof; (iii) estates the income of which is subject to United States federal income tax regardless of its source; or (iv) trusts if (a) a court within the United States can exercise primary supervision over the administration of the trust or (b) theyfactors listed below could have a valid electionmaterial adverse effect on your investment in place to be treated asour securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a United States person and one or more United States persons has authority to control all substantial decisions of the trust (each such person, a “U.S. Holder”) that, at the time of the Redomiciliation, (i) own shares of the Company with a fair market value of $50,000 or more and (ii) would otherwise recognize taxable gain for U.S. federal income tax purposes with respect to their shares of the Company in connection with the Proposed Transactions (and specifically, the Redomiciliation), may make the “all earnings and profits” election with respect to their shares of the Company in lieu of recognizing such taxable gain. A U.S. Holder that validly makes such “all earnings and profits” election will be required to include in income, as a deemed dividend, the “all earnings and profits amount” (as defined under applicable Treasury Regulations) that is attributable, under U.S. tax principles, to such U.S. Holder’s shares of the Company. Additionally, U.S. persons that own directly, indirectly or constructively (under specified attribution rules), 10% or more of the total combined voting power or of the total value of all classes of the Company’s equity (each such person, a “10% U.S. Shareholder”) may be subject to special rules which depend on the Company’s calculation of its earnings and profits.further decline.
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The Company is currentlyFactors affecting the trading price of our securities may include (but are not limited to):
market conditions in the processbroader stock market in general or in our industry in particular;
actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of determining its historical earningscompanies perceived to be similar to us;
changes in the market’s expectations about our operating results;
the public’s reaction to our press releases, other public announcements and profits and also expects to determine its earnings and profits for the taxable year of the Redomiciliation endingfilings with the dateSecurities and Exchange Commission;
rumors and speculation in the press or investment community or on social media about us, our clients or companies perceived to be similar to us;
actual or anticipated developments in our business, competitors’ businesses or the competitive landscape generally;
the operating results failing to meet the expectation of the closing of the Redomiciliation (the “Redomiciliation Effective Date”). Although the Company will not complete this determination until after completion of the Proposed Transactions, the Company currently expects to have a significant amount of earnings and profits for the taxable year of the Redomiciliation. The calculation of “all earnings and profits” depends on the applicable shareholder’s period of ownership and the outcome may differ based on the particular shareholder. At this stage, there can be no assurances regarding the “all earnings and profits amount.” In general, the “all earnings and profits amount” attributable to the shares of the Company held bysecurities analysts or investors in a particular U.S. Holder should depend onperiod;
our operating results failing to meet the Company’s accumulated earningsguidance we may issue from time to time;
changes in financial estimates and profits fromrecommendations by securities analysts concerning us or the date that the shares of the Company were acquired by such U.S. Holder through the Redomiciliation Effective Date. The determination of the Company’s earnings and profits is a complex determination and may be impacted by numerous factors. Accordingly, there can be no assurance that the IRS will agree with the Company’s determination of such earnings and profits.market in general;
If the IRS does not agree with the Company’s determination of the amount, timing or source of its earnings and profits, the earnings and profits of the Company may be greater than anticipated, and the effect of such earnings and profits on shareholder taxation may be greater than anticipated. In such case, a U.S. Holder that makes an “all earnings and profits” election or a 10% U.S. Shareholder could have a greater than anticipated “all earnings and profits amount” in respect of such U.S. Holder’s MDC shares and thereby recognize greater taxable income. In addition, MDC shareholders who receive “all earnings and profits” data from the Company may bring suit against the Company if such data is successfully disputed by the IRS.
U.S. Holders are strongly urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the Proposed Transactions to them in their particular circumstances, including whether they would be considered 10% U.S. Shareholders, whether to make the “all earnings and profits” election where applicable, and the appropriate filing requirements with respect to this election
Additionally, special rules apply to 10% U.S. Shareholders. 10% U.S. Shareholders should consult their own tax advisors regarding the U.S. federal and other applicable tax consequences of the Proposed Transactions to them in light of their particular circumstances.
Completion of the Proposed Transactions may affect the timing of auditthe achievement of objectives under our business plan and the timing and amount of costs we incur in connection therewith;
short selling of our Class A Common Stock or reassessmentsrelated derivative securities;
actions by tax authorities.hedge funds, short term investors, activist stockholders or stockholder representative organizations;
The determinationoperating and stock price performance of income and other tax liabilities of the Company and its subsidiaries requires interpretation of complex domestic and foreigncompanies that investors deem comparable to ours;
changes in laws and regulations affecting our business;
commencement of, or involvement in, litigation or investigations involving us;
changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
the volume of our Class A Common Stock available for public sale;
any major change in our Board or management;
sales of substantial amounts of our Class A Common Stock by our directors, officers or significant stockholders or the perception that are subjectsuch sales could occur;
the extent to change.which retail and other individual investors (as distinguished from institutional investors), invest in our Class A Common Stock;
sudden increases in the demand for our Class A Common Stock, including as a result of any “short squeezes”;
speculative trading that is not primarily motivated by our announcements or the condition of our business;
general economic and political conditions such as recessions or other economic downturns, inflation, interest rate increase, “trade wars,” pandemics and acts of war or terrorism and geopolitical tensions; and
other risk factors described in this “Risk Factors” section.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The Company’s interpretation of taxation law may differ fromstock market in general and Nasdaq in particular have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the interpretationoperating performance of the tax authorities. There are tax matters under reviewparticular companies affected. The trading prices and valuations of these stocks, and of our Class A Common Stock, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which the timing of resolution is uncertain. While the Company believes that the provision for income taxes is adequate, completion of the Proposed Transactions may affect the timing of audit and reassessment of taxes by certain tax authorities, which reassessments may be without technical merit and possibly material.
The Company will allocate time and resources to effecting the Proposed Transactions and incur non-recurring costs related to the Proposed Transactions.
The Company and its management have allocated and will continueinvestors perceive to be requiredsimilar to allocate time and resources to effecting the completionours could depress our stock price regardless of the Proposed Transactions and related and incidental activities, including preparing the “all earnings and profits amount” attributable to the shares of the Company, which data certain U.S. Holders may request. There is a risk that the challenges associated with managing these various initiatives may have aour business, impact and that consequently the underlying businesses will not perform in line with expectations. This could have an adverse effect on the reputation, business,prospects, financial condition or results of operationsoperations. Broad market and industry factors and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our Class A Common Stock, regardless of our actual operating performance. In addition, the Combined Company.trading price of our Class A Common Stock may be adversely affected by third parties trying to drive down or drive up the market price. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if our stock declines or otherwise exhibits volatility, and their activities can negatively affect our stock price and increase the volatility of our stock price. These broad market and industry factors could seriously harm the market price of our Common Stock, regardless of our operating performance. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
In addition, in the Company expectspast, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or any amounts paid to incursettle any such actual or threatened litigation could require that we make significant payments.
If 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.
We have in the past provided, and may from time to time provide, guidance regarding our future performance that represents our management’s estimates as of the date such guidance is provided. Any such guidance is based upon a number of non-recurring costs associatedassumptions with the Proposed Transactions, including taxes, legal fees, advisor fees, proxy solicitor fees, filing fees, mailing expenses, financial printing expensesrespect to future business decisions (some of which may change) and other fees. There can be no assuranceestimates that, the actual costs will not exceed those estimated and the actual completion of the Proposed Transactions may result in additional and unforeseen expenses. Many of these costs will be payable whether or not the Proposed Transactions are completed. While it is expected that benefits of the Proposed Transactions achieved by the Combined Company will offset these transaction costs over time, this net benefit may not be achieved in the short-term or at all, particularly if the Proposed Transactions are delayed or do not happen at all. These combined factors could adversely affect the business, results of operations or financial condition of the Combined Company.
The calculation of the number of Stagwell OpCo Units and the Stagwell Class C Shares to be issued will not be adjusted if there is a change in the value of Stagwell or its assets or the value of MDC before the Proposed Transactions are completed.
The calculation of the number of the Stagwell OpCo Units and the Stagwell Class C Shares to be issued to Stagwell in the Proposed Transactions will not be adjusted (i) if the value of the business or assets of Stagwell increases prior to the consummation of the Proposed Transactions or the value of MDC decreases prior to the Proposed Transactions, or (ii) if the value of the business or assets of Stagwell declines prior to the consummation of the Proposed Transactions or the value of MDCwhile presented with
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increases priornumerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies (many of which are beyond our control). Guidance is necessarily speculative in nature, and it can be expected that some or all of the Proposed Transactions. MDCassumptions that inform such guidance will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date such guidance is provided. Actual results may notvary from such guidance, and the variations may be permitted to terminatematerial. Investors should also recognize that the Transaction Agreement becausereliability of changesany forecasted financial data diminishes the farther in the valuefuture that the data is forecast. In light of Stagwell’s assets.the foregoing, investors should not place undue reliance on our financial guidance and should carefully consider any guidance we may publish in context. In addition, in prior periods our operating or financial results have not met our guidance, or we have reduced our guidance. If in the future our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline. In addition, even though we have issued public guidance in the past, we are not obligated to and may determine not to continue to do so in the future.
The Proposed Transactions may not be completed on the terms or timeline currently contemplated, or at all, as MDC and StagwellA significant portion of our Class A Common Stock is restricted from immediate resale but may be unable to satisfysold into the conditions or obtainmarket in the approvals required to completefuture, which could negatively affect the Proposed Transactions or such approvals may contain material restrictions or conditions.market price of our Class A Common Stock.
CompletionAs of December 31, 2022, Stagwell Media beneficially owned approximately 64% of our outstanding shares of Class A Common Stock on an as-converted basis. Although the Proposed Transactions isshares held by Stagwell Media are subject to numerous conditions, including the occurrence of,securities law restrictions on sales by affiliates, we, Stagwell Media and certain other parties are party to a registration rights agreement pursuant to which, among other things receiptand subject to certain restrictions, we are required to file with the Securities and Exchange Commission a registration statement registering for resale the shares of approvalsour Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders. In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued upon the conversion of our previously outstanding Series 8 convertible preferred stock.
As such, sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of Class A Common Stock.
We are a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, qualify for exemptions from certain corporate governance requirements. Our stockholders will not have the same protections afforded to stockholders of companies that are not controlled companies, and the satisfactioninterests of our controlling stockholder may differ from the interests of other conditions, including (i) the receiptstockholders.
Our CEO and Chairman, Mark Penn, beneficially owns or controls approximately 64% of the required shareholder approvals, and (ii) with respect tovoting power of our Common Stock. As a result, we are a “controlled company” within the Redomiciliation, authorizationmeaning of the director duly appointed (the “Director”) under Section 260Nasdaq rules, and as a result, we qualify for exemptions from certain corporate governance requirements. Under these rules, a company of which more than 50% of the Canada Business Corporations Act (the “CBCA”). Althoughvoting power for the Companyelection of directors is diligently applying its effortsheld by an individual, group or another company is a “controlled company” and may elect not to take, or causecomply with certain corporate governance requirements, including the requirements to be taken, all actions to do, or cause to be done, all things necessary, proper or advisable to obtain the requisite approvals, there can be no assurance that these conditions will be fulfilled or that the Proposed Transactions will be completedhave: (a) a majority of independent directors on the termsboard; (b) a nominating committee comprised solely of independent directors; (c) compensation of executive officers determined by a majority of the independent directors or timeline currently contemplated,a compensation committee comprised solely of independent directors; and (d) director nominees selected, or at all. MDC has and will continue to expend time and resources and incur expenses related torecommended for the Proposed Transactions. Manyselection by the board, either by a majority of the independent directors or a nominating committee comprised solely of independent directors. Although as of the date of this prospectus, we do not utilize any of these expenses must be paidexemptions, we may elect to utilize one or more of these exemptions for so long as we remain a “controlled company.” As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
In addition, this concentration of ownership and voting power allows Mr. Penn to control our decisions, including matters requiring approval by our stockholders (such as, subject to certain limitations, the election of directors and the approval of mergers or other extraordinary transactions), regardless of whether or not other stockholders believe that the Proposed Transactions are consummated. Governmental agencies may not approve the Proposed Transactions, may impose conditions to the approvaltransaction is in their own best interests. Such concentration of the Proposed Transactions or require changes to the terms of the Proposed Transactions. Any such conditions or changesvoting power could also have the effect of delaying, completion of the Proposed Transactions, imposing costs ondeterring or limiting the revenues of the Combined Company following the Proposed Transactions or otherwise reducing the anticipated benefits of the Proposed Transactions.
Completion of the Proposed Transactions may trigger certain provisions in agreements to which the Company orprecluding a StagwellEntity is a party.
The completion of the Proposed Transactions may trigger certain change in control, right of first offer, notice, consent, assignment or other provisions in agreements to which the Company or its subsidiaries are a party. In addition, while the Proposed Transactions will not result in an effective change of control or other business combination that might otherwise be beneficial to our stockholders, could deprive our stockholders of any Stagwell Entity, the completionan opportunity to receive a premium for their Class A Common Stock as part of the Proposed Transactions may trigger certain technical provisions in agreements to which a Stagwell Entity is a party. If such Stagwell Entity is unable to assert that such provisions should not apply, or the Company or such Stagwell Entity are unable to comply with or negotiate waiverssale of those provisions, the counterparties may exercise their rightsour company and remedies under the agreements, including potentially terminating such agreements or seeking monetary damages. Even if the Company or the applicable Stagwell Entity is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to the Combined Company.
Failure to complete the Proposed Transactions could adverselymight ultimately affect the market price of the Company’s Class A Shares as well as its business, financial condition and results of operations.
If the Proposed Transactions are not completed for any reason, the price of the Class A Shares may decline, or MDC’s business, financial condition and results of operations may be impacted to the extent that the market price of MDC’s shares reflects positive market assumptions that the Proposed Transactions will be completed and the related expected benefits will be realized; based on significant expenses, such as legal, advisory and financial services which generally must be paid regardless of whether the Proposed Transactions are completed; based on potential disruption of the business of MDC and distraction of its workforce and management team; and the requirement in the Transaction Agreement that, under certain limited circumstances, MDC must pay Stagwell a termination fee of $5,855,000.
Investors holding the Company’s shares prior to the completion of the Proposed Transactions will, in the aggregate, have a significantly reduced ownership and voting interest in the Combined Company after the Proposed Transactions and will exercise less influence over management.
Investors holding the Company’s shares prior to the completion of the Proposed Transactions will, in the aggregate, own a significantly smaller percentage of the Combined Company after the completion of the Proposed Transactions. On a pro forma basis (and (i) without giving effect to the conversion of any Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of Class A Shares (including Stagwell) and Class B Shares will receive Combined Companyour Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. Consequently, the Company’s shareholders, collectively, will be able to exercise less influence over the management and policies of the Combined Company than they will be able to exercise over the Company’s management and policies prior to the completion of the Proposed Transactions. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed TransactionsStock.
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will eachSecurities or industry analysts may cease publishing research or reports about us, our business, or our market, or publish negative opinions about our company or the price of our Class A Common Stock, which could cause the price and trading volume of our Class A Common Stock to decline.
The trading market for our Class A Common Stock is influenced by the research and reports that industry or securities analysts publish (or may publish) about us, our business and operations, our market or our competitors. If securities or industry analysts cease such coverage, or other analysts fail to commence coverage of us, our stock price and trading volume could be reduced,negatively impacted. In addition, we have no control over equity research analysts or the content of their reports, and the percentageif any of the Combined Companyanalysts who cover, or may cover us in the future, make negative recommendations regarding our stock or issue other unfavorable commentary or research. or provide more favorable relative recommendations about our competitors, the price and trading volume of our Class A Common Stock could decline.
There is no guarantee that existing Company shareholders will holdan active and liquid public market for our securities will be proportionally increased,sustained.
A liquid trading market for our Class A Common Stock may not be sustained. In the absence of a liquid public trading market:
you may not be able to liquidate your investment in shares of our Class A Common Stock;
you may not be able to resell your shares of our Class A Common Stock at or above the price you paid for them;
the market price of shares of our Class A Common Stock may experience significant price volatility; and
there may be less efficiency in carrying out your purchase and sale orders.
Additionally, if Stagwell isour Class A Common Stock becomes delisted from Nasdaq for any reason, the liquidity and price of our Class A Common Stock may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to effectsell your shares of Class A Common Stock unless a market can be sustained.
We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the certain restructuring transactions prior to the closing of the Proposed Transactions.
The announcement and pendency of the Proposed Transactions could have an adverse effect on the stock price of the Class A Shares as well asCommon Stock.
We do not intend to declare and pay dividends on our common stock for the foreseeable future. We currently intend to invest future earnings, if any, to fund growth, to develop business, financial condition, results of operations or business prospects of MDCfor working capital needs and Stagwell.
The announcement and pendency of the Proposed Transactions could disrupt MDC’s and Stagwell’s businesses in negative ways. For example, customers and other third-party business partners of MDC or Stagwell may seek to terminate and/or renegotiate their relationships with MDC or Stagwell as a result of the Proposed Transactions, whether pursuant to the terms of their existing agreements with MDC and/or Stagwell or otherwise.for general corporate purposes. In addition, currentcertain provisions of Delaware law and prospective employees of MDC and Stagwellour outstanding indebtedness impose requirements that may experience uncertainty regarding their future roles with the Combined Company, which might adversely affect MDC’s and Stagwell’srestrict our ability to retain, recruitpay cash dividends on our common stock. Therefore, you are not likely to receive any cash dividends on shares of our Class A Common Stock for the foreseeable future, and motivate key personnel. Should they occur,the success of an investment in the shares of our Class A Common Stock will depend upon any of these events could adversely affect the stockfuture appreciation in their market price. The market price of theshares of our Class A Shares,Common Stock may never appreciate and may decrease.
We may issue additional shares of our Class A Common Stock or harmother equity securities without your approval, which would dilute your ownership interests and may depress the financial condition, resultsmarket price of operationsyour shares.
We may issue additional shares of our Class A Common Stock or business prospectsother equity securities of MDCequal or Stagwell.senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our equity incentive plans, without stockholder approval, in a number of circumstances. Our issuance of additional shares of our Class A Common Stock or other equity securities of equal or senior rank could have the following effects:
your proportionate ownership interest in us will decrease;
the relative voting strength of each previously outstanding share of Class A Common Stock may be diminished; or
the market price of our stock may decline.
Some provisions of MDC’s directorsDelaware law and executive officers have interests in seeingour certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the Proposed Transactions completed that may be different from, or invalue of our Class A Common Stock.
In addition to thoseprotections afforded under the Delaware General Corporation Law (“DGCL”), or certificate of incorporation and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in management or to our Board. These provisions include, among other MDC Canada Shareholders.things:
Certain of MDC’s directors and executive officers have interestsno cumulative voting in the Proposed Transactions that may differ from,election of directors, which limits the ability of minority stockholders to elect director candidates; and
the ability of our Board to issue shares of preferred stock in one or be in addition to, those of the Company’s shareholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. These interests include, but are not limited to, the continued service of certain directors of MDC as directors of the Combined Company following the Proposed Transactions, the continued employment of all of MDC’s current executive officers by the Combined Company following the Proposed Transactions, the treatment in the Proposed Transactions of equity awards,more series and, with respect to Mark Penn, potential receipteach such series, to fix the number of distributions as a resultshares constituting such series and the designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of the Proposed Transactions andshares of such series, without stockholder approval, which could be used to significantly dilute the ownership of interestsa hostile acquirer.
These provisions in Stagwell. The membersour certificate of incorporation and our bylaws, as well as provisions of Delaware law, may discourage, delay or prevent a transaction involving a change in our control that is in the best interest of our minority stockholders. Even in
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the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A Common Stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more difficult for stockholders to nominate directors for election to our Board and take other corporate actions and may also discourage acquisition proposals, or delay or prevent a change in control, which could depress the trading price of our Class A Common Stock.
Our certificate of incorporation designates the Court of Chancery of the MDC Special CommitteeState of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.
Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the exclusive forum for:
any derivative action or proceeding brought on behalf of our company;
any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of our company to us or our stockholders;
any action or proceeding asserting a claim arising pursuant to any provision of the DGCL (or any successor provision thereto) or as to which the DGCL (or any successor provision thereto) confers jurisdiction on the Court of Chancery of the State of Delaware;
any action or proceeding asserting a claim against us or any current or former director, officer or other employee of our company arising pursuant to any provision of the DGCL, our certificate of incorporation, or our bylaws (as each may be amended from time to time);
any action asserting a claim governed by the internal affairs doctrine; or
any other action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
For the avoidance of doubt, the foregoing provisions of our certificate of incorporation will not apply to any action or proceeding asserting a claim under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the MDC Boardthreat of Directors (withinconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation provides that, unless we consent in writing to the interested directors abstaining) were awareselection of these interests and considered them, among others, in their approval and adoptionan alternative forum, the federal district courts of the Transaction AgreementUnited States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933. Although investors cannot waive compliance with the federal securities laws and the Proposed Transactionsrules and their recommendation thatregulations thereunder, any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the Company’s shareholders adoptprovisions of our certificate of incorporation described in the Transaction Agreement and approvepreceding sentences.
These provisions of our certificate of incorporation could limit the Proposed Transactions.
MDC and Stagwell may have difficulty attracting, motivating and retaining executives andability of our stockholders to obtain a favorable judicial forum for certain disputes with us or with our directors, officers or other employees, in light of the Proposed Transactions.
MDC and Stagwellwhich may have difficulty attracting, motivating and retaining executives and other employees in light of the Proposed Transactions. Uncertainty about the effect of the Proposed Transactions on the employees of MDC and Stagwell may have an adverse effect on MDC and Stagwell. This uncertainty may impair MDC’s and Stagwell’s ability to attract, retain and motivate personnel until the Proposed Transactions are completed. Employee retention may be particularly challenging during the pendency of the Proposed Transactions, as employees may feel uncertain about their future roles with MDC or Stagwell after their combination. If employees of MDC or Stagwell depart because of issues relating to the uncertainty or perceived difficulties of integration or a desire not to become employees of MDC after the Proposed Transactions are consummated, MDC’s ability to realize the anticipated benefits of the Proposed Transactions could be reduced.
Litigation relating to the Transactions could result in an injunction preventing the completion of the Transactions and/or substantial costs to MDC.
Securities class actiondiscourage such lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements like the Transaction Agreement. Following the filing of our registration statement on Form S-4, dated February 8, 2021, three securities lawsuits have been filed against us and our directors, relatingofficers and employees. Alternatively, if a court were to alleged omissionsfind these provisions of material informationour current bylaws inapplicable to, or unenforceable in respect of, one or more of the Form S-4types of actions or proceedings listed above, we may incur additional costs associated with respect to the Transaction. Defending against these and any additional claims can resultresolving such matters in substantial costs and divert management time and resources. An adverse judgment in any current or future claim could result in monetary damages,other jurisdictions, which could have a negative impact on MDC's liquidity and financial condition. The lawsuits that have been filed to date seek, and any additional lawsuits could also seek, among other things, injunctive relief or other equitable relief, including a request enjoin the parties from consummating the Proposed Transactions. One of the conditions to the closing of the Proposed Transaction is that no injunction by any governmental entity having jurisdiction over MDC has been entered and continues to be in effect and no law has been adopted, in either case that prohibits the closing of the Proposed Transactions. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Proposed Transactions, that injunction may delay or prevent the mergers from being completed within the expected time frame or at all, which may adversely affect MDC'sour business, financial positioncondition and results of operations.
There While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that anysuch provisions will be enforced by a court in those other jurisdictions.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers.
We are subject to the reporting requirements of the defendants will be successful inSecurities Exchange Act of 1934, as amended (the “Exchange Act”), the outcomelisting requirements of the existingNasdaq Stock Market and other applicable securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities more difficult, time-consuming or any potential future lawsuits.costly and increased demand on our systems and resources. The defense or settlement of any lawsuit or claimExchange Act requires, among other things, that remains unresolved at the time the mergers are completed may adversely affect MDC'swe file annual, quarterly and current reports with respect to our business financial condition,and results of operations and cash flows.maintain effective disclosure controls and procedures and internal controls over financial reporting. Maintaining our disclosure controls and procedures and internal controls over financial reporting in accordance with this standard requires significant resources and management oversight. As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.
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The COVID-19 pandemic triggered an economic crisis which may delay or prevent the consummation of the Proposed Transactions.
In March 2020, the World Health Organization declared the COVID-19 coronavirus outbreak a pandemic. The coronavirus has spread throughout the world and has resulted in unprecedented restrictions and limitations on operations of many businesses, educational institutions and governmental entities, including in the United States and Canada. Given the ongoing and dynamic nature of the COVID-19 crisis, it is difficult to predict the impact on the business of MDC and Stagwell, and there is no guarantee that efforts by MDC and Stagwell to address any adverse impact of COVID-19 will be effective. If MDC or Stagwell is unable to recover from a business disruption on a timely basis, the Proposed Transactions and the Combined Company’s business and financial conditions and results of operations following the completion of the Proposed Transactions would be adversely affected. The Proposed Transactions may also be delayed and adversely affected by the coronavirus outbreak, and become more costly. Each of MDC and Stagwell may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.
If the Proposed Transactions are consummated, the Combined Company will be subject to certain risks, including tax-related risks.
As more fully discussed in the Company’s Registration Statement on Form S-4 filed with the SEC on February 8, 2021 (the “Form S-4”), the Combined Company will be subject to certain risks, including risks related to the proposed Up-C structure, tax-related risks, risks that the expected benefits of the Proposed Transactions may not be realized, and risks related to the business of the Combined Company.

Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
See Note 10 of the Notes to the Audited Consolidated Financial Statements (the “Notes”) included herein included in this Annual Report for a discussion of the Company’s lease commitments and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the impact of occupancy costs on the Company’s operating expenses.commitments.
The Company maintains office space in many cities in North America, Africa, Europe, Asia, South America, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. This office space is in suitable and well-maintained condition for MDC’sStagwell’s current operations. All of the Company’s materially important office space is leased from third parties with varying expiration dates. Certain of these leases are subject to rent reviews or contain various escalation clauses and certain of our leases require our payment of various operating expenses, which may also be subject to escalation. In addition, leases related to the Company’s non-U.S. businesses are denominated in currencies other than U.S. dollars and are therefore subject to changes in foreign exchange rates.
The table below provides a brief description of all locations in which office space is maintained and the related reportable segment.
Reportable SegmentOffice Locations
Integrated Networks - Group AAgencies NetworkLos Angeles, Venice, CA, Playa Vista, Redwood City,Argentina, Australia, California, Canada, China, Connecticut, Florida, Georgia, Germany, Illinois, India, Indiana, Michigan, Minnesota, New York, Netherlands, Canada, UK, China, Germany, Minneapolis, New Jersey, Atlanta, Indianapolis, IndiaOregon, Pennsylvania, Philippines, United Kingdom, and Virginia
Integrated Networks - Group BBrand Performance NetworkLos Angeles, Santa Monica, San Francisco,Brazil, California, Canada, China, Colorado, Egypt, France, Japan, Florida, Germany, Hong Kong, India, Italy, Korea, Maryland, Mexico, Netherlands, New York, Netherlands, Australia,Poland, Singapore, UK, Boulder, Brazil, China, Portland, Canada, Detroit, Cleveland, Norwalk, Atlanta, Pennsylvania, Chicago, MinneapolisSouth Carolina, Spain, Sweden, Taiwan, Texas, United Kingdom, United Arab Emirates, Utah, and Virginia
Media & Data ServicesCommunications NetworkNew York, Canada, India, Los Angeles, Austin, Century City, UK

California, China, Georgia, Germany, Japan, Massachusetts, North Carolina, Oregon, Singapore, Thailand, and Virginia, Washington, and Washington D.C.
All OtherAtlanta, Austin, Boston, Dallas, Ft. Lauderdale, Miramar, Los Angeles, New York, Portland, San Diego, San Francisco, Scottsdale, Seattle, Washington, China, Singapore, Thailand, UK, Tokyo, Germany,Argentina, Canada, Sweden, Virginia

Illinois, and United Kingdom
CorporateCalifornia, Florida, New York, Washington, and Washington D.C.

Item 3. Legal Proceedings
In the ordinary course of business, we are involved in various legal proceedings. We currently do not currently expect that these proceedings will have a material adverse effect on our results of operations, cash flows or financial position.

Item 4. Mine Safety Disclosures
Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of
Our Class A Subordinate Voting Shares
The principal marketCommon Stock is traded on which the Company’s Class A subordinate voting shares are traded is the Nasdaq StockGlobal Select Market, (“NASDAQ”) (symbol: “MDCA”).under the symbol “STGW.” There is no established public trading market for our Class B voting shares.common stock, par value $0.001 per share (the “Class B Common Stock”), or Class C Common Stock. As of February 25, 2021,28, 2023, the approximate number of registered holders of our Class A subordinate voting sharesCommon Stock, Class B Common Stock, and Class B voting shares,C Common Stock, including those whose shares are held in a nominee name, was 264525, 60, and 87,1, respectively.
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Table of Contents
Dividend Practice
The Company has notDividends
We have never declared a dividend for the three-year period ending December 31, 2020.
The payment ofor paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of MDC’s board of directorsour Board, subject to applicable laws, and will depend upon limitations under applicable law and contained inon a number of factors, including our Credit Agreement and the indenture governing the Senior Notes, future earnings,financial condition, results of operations, capital requirements, our general financial condition andcontractual restrictions, general business conditions.conditions, and other factors that the Board may deem relevant.
Unregistered Sales of Equity Securities
In the three months ended December 31, 2022, the Company granted 751,784 shares of Class A Common Stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act. Of these, 68,452 shares were granted to employees as inducement for employment, 100,000 shares were issued to a member of management of a subsidiary for payment in the acquisition of the remaining interest in the majority-owned subsidiary, 174,999 shares were issued as purchase consideration in connection with the acquisition of a company and 408,333 shares were issued to the previous owners of this company with vesting conditions based upon continued employment. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of these shares.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
ForOn March 1, 2023, the twelve months ended December 31, 2020,Board authorized an extension and a $125,000,000 increase in the Companysize of our previously approved stock repurchase program (the “Repurchase Program”). Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $250,000,000 of shares of our outstanding Class A Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on March 1, 2026. Under the Repurchase Program, share repurchases may be made noat our discretion from time to time in open market purchasestransactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its Class A shares or its Class B shares.terms. Pursuant to its Combined Credit Agreement (as defined and discussed in Note 11 of the Notes included herein) and the indenture governing the Senior5.625% Notes, the Company is currently limited from repurchasing itsas to the dollar value of shares it may repurchase in the open market.
During 2020, the Company’s employees surrendered Class A shares in connection with the required tax withholding resulting from the vesting of restricted stock. The Company paid these withholding taxes on behalf of the related employees. These Class A shares were subsequently retired and no longer remain outstanding as of December 31, 2020. The following table details thoseour monthly shares withheldrepurchased during the fourth quarter of 2020:2022 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum Number of Shares That May Yet Be Purchased Under the Program
10/1/2020 - 10/31/202020,014 $2.21 — — 
11/1/2020 - 11/30/2020— — — — 
12/1/2020 - 12/31/2020— — — — 
Total20,014 $2.21   
Period
Total Number of Shares Purchased (1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramApproximate Dollar Value of Shares That May Yet Be Purchased Under the Program
10/1/2022 - 10/31/2022993,829 $7.37 967,718 $89,111,111 
11/1/2022 - 11/30/20221,040,262 7.54 1,040,262 81,337,610 
12/1/2022 - 12/31/20221,680,539 6.42 1,180,353 73,309,347 
Total3,714,630 $7.11 3,188,333 $73,309,347 

(1) Includes 526,297 shares repurchased to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.

Item 6. Selected Financial Data
Not Applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, referencesThe following discussion and analysis are based on and should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this Form 10-K. The following discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-K. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP measures are below.
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In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or “MDC” mean MDC Partnersperiods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its subsidiaries,direct and referencesindirect subsidiaries. References to a “fiscal year” meansmean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 20202022 means the period beginning January 1, 2020,2022, and ending December 31, 2020)2022).
The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP measures included are “organic revenue growth” or “organic revenue decline” and “Adjusted EBITDA.”
Organic revenue growth or organic revenue decline refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating the prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of in the current period. The organic revenue growth (decline) component reflects the constant currency impact (a) of the change in revenue of the Partner Firms which the Company has held throughout each of the comparable periods presented and (b) “non-GAAP acquisitions (dispositions), net.” Non-GAAP acquisitions (dispositions), net
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consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year or same period as the current reportable period, taking into account their respective pre-acquisition revenues for the applicable periods and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year. The Company believes that isolating the impact of acquisition activity and foreign currency impacts is an important and informative component to understand the overall change in the Company’s consolidated revenue. The change in the consolidated revenue that remains after these adjustments illustrates the underlying financial performance of the Company’s businesses. Specifically, it represents the impact of the Company’s management oversight, investments and resources dedicated to supporting the businesses’ growth strategy and operations. In addition, it reflects the network benefit of inclusion in the broader portfolio of firms that includes, but is not limited to, cross-selling and sharing of best practices. This approach isolates changes in performance of the business that take place under the Company’s stewardship, whether favorable or unfavorable, and thereby reflects the potential benefits and risks associated with owning and managing a talent-driven services business.
Accordingly, during the first twelve months of ownership by the Company, the organic growth measure may credit the Company with growth from an acquired business that is dependent on work performed prior to the acquisition date, and may include the impact of prior work in progress, existing contracts and backlog of the acquired businesses. It is the presumption of the Company that positive developments that may have taken place at an acquired business during the period preceding the acquisition will continue to result in value creation in the post-acquisition period.
While the Company believes that the methodology used in the calculation of organic revenue change is entirely consistent with our closest U.S. competitors, the calculations may not be comparable to similarly titled measures presented by other publicly traded companies in other industries. Additional information regarding the Company’s acquisition activity as it relates to potential revenue growth is provided in this Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Certain Factors Affecting our Business.”
Adjusted EBITDA is defined as Net income (loss) attributable to MDC Partners Inc. common shareholders plus or minus adjustments to Operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items, net. Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). Other items include items such as impairment charges, fees associated with the combination of MDC with the Stagwell Entities, severance expense and other restructuring expenses, including costs for leases that will either be terminated or sublet in connection with the centralization of our New York real estate portfolio.
Direct costs represent billable or non-billable internal and third-party expenses that are directly tied to providing services to our clients where we are principal in the arrangement. Direct costs exclude staff costs, which are presented separately.
All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
The percentage changes included in the tables herein Item 7 that are not considered meaningful are presented as “NM”.
Recent Developments
On December 21, 2020, MDC and Stagwell Media LP, a Delaware limited partnership (“Stagwell”), announced that they entered into a definitive transaction agreement (the “Transaction Agreement”) providing for the combination of MDC with the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (the “Stagwell Entities”). Under the terms of the Transaction Agreement, the combination between MDC and the Stagwell Entities will be effected using an “Up-C” partnership structure. Through a series of steps and transactions (collectively, the “Transactions”), including the domestication of MDC to a Delaware corporation and the merger of MDC Delaware with one of its indirect wholly owned subsidiaries (the “MDC Merger”), MDC Delaware will become a direct subsidiary (from and after the merger, “OpCo”) of a newly-formed, Delaware-organized, NASDAQ-listed corporation (“New MDC”). Following the MDC Merger, (i) OpCo will convert into a limited liability company that will hold MDC’s operating assets and to which Stagwell will contribute the equity interests of the Stagwell Entities (the “Stagwell Contribution”) in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) Stagwell will contribute to New MDC an aggregate amount of cash equal to $100 in exchange for shares of a new Class C series of voting-only common stock (the “New MDC Class C Stock”) equal in number to the Stagwell OpCo Units. On a pro forma basis, without giving effect to any outstanding preference shares of MDC, the existing holders of MDC’s Class A and Class B shares would receive interests equal to approximately 26% of the combined company and Stagwell would be issued New MDC Class C Stock equivalent to approximately 74% of the voting rights of the combined company and exchangeable, together with Stagwell OpCo Units, into Class A shares of New MDC on a one-for-one basis at Stagwell’s election. The number of Stagwell OpCo Units and shares of New MDC Class C Stock that Stagwell will receive in
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the Transactions, and the percentage of the combined company that Stagwell will hold following the consummation of the Transactions, will be reduced, and the percentage of the combined company that existing MDC shareholders will hold will be proportionally increased, if Stagwell is unable to effect certain restructuring transactions prior to the closing of the Transactions.
On December 21, 2020, MDC and Broad Street Principal Investments, L.L.C., an affiliate of Goldman Sachs (“Broad Street”), entered into a letter agreement, pursuant to which Broad Street consented to the Transactions subject to entry with MDC into a definitive agreement reflecting revised terms of MDC’s issued and outstanding Series 4 convertible preference shares (the “Goldman Letter Agreement”). The revised terms of the Series 4 convertible preference shares would (subject to the closing of the Transactions) reduce the conversion price from $7.42 to $5.00 and extend accretion for two years beyond the date on which accretion would have otherwise ceased, at a reduced rate of 6%. In connection with the closing of the Transactions, Broad Street will have the right to redeem up to $30 million of its preference shares in exchange for a $25 million subordinated note or loan with a 3-year maturity (i.e., exchange at an approximately 17% discount to face value). The $25 million note or loan will accrue interest at 8.0% per annum and is, pre-payable any time at par without penalty.
On December 21, 2020, MDC entered into consent and support agreements (the “Consent and Support Agreements”) with holders of more than 50% of the aggregate principal amount of its Senior Notes to consent to the consummation of the combination of MDC with the Stagwell Entities. Pursuant to the Consent and Support Agreements, MDC agreed to increase the interest rate on the Senior Notes by 1% per annum effective as of the date of the Consent and Support Agreements and to pay a consent fee of 2% to all holders of Notes upon a successful consent solicitation, or 3% if a supplemental indenture with the waivers and amendments is executed and becomes operative and the combination of MDC with the Stagwell Entities is consummated. On February 5, 2021, MDC announced it had received and accepted consents from holders of at least a majority in principal amount of the Senior Notes, and on February 8, 2021, MDC entered into a supplemental indenture providing for waivers and amendments in connection with the combination of MDC with the Stagwell Entities.
On February 8, 2021, MDC filed a proxy statement/prospectus on Form S-4, which describes the Transaction Agreement, the Transactions, and ancillary agreements related thereto in more detail.
Executive Summary
The novel coronavirus (“COVID-19”) is a pandemic that has altered how society interacts across the world. The outbreak of COVID-19 and the measures put in place to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted the global economy. We took various actions to address the pandemic. The Company implemented comprehensive controls and procedures to protect our employees, families, clients, and their communities. This included implementing a world-wide work-from-home policy and stress-testing our infrastructure to ensure that all employees had the tools and resources to work virtually. Our leadership and business continuity teams also proactively took thorough measures to ensure the highest level of continued service and partnership for our clients. Our Partner Firms altered how they work and respond to client challenges around the world, generating impactful creative work, rapid pivots, and inventive business solutions for brands in every sector. Early in 2020, the Company aligned operating expenses with changes in revenue. We implemented freezes on hiring, staff reductions, furloughs, salary reductions, benefit reductions and a significant reduction in discretionary spending. In addition to expense reductions, we tightened capital expenditures where possible to preserve our cash flow. The effects of the COVID-19 pandemic negatively impacted our results of operations, financial position and cash flows in 2020. While it is difficult to predict the continued impact of the pandemic, we anticipate that its negative impact on our revenue will continue through the first half of 2021. If the impact of the pandemic is prolonged beyond our expectation, the Company believes it is well positioned through the actions taken in 2020 to successfully work through the effects of COVID-19 in 2021.Overview
MDCStagwell conducts its business through its network of Partner Firms,networks, which provide marketing and business solutions that realize the potential of combining data and creativity. MDC’sStagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. MDC’sStagwell’s differentiation lies in its best-in-class creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. MDCStagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
MDCStagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenues,revenue, operating expenses, capital expenditures and the non-GAAP financial measures described above.below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth by client industry vertical, (iii) growth from existing clients and the addition of new clients, (iv)(iii) growth by primary discipline, (v)principal capability, (iv) growth from currency changes, and (vi)(v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our Partner Firms.networks. These indicators may include a Partner Firm’snetwork’s recent new client win/loss record; the depth and scope of a
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pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Partner Firm’snetwork’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
Effective inBusiness Combination
On December 21, 2020, MDC and Stagwell Media LP announced that they had entered into the Company reorganizedTransaction Agreement, providing for the combination of MDC with the “Stagwell Subject Entities.” The Stagwell Subject Entities comprised Stagwell Marketing and its management structure resulting indirect and indirect subsidiaries.
On August 2, 2021 (the “Closing Date”), we completed the aggregation of certain Partner Firms into integrated groups (“Networks”). Mark Penn, Chief Executive Officer and Chairman of the Company, appointed key agency executives, that report directly into him, to lead each Network.Transactions. In connection with the reorganization, we reassessed our reportable segmentsTransactions, among other things, (i) MDC completed a series of transactions pursuant to align our externalwhich it emerged as a wholly owned subsidiary of the Company, converted into OpCo; (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.
The Transactions were treated as a reverse acquisition for financial reporting purposes, with how we operateMDC treated as the Networks under our new organizational structure. Prior periods presented have been recast to reflectlegal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the change in reportable segments.our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-K for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021, which do not include the financial results of MDC. See Notes 1 and 20Note 4 of the Notes to the Consolidated Financial Statements included herein for a description of each of our reportable segments, the All Other category, as well asadditional information regarding the Transactions.
Recent Developments
On March 1, 2023, the Board authorized an extension and a change$125.0 million increase in reportable segments between the first and second quarter of 2020.
The three reportable segments that result from our assessment are as follows: “Integrated Networks - Group A,” “Integrated Networks - Group B” and the “Media & Data Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described in Note 2size of the NotesRepurchase Program to an aggregate of $250.0 million, with any previous purchases under the Consolidated Financial Statements included herein.Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.
In addition, MDC reports its corporate office expenses incurred in connection with the strategic resources provided to the Partner Firms, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate, including interest expense and public company overhead costs. Corporate provides client and business development support to the Partner Firms as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.
Significant Factors Affecting our Business and Results of Operations.  In addition to the impact of the COVID-19 pandemic discussed above, the
The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the creative productdigital and data-driven products that our Partner FirmsBrands offer. A client may choose to change marketing communication firms for a number ofseveral reasons, such as a change in top management and theleadership where new management wants to retain an agencya Brand that it may have previously worked with. In addition, if
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the client is merged or acquired by another company, the marketing communication firm is often changed. Another factor inClients also change firms as a client changing firms isresult of the agency’s campaign or work failingfirm’s failure to meet the client’s expected financialmarketing performance targets or other measures.expectations in client service delivery.
Acquisitions and Dispositions. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with world class expertise and strong reputations in the industry. The Company provides post-acquisition support to Partner Firms in order to help accelerate growth, including in areas such as business and client development (including cross-selling), corporate communications, corporate development, talent recruitment and training, procurement, legal services, human resources, financial management and reporting, and real estate utilization, among other areas. Integration isSeasonality
Historically, we typically implemented promptly, and new Partner Firms can begin to tap into the full range of MDC’s resources immediately.
Seasonality.  Historically, the Company typically generatesgenerate the highest quarterly revenuesrevenue during the fourth quarter in each year. The fourth quarter has historically beenIn addition, client concentration increases during election years due to the period in the year in which thecyclical nature of our advocacy Brands. The highest volumes of media placements and retail related consumer marketing occur.increase with the back-to-school season through the end of the holiday season.
Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “organic revenue growth or decline,” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”
“Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Brands that the Company has held throughout each of the comparable periods presented, and (b) “Net acquisitions (divestitures).” Net acquisitions (divestitures) consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or the same prior year period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.
Adjusted EBITDA is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.
Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding. Other items includes restructuring costs, acquisition-related expenses, and non-recurring items. The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS.
All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
The percentage changes included in the tables in Item 7 herein that are not considered meaningful are presented as “NM.”
Segments
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.
The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.
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Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments. The changes in reportable segments were that the Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro Brands, previously within the Integrated Agencies Network, are now within the Stagwell Brand Performance Network.
The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies. See Note 212 of the Notes to the Consolidated Financial Statements included herein for information relatingthe Company’s significant accounting policies.
In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.
The following discussion focuses on the operating performance of the Company for the years ended December 31, 2022 and 2021 and the financial condition of the Company as of December 31, 2022.
For similar operating and financial data and discussion of the Company’s year ended December 31, 2021 results compared to the Company’s quarterly results.year ended December 31, 2020 results, refer to Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K that was filed with the SEC on March 17, 2022, including the sections entitled “Result of Operations — Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020” and “Liquidity — Cash Flows”.
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Results of Operations:
Years Ended December 31,
202020192018
Revenue:(Dollars in Thousands)
Integrated Networks - Group A$379,648 $392,101 $393,890 
Integrated Networks - Group B435,589 531,717 551,317 
Media & Data Network139,015 161,451 183,287 
All Other244,759 330,534 346,594 
Total Revenue$1,199,011 $1,415,803 $1,475,088 
Operating Income (Loss):
Integrated Networks - Group A$14,297 $35,230 $59,130 
Integrated Networks - Group B34,581 61,417 34,659 
Media & Data Network(7,724)2,376 (51,441)
All Other(23,021)26,205 14,243 
Corporate(63,890)(45,768)(55,157)
Total Operating Income (Loss)$(45,757)$79,460 $1,434 
Other Income (Expenses):
Interest expense and finance charges, net$(62,163)$(64,942)$(67,075)
Foreign exchange gain (loss)(982)8,750 (23,258)
Other, net20,500 (2,401)230 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(88,402)20,867 (88,669)
Income tax expense116,555 10,316 29,615 
Income (loss) before equity in earnings of non-consolidated affiliates(204,957)10,551 (118,284)
Equity in earnings of non-consolidated affiliates(2,240)352 62 
Net income (loss)(207,197)10,903 (118,222)
Net income attributable to the noncontrolling interest(21,774)(16,156)(11,785)
Net loss attributable to MDC Partners Inc.(228,971)(5,253)(130,007)
Accretion on and net income allocated to convertible preference shares(14,179)(12,304)(8,355)
Net loss attributable to MDC Partners Inc. common shareholders$(243,150)$(17,557)$(138,362)
Adjusted EBITDA:
Integrated Networks - Group A$79,793 $74,822 $75,609 
Integrated Networks - Group B84,297 84,568 74,091 
Media & Data Network9,707 7,746 12,205 
All Other30,755 37,618 38,307 
Corporate(27,220)(30,601)(38,761)
Total Adjusted EBITDA$177,332 $174,153 $161,451 
Year Ended December 31,
202220212020
(dollars in thousands)
Revenue:
Integrated Agencies Network$1,479,802 $770,056 $221,595 
Brand Performance Network757,208 424,632 262,362 
Communications Network430,820 248,832 382,815 
All Other19,962 25,843 21,260 
Total Revenue$2,687,792 $1,469,363 $888,032 
Operating Income$159,228 $44,726 $83,740 
Other Income (Expenses):
Interest expense, net(76,062)(31,894)(6,223)
Foreign exchange, net(2,606)(3,332)(721)
Other, net(7,059)50,058 544 
Income before income taxes and equity in earnings of non-consolidated affiliates73,501 59,558 77,340 
Income tax expense7,580 23,398 5,937 
Income before equity in earnings of non-consolidated affiliates65,921 36,160 71,403 
Equity in income (loss) of non-consolidated affiliates(79)(240)58 
Net income65,842 35,920 71,461 
Net income attributable to noncontrolling and redeemable noncontrolling interests(38,573)(14,884)(15,105)
Net income attributable to Stagwell Inc. common shareholders$27,269 $21,036 $56,356 
Reconciliation to Adjusted EBITDA:
Net income attributable to Stagwell Inc. common shareholders$27,269 $21,036 $56,356 
Non-operating items (1)
131,959 23,690 27,384 
Operating income159,228 44,726 83,740 
Depreciation and amortization131,273 77,503 41,025 
Impairment and other losses122,179 16,240 — 
Stock-based compensation33,152 75,032 — 
Deferred acquisition consideration(13,405)18,721 4,497 
Other items, net18,691 21,430 13,906 
Adjusted EBITDA$451,118 $253,652 $143,168 
(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income attributable to Stagwell Inc. common shareholders.


24

45

Years Ended December 31,
202020192018
Capital expenditures:
Integrated Networks - Group A$1,087 $5,934 $8,228 
Integrated Networks - Group B987 9,270 6,352 
Media & Data Network569 627 1,632 
All Other966 2,729 3,985 
Corporate33,694 36 67 
Total$37,303 $18,596 $20,264 
YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021
Corporate’s capital expenditures in 2020 are primarily for leasehold improvements at its new headquarters at One World Trade Center in connection with the centralizationConsolidated Results of the Company’s New York real estate portfolio. As of December 31, 2020, the Company had $12,993 of capital expenditures that were incurred in the current year, but not yet paid.Operations
The following tables reconcile Net income (loss) attributable to MDC Partners Inc. common shareholders (GAAP) to Adjusted EBITDA (non-GAAP)components of operating results for the twelve monthsyear ended December 31, 2020, 2019 and 2018. The adjustments from Net income (loss) attributable2022 compared to MDC Partners Inc. common shareholdersthe year ended December 31, 2021 were as follows:
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Revenue$2,687,792 $1,469,363 $1,218,429 82.9 %
Operating Expenses
Cost of services1,673,576 906,856 766,720 84.5 %
Office and general expenses601,536 424,038 177,498 41.9 %
Depreciation and amortization131,273 77,503 53,770 69.4 %
Impairment and other losses122,179 16,240 105,939 NM
$2,528,564 $1,424,637 $1,103,927 77.5 %
Operating income$159,228 $44,726 $114,502 NM
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Net Revenue$2,222,153 $1,268,937 $953,216 75.1 %
Billable costs465,639 200,426 265,213 NM
Revenue2,687,7921,469,3631,218,429 82.9 %
Billable costs465,639 200,426 265,213 NM
Staff costs1,392,535 790,121 602,414 76.2 %
Administrative costs256,755 144,294 112,461 77.9 %
Unbillable and other costs, net121,745 80,870 40,875 50.5 %
Adjusted EBITDA451,118 253,652 197,466 77.8 %
Stock-based compensation33,152 75,032 (41,880)(55.8)%
Depreciation and amortization131,273 77,503 53,770 69.4 %
Deferred acquisition consideration(13,405)18,721 (32,126)NM
Impairment and other losses122,179 16,240 105,939 NM
Other items, net18,691 21,430 (2,739)(12.8)%
Operating Income (1)
$159,228 $44,726 $114,502 NM
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the year ended December 31, 2022 was $2,687.8 million compared to Operating income (loss) are detailed in$1,469.4 million for the table above.

Twelve Months Ended December 31, 2020
Integrated Networks - Group AIntegrated Networks - Group BMedia & Data NetworkAll OtherCorporateTotal
(Dollars in Thousands)
Net loss attributable to MDC Partners Inc. common shareholders$(243,150)
Adjustments197,393
Operating income (loss)$14,297$34,581$(7,724)$(23,021)$(63,890)$(45,757)
Adjustments:
Depreciation and amortization6,46717,2044,3767,4781,38036,905
Impairment and other losses6,39131,78411,76045,3351,12996,399
Stock-based compensation7,5803,1911223042,98214,179
Deferred acquisition consideration adjustments44,073(2,706)37544542,187
Distributions from non-consolidated affiliates2,1752,175
Other items, net98524379821429,00431,244
Adjusted EBITDA$79,793$84,297$9,707$30,755$(27,220)$177,332


year ended December 31, 2021, an increase of $1,218.4 million.
25

46

Twelve Months Ended December 31, 2019
Integrated Networks - Group AIntegrated Networks - Group BMedia & Data NetworkAll OtherCorporateTotal
(Dollars in Thousands)
Net loss attributable to MDC Partners Inc. common shareholders$(17,557)
Adjustments97,017 
Operating income (loss)$35,230 $61,417 $2,376 $26,205 $(45,768)$79,460 
Adjustments:
Depreciation and amortization8,559 15,904 4,303 8,695 868 38,329 
Impairment and other losses4,879 1,933 929 11 847 8,599 
Stock-based compensation24,420 4,303 63 374 1,880 31,040 
Deferred acquisition consideration adjustments1,734 1,261 75 2,333 — 5,403 
Distributions from non-consolidated affiliates— (250)— — 2,298 2,048 
Other items, net— — — — 9,274 9,274 
Adjusted EBITDA$74,822 $84,568 $7,746 $37,618 $(30,601)$174,153 
Net Revenue
The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows:
Net Revenue - Components of ChangeChange
Year Ended December 31, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeYear Ended December 31, 2022OrganicTotal
(dollars in thousands)
Integrated Agencies Network$683,563 $(4,467)$458,712 $109,560 $563,805 $1,247,368 16.0 %82.5 %
Brand Performance Network393,481 (9,542)188,168 95,775 274,401 667,882 24.3 %69.7 %
Communications Network166,050 (484)51,460 69,915 120,891 286,941 42.1 %72.8 %
All Other25,843 (835)(4,616)(430)(5,881)19,962 (1.7)%(22.8)%
$1,268,937 $(15,328)$693,724 $274,820 $953,216 $2,222,153 21.7 %75.1 %
Component % change(1.2)%54.7%21.7%75.1%


For the year ended December 31, 2022, organic net revenue increased $274.8 million, or 21.7%. The organic revenue growth was primarily attributable to increased spending by existing clients and business with new clients, as well as higher public relations business due to advocacy services, as these are typically higher during election years. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of MDC.
Twelve Months Ended December 31, 2018
Integrated Networks - Group AIntegrated Networks - Group BMedia & Data NetworkAll OtherCorporateTotal
(Dollars in Thousands)
Net loss attributable to MDC Partners Inc. common shareholders$(138,362)
Adjustments139,796 
Operating income (loss)$59,130 $34,659 $(51,441)$14,243 $(55,157)$1,434 
Adjustments:
Depreciation and amortization9,602 19,032 3,820 12,980 762 46,196 
Impairment and other losses— 17,828 59,188 7,871 2,317 87,204 
Stock-based compensation5,792 6,890 320 755 4,659 18,416 
Deferred acquisition consideration adjustments1,085 (4,318)318 2,458 — (457)
Distributions from non-consolidated affiliates— — — — 779779 
Other items, net— — — — 7,879 7,879 
Adjusted EBITDA$75,609 $74,091 $12,205 $38,307 $(38,761)$161,451 
The geographic mix in net revenues for the years ended December 31, 2022 and 2021 was as follows:

Year Ended December 31,
 20222021
(dollars in thousands)
United States$1,790,776 $1,039,934 
United Kingdom175,422 101,900 
Other255,955 127,103 
Total$2,222,153 $1,268,937 
Impairment and Other Losses

The Company recognized an impairment and other losses charge of $122.2 million for the year ended December 31, 2022, primarily related to the impairment of goodwill, right-of-use leases assets and intangible assets.

The Company recognized a charge of $116.7 million of goodwill impairment to write-down the carrying value in excess of the fair value of eight reporting units, two within the Integrated Agencies Network, five within the Brand Performance Network and one within the All Other category. The expense was recorded within Impairment and other losses on the Consolidated Statements of Operations.

The Company recognized a charge of $2.6 million to reduce the carrying value of three of its right-of-use lease assets and related leasehold improvements. These right-of-use lease assets related to agencies within the Integrated Agencies Network and the Brand Performance Network. This impairment charge is included in Impairment and other losses within the Consolidated Statements of Operations.

The Company recognized a charge of $1.4 million to reduce the carrying values of intangible assets within the Integrated Agencies Network and Brand Performance Network reportable segments primarily in connection with the abandonment of certain trade names as part of the integration of certain entities. The impairment charge was recorded within Impairment and other losses on the Consolidated Statements of Operations
During the year ended December 31, 2021, the Company recognized an impairment and other loss of $16.2 million in connection with a write-down of trade names no longer in use.
26

47


Operating Income
YEAR ENDED DECEMBER 31, 2020 COMPARED TO YEAR ENDED DECEMBER 31, 2019
Consolidated Results of Operations
Revenues
Revenue was $1.20 billionOperating income for the twelve monthsyear ended December 31, 20202022 was $159.2 million compared to revenue of $1.42 billion$44.7 million for the twelve monthsyear ended December 31, 20192021, representing a decreasean increase of $216.8 million, or 15.3%.$114.5 million.
The components of the fluctuations in revenuesOperating income for the twelve monthsyear ended December 31, 2020 compared2022 was impacted primarily by an increase in revenue and expenses from existing operations and due to the twelve months ended December 31, 2019 were as follows:acquisition of MDC.
TotalUnited StatesCanadaOther
$%$%$%$%
(Dollars in Thousands)
December 31, 2019$1,415,803 $1,116,045 $105,067 $194,691 
Components of revenue change:
Foreign exchange impact(1,014)(0.1)%— — %(600)(0.6)%(414)(0.2)%
Non-GAAP acquisitions (dispositions), net(18,312)(1.3)%(14,607)(1.3)%(3,705)(3.5)%— — %
Organic revenue(197,466)(13.9)%(141,802)(12.7)%(18,832)(17.9)%(36,832)(18.9)%
Total Change(216,792)(15.3)%(156,409)(14.0)%(23,137)(22.0)%(37,246)(19.1)%
December 31, 2020$1,199,011 $959,636 $81,930 $157,445 

The negative foreign exchange impactStock-based compensation expense decreased, primarily driven by awards issued to employees in the third quarter of $1.0 million, or 0.1%, was attributable to the fluctuation of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro and British Pound.
The Company utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined above. For the twelve months ended December 31, 2020, organic revenue decreased by $197.5 million or 13.9%. The decline in revenue from existing Partner Firms was primarily attributable to reduced spending by clients2021, in connection with the COVID-19 pandemic. The changeacquisition of MDC, that fully vested in revenue wasthe third quarter of 2021 and the first quarter of 2022, partially offset by awards issued in 2022.
Deferred acquisition consideration decreased primarily driven bydue to a decline in categories including food and beverage, communications, technology, transportation, financials and automotive, partially offset by growthfair value associated with a Brand in healthcare.
The table below provides a reconciliation betweenwhich the revenue from acquired/disposed businessesdeferred acquisition consideration liability originated in the Statementsfourth quarter of Operations2021 from the purchase of the remaining interest we did not already own.
Depreciation and amortization increased primarily due to non-GAAP acquisitions (dispositions), net for the twelve months ended December 31, 2020:
Acquisition (Dispositions) Revenue ReconciliationAll Other
(Dollars in Thousands)
GAAP revenue from 2019 and 2020 acquisitions$— 
Foreign exchange impact(248)
Contribution to non-GAAP organic revenue (growth) decline(411)
Prior year revenue from dispositions(17,653)
Non-GAAP acquisitions (dispositions), net$(18,312)

The geographic mix in revenues for the twelve months ended December 31, 2020 and 2019 was as follows:
 20202019
United States80.1 %78.8 %
Canada6.8 %7.4 %
Other13.1 %13.8 %
27


Impairment and Other Losses
The Company recognized a charge of $96.4 million for the twelve months ended December 31, 2020 consisting of an impairment of goodwill and intangible assets of $61.7 million and $12.1 million, respectively, as well as a charge of $22.7 million associated with the impairment of right-of-use leasedepreciable fixed assets and related leasehold improvements and the acceleration of variable lease expenses. The lease charge was primarilyamortizable intangible assets in connection with the exitacquisitions of propertiesMDC and GoodStuff Holdings Limited (“Goodstuff”).
Impairment and other losses increased primarily due to the impairment of goodwill, intangible assets and right-of-use lease assets in New York as part of the centralization of the Company’s New York real estate portfolio.2022.
Operating Income (Loss)Other, net
Operating lossOther, net, for the twelve monthsyear ended December 31, 20202022 was $45.8expense of $7.1 million, compared to income of $79.5$50.1 million for the twelve monthsyear ended December 31, 2019, representing2021 a changedecrease of $125.2 million. The operating loss in 2020 was impacted by the impairment and other losses$57.1 million, primarily due to a gain of $96.4 million as compared to operating income in 2019 being impacted by an impairment and other losses of $8.6approximately $43.0 million in connection with a write-downthe sale of the carrying value of goodwill and right-of-use lease assets and related leasehold improvements. In addition, the decline in revenues more than offset by the reduction in operating expenses also drove the change in operating income (loss).
Adjusted EBITDA
Adjusted EBITDA for the twelve months ended December 31, 2020 was $177.3 million, compared to $174.2 million for the twelve months ended December 31, 2019, representing an increase of $3.2 million, principally resulting from a reduction in operating expenses that more than offset the decline in revenues.
Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the twelve months ended December 31, 2020 was $62.2 million compared to $64.9 million for the twelve months ended December 31, 2019, representing a decrease of $2.8 million, primarily driven by a declineReputation Defender in the average amounts outstanding under the Company’s revolving credit facility and a lower amountthird quarter of Senior Notes outstanding due to a partial repurchase of Notes in 2020.2021.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange loss for the twelve monthsyear ended December 31, 20202022 was $1.0$2.6 million compared to a gainloss of $8.8$3.3 million for the twelve monthsyear ended December 31, 2019. The change in foreign exchange was primarily attributable to the weakening of the Canadian dollar against the U.S. dollar, in connection with a U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company.2021.
Other,Interest Expense, Net
Other,Interest expense, net, for the twelve monthsyear ended December 31, 20202022 was income of $20.5$76.1 million compared to loss of $2.4$31.9 million for the twelve monthsyear ended December 31, 2019. In 2020, we recognized2021, an increase of $44.2 million, primarily driven by a gainhigher level of $16.8 million relateddebt due to the saleissuance of Sloane and Company LLC$1,100.0 million aggregate principal amount of 5.625% senior notes due 2029 (“Sloane”5.625% Notes”), an indirectly wholly owned subsidiary of the Company. Additionally, the Company repurchased $29.7 million of Senior Notes, which resulted in a gain of $7.4 million, partially offset by a loss of $3.7 million related to other investments.August 2021.
Income Tax Expense (Benefit)
IncomeThe Company had an income tax expense for the twelve monthsyear ended December 31, 2020 was $116.62022 of $7.6 million (on pre-tax loss of $88.4 million resulting in a negative effective tax rate of 131.8%) compared to $10.3 million (on pre-tax income of $20.9$73.5 million resulting in an effective tax rate of 49.4%10.3%) compared to income tax expense of $23.4 million (on pre-tax income of $59.6 million resulting in an effective tax rate of 39.3%) for the twelve monthsyear ended December 31, 2019.2021.
The negativedifference in the effective tax rate of 10.3% in 2020 was driven by the recognition of a valuation allowance of $128.9 million to establish a reserve primarily for U.S. deferred tax assets. The effective tax rate in 2019 was driven by the taxation of foreign operations, base erosion and anti-abuse tax, and non-deductible stock compensation for which a tax benefit was not recognized.
Equity in Earnings (Losses) of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates represents the income or losses attributable to equity method investments. The Company recorded $2.2 million of loss for the twelve monthsyear ended December 31, 20202022 as compared to $0.4 million of income for39.3% in the twelve monthsyear ended December 31, 2019.2021 was primarily related to share-based compensation, revaluation of the TRA step up, and return to provision adjustments in the year ended December 31, 2022 and a change in ownership of OpCo, offset in part by the impact of non-deductible goodwill impairments in the year ended December 31, 2022.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the twelve monthsyear ended December 31, 20202022 was $21.8$38.6 million compared to $16.2$14.9 million for the twelve monthsyear ended December 31, 2019,2021. The increase is primarily related to noncontrolling interest income associated with holders of Class C Common Stock.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net income attributable to an increase in operating results at Partner Firms with a noncontrolling interest.Stagwell Inc. common shareholders for the year ended December 31, 2022 was $27.3 million compared to net income attributable to Stagwell Inc. common shareholders of $21.0 million for the year ended December 31, 2021.
2848

Earnings Per Share
Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2022 was as follows:
Reported (GAAP)
Adjustments(1)
(Non-GAAP)
(dollars in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders$27,269 $95,147 $122,416 
Net income attributable to Class C shareholders24,452 120,655 145,107 
Net income attributable to Stagwell Inc. and Class C and adjusted net income$51,721 $215,802 $267,523 
Weighted average number of common shares outstanding130,625 — 130,625 
Weighted average number of common Class C shares outstanding165,971 — 165,971 
Weighted average number of shares outstanding296,596 — 296,596 
Diluted EPS and Adjusted Diluted EPS$0.17 $0.90 
Adjustments to Net Income(1)
Pre-TaxTaxNet
(dollars in thousands)
Amortization$104,763 $(20,953)$83,810 
Impairment and other losses122,179 (1,093)121,086 
Stock-based compensation33,152 (6,630)26,522 
Deferred acquisition consideration(13,405)2,681 (10,724)
Other items, net18,691 (3,738)14,953 
Tax adjustments7,482 (27,327)(19,845)
$272,862 $(57,060)$215,802 
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2022 was $451.1 million, compared to $253.7 million for the year ended December 31, 2021, representing an increase of $197.5 million, primarily driven by the increase in revenue from existing operations and the acquisitions of MDC and Goodstuff, partially offset by higher operating expenses.
Integrated Agencies Network
The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows:
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Revenue$1,479,802 $770,056 $709,746 92.2 %
Operating Expenses
Cost of services951,003 506,195 444,808 87.9 %
Office and general expenses262,560 167,993 94,567 56.3 %
Depreciation and amortization74,609 37,646 36,963 98.2 %
Impairment and other losses52,360 1,394 50,966 NM
$1,340,532 $713,228 $627,304 88.0 %
Operating income$139,270 $56,828 $82,442 NM

49

Year Ended December 31,

20222021Change
(dollars in thousands)
$%
Net Revenue$1,247,368 $683,563 $563,805 82.5 %
Billable costs232,434 86,493 145,941 NM
Revenue1,479,802 770,056 709,746 92.2 %
Billable costs232,434 86,493 145,941 NM
Staff costs771,324 405,589 365,735 90.2 %
Administrative costs112,285 59,479 52,806 88.8 %
Unbillable and other costs, net70,116 54,899 15,217 27.7 %
Adjusted EBITDA293,643 163,596 130,047 79.5 %
Stock-based compensation13,774 47,190 (33,416)(70.8)%
Depreciation and amortization74,609 37,646 36,963 98.2 %
Deferred acquisition consideration9,157 18,457 (9,300)(50.4)%
Impairment and other losses52,360 1,394 50,966 NM
Other items, net4,473 2,081 2,392 NM
Operating Income$139,270 $56,828 $82,442 NM
Revenue
Revenue for the year ended December 31, 2022 was $1,479.8 million compared to $770.1 million for the year ended December 31, 2021, an increase of $709.7 million.
Net Revenue
The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows:
Net Revenue - Components of ChangeChange
Year Ended December 31, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeYear Ended December 31, 2022OrganicTotal
(dollars in thousands)
Integrated Agencies Network$683,563 $(4,467)$458,712 $109,560 $563,805 $1,247,368 16.0 %82.5 %
Component % change(0.7)%67.1%16.0%82.5%
The growth in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of MDC.
Operating Income
The increase in expenses was primarily driven by higher costs associated with providing services as well as the acquisition of MDC.
Stock-based compensation expense decreased, primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022 as well as a net decrease in the value of profits interests awards in 2022.
Depreciation and amortization grew due to the recognition of depreciable fixed assets and amortizable intangible assets primarily in connection with the acquisition of MDC.
Deferred acquisition consideration decreased primarily due to the earn-out periods for certain of our Brands ending in the second quarter of 2022 and thus the final payments being made to those Brands at that time.
Impairment and other losses for the year ended December 31, 2022 of $52.4 million relates to the impairment of goodwill, an intangible asset, and right-of-use lease assets in 2022.
50

Operating income and Adjusted EBITDA were higher driven by the increase in revenues, partially offset by higher expenses as detailed above.
Brand Performance Network
The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows:
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Revenue$757,208 $424,632 $332,576 78.3 %
Operating Expenses
Cost of services439,814 219,492 220,322 NM
Office and general expenses217,254 148,761 68,493 46.0 %
Depreciation and amortization33,674 26,031 7,643 29.4 %
Impairment and other losses50,778 14,846 35,932 NM
$741,520 $409,130 $332,390 81.2 %
Operating income$15,688 $15,502 $186 1.2 %

Year Ended December 31,

20222021Change
(dollars in thousands)
$%
Net Revenue$667,882 $393,481 $274,401 69.7 %
Billable costs89,326 31,151 58,175 NM
Revenue757,208 424,632 332,576 78.3 %
Billable costs89,326 31,151 58,175 NM
Staff costs412,982 244,078 168,904 69.2 %
Administrative costs90,853 58,411 32,442 55.5 %
Unbillable and other costs, net48,212 25,050 23,162 92.5 %
Adjusted EBITDA115,835 65,942 49,893 75.7 %
Stock-based compensation5,830 5,251 579 11.0 %
Depreciation and amortization33,674 26,031 7,643 29.4 %
Deferred acquisition consideration1,736 184 1,552 NM
Impairment and other losses50,778 14,846 35,932 NM
Other items, net8,129 4,128 4,001 96.9 %
Operating Income$15,688 $15,502 $186 1.2 %
Revenue
Revenue for the year ended December 31, 2022 was $757.2 million compared to $424.6 million for the year ended December 31, 2021, an increase of $332.6 million.
51

Net Income (Loss) Attributable to MDC Partners Inc. Common ShareholdersRevenue
As a resultThe components of the foregoing and the impact of accretion on andfluctuations in net income allocated to convertible preference shares, the net loss attributable to MDC Partners Inc. common shareholdersrevenue for the twelve monthsyear ended December 31, 2020 was $243.2 million, or $3.34 per diluted loss per share,2022 compared to a net loss attributable to MDC Partners Inc. common shareholders of $17.6 million, or $0.25 per diluted loss per share, for the twelve monthsyear ended December 31, 2019.
Integrated Networks - Group A
The change in operating results in the Integrated Networks - Group A reportable segment for the twelve months ended December 31, 2020 and 2019 was2021 were as follows:
20202019Change
Integrated Networks - Group A$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$379,648 $392,101 $(12,453)(3.2)%
Operating expenses
Cost of services sold248,902 65.6 %283,421 72.3 %(34,519)(12.2)%
Office and general expenses103,591 27.3 %60,012 15.3 %43,579 72.6 %
Depreciation and amortization6,467 1.7 %8,559 2.2 %(2,092)(24.4)%
Impairment and other losses6,391 1.7 %4,879 1.2 %1,512 31.0 %
365,351 96.2 %356,871 91.0 %8,480 2.4 %
Operating income$14,297 3.8 %$35,230 9.0 %$(20,933)(59.4)%
Adjusted EBITDA$79,793 21.0 %$74,822 19.1 %$4,971 6.6 %
Net Revenue - Components of ChangeChange
Year Ended December 31, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeYear Ended December 31, 2022OrganicTotal
(dollars in thousands)
Brand Performance Network$393,481 $(9,542)$188,168 $95,775 $274,401 $667,882 24.3 %69.7 %
Component % change(2.4)%47.8%24.3%69.7%
Revenue declineThe increase in organic net revenue was primarily attributable to lowernew clients and increased spending by clientsexisting clients. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of MDC and Goodstuff.
Operating Income
The increase in expenses was primarily driven by an increase in the costs associated with providing services as well as the impact of the acquisitions of MDC and Goodstuff.
Depreciation and amortization expense increased primarily due to the recognition of depreciable fixed assets and amortizable intangible assets in connection with the COVID-19 pandemic.acquisitions of MDC and Goodstuff.
The decline in operating income was attributable to a decline in revenueImpairment and higher operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Integrated Networks - Group A reportable segmentother losses for the twelve monthsyear ended December 31, 20202022 of $50.8 million, relates to the impairment of goodwill, intangible assets, and 2019 was as follows:one right-of-use lease asset. Impairment and other losses of $14.8 million for the year ended December 31, 2021 relates to the write-down of certain trade names no longer in use.
20202019Change
Integrated Networks - Group A$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$58,289 15.4 %$51,794 13.2 %$6,495 12.5 %
Staff costs204,433 53.8 %221,456 56.5 %(17,023)(7.7)%
Administrative38,118 10.0 %44,029 11.2 %(5,911)(13.4)%
Deferred acquisition consideration44,073 11.6 %1,734 0.4 %42,339 NM
Stock-based compensation7,580 2.0 %24,420 6.2 %(16,840)(69.0)%
Depreciation and amortization6,467 1.7 %8,559 2.2 %(2,092)(24.4)%
Impairment and other losses6,391 1.7 %4,879 1.2 %1,512 31.0 %
Total operating expenses$365,351 96.2 %$356,871 91.0 %$8,480 2.4 %
The increase in direct costs was associated with higher revenue from public relations services which grew in 2020 as compared to 2019.
The decline in staff costs was attributable to a reduction in staff to combat the impact of the COVID-19 pandemic on the business.
Administrative costs were lowerDeferred acquisition consideration increased primarily due to the acquisition of Goodstuff in the fourth quarter of 2021, partially offset by a declinedecrease in spending resulting from the orders to work-from-home given the COVID-19 pandemic and related cost containment initiatives.
The increase infair value of deferred acquisition consideration for the twelve monthsyear ended 2022.
Operating income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.
Communications Network
The components of operating results for the year ended December 31, 2020 was primarily attributable2022 compared to the favorable performance of a Partner Firm achieving certain contractual targets.year ended December 31, 2021 were as follows:
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Revenue$430,820 $248,832 $181,988 73.1 %
Operating Expenses
Cost of services272,752 167,303 105,449 63.0 %
Office and general expenses50,638 52,106 (1,468)(2.8)%
Depreciation and amortization10,831 7,553 3,278 43.4 %
$334,221 $226,962 $107,259 47.3 %
Operating income$96,599 $21,870 $74,729 NM
29

52

Stock-based compensation expense declined in 2020 compared to 2019, which reflected
Year Ended December 31,

20222021Change
(dollars in thousands)
$%
Net Revenue$286,941 $166,050 $120,891 72.8 %
Billable costs143,879 82,782 61,097 73.8 %
Revenue430,820 248,832 181,988 73.1 %
Billable costs143,879 82,782 61,097 73.8 %
Staff costs169,109 104,173 64,936 62.3 %
Administrative costs31,721 16,106 15,615 97.0 %
Unbillable and other costs, net427 244 183 75.0 %
Adjusted EBITDA85,684 45,527 40,157 88.2 %
Stock-based compensation1,797 15,928 (14,131)(88.7)%
Depreciation and amortization10,831 7,553 3,278 43.4 %
Deferred acquisition consideration(24,298)80 (24,378)NM
Other items, net755 96 659 NM
Operating Income$96,599 $21,870 $74,729 NM
Revenue
Revenue for the recognition of expense associated with performance based awards granted in the prior year.
The impairment and other losses in the twelve monthsyear ended December 31, 2020 included an impairment charge of $6.42022 was $430.8 million compared to reduce$248.8 million for the carrying value of right-of-use lease assets and related leasehold improvements as well as the acceleration of the variable lease expenses primarily associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio. For the twelve monthsyear ended December 31, 2019,2021, an impairment chargeincrease of $4.9 million was attributable$182.0 million.
Net Revenue
The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the write-down of the carrying value of goodwill.year ended December 31, 2021 were as follows:
Net Revenue - Components of ChangeChange
Year Ended December 31, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeYear Ended December 31, 2022OrganicTotal
(dollars in thousands)
Communications Network$166,050 $(484)$51,460 $69,915 $120,891 $286,941 42.1 %72.8 %
Component % change(0.3)%31.0%42.1%72.8%
The increase in Adjusted EBITDA grew in 2020 principally from a reduction in operating expenses that more than offset the decline in revenues.
Integrated Networks - Group B
The change in operating results in the Integrated Networks - Group B reportable segment for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
Integrated Networks - Group B$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$435,589 $531,717 $(96,128)(18.1)%
Operating expenses
Cost of services sold257,524 59.1 %328,165 61.7 %(70,641)(21.5)%
Office and general expenses94,496 21.7 %124,298 23.4 %(29,802)(24.0)%
Depreciation and amortization17,204 3.9 %15,904 3.0 %1,300 8.2 %
Impairment and other losses31,784 7.3 %1,933 0.4 %29,851 NM
401,008 92.1 %470,300 88.4 %(69,292)(14.7)%
Operating income$34,581 7.9 %$61,417 11.6 %$(26,836)NM
Adjusted EBITDA$84,297 19.4 %$84,568 15.9 %$(271)(0.3)%
The decline inorganic net revenue was primarily attributable to lowerincreased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are higher during election years. The increase in net acquisitions (divestitures) was driven by the acquisition of MDC.
Operating Income
The increase in expenses was primarily driven by an increase in the costs associated with providing services as well as the impact of the acquisition of MDC.
Deferred acquisition consideration decreased primarily due to the reduction in fair value associated with the deferred acquisition consideration assumed in connection with the COVID-19 pandemic.
The changepurchase of a portion of the remaining interest in operating income was attributable to a decline in revenue, partially offset by lower operating expenses, as outlined below.
The changeone of our Brands in the categoriesfourth quarter of expenses as a percentage of revenue2021.
Stock-based compensation expense decreased primarily due to awards issued to employees in the Integrated Networks - Group B reportable segment for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
Integrated Networks - Group B$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$48,806 11.2 %$73,776 13.9 %$(24,970)(33.8)%
Staff costs249,963 57.4 %306,549 57.7 %(56,586)(18.5)%
Administrative52,766 12.1 %66,574 12.5 %(13,808)(20.7)%
Deferred acquisition consideration(2,706)(0.6)%1,261 0.2 %(3,967)NM
Stock-based compensation3,191 0.7 %4,303 0.8 %(1,112)(25.8)%
Depreciation and amortization17,204 3.9 %15,904 3.0 %1,300 8.2 %
Impairment and other losses31,784 7.3 %1,933 0.4 %29,851 NM
Total operating expenses$401,008 92.1 %$470,300 88.4 %$(69,292)(14.7)%
Direct costs declinedthird quarter of 2021 in connection with the reductionacquisition of MDC that fully vested in revenue as discussed above.the third quarter of 2021 and the first quarter of 2022, partially offset by awards issued to employees in 2022.
The declineDepreciation and amortization increased primarily due to the recognition of amortizable intangible assets in staff costs was attributable to a reduction in staff to combatconnection with the impactacquisition of the COVID-19 pandemic on the business.MDC.
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53

Administrative costsOperating income and Adjusted EBITDA were lower due to a decline in spending resulting from the orders to work-from-home given the COVID-19 pandemic and related cost containment initiatives.
Deferred acquisition consideration change for the twelve months ended December 31, 2020 was primarily attributable to the aggregate performance of certain Partner Firms in 2020 relative to the previously projected expectations.
The decrease in stock-based compensation expense was primarily driven by awards that fully vestedan increase in 2020.
For the twelve months ended December 31, 2020, the impairment and other losses charge of $31.8 million was attributable to a $16.1 million charge to reduce the carrying value of goodwill, a $9.1 million charge to reduce the carrying value of an intangible asset and a $6.6 million impairment to reduce the carrying value of right-of-use lease assets and related leasehold improvements as well as the acceleration of the variable lease expenses associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio.
For the twelve months ended December 31, 2019, an impairment charge of $1.9 million was attributable to an impairment in connection with the sublet of a leased property, to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
Adjusted EBITDA in 2020 remained flat compared to 2019 as the decline in revenue was offset by the reduction in operating expenses.
Media & Data Network
The change in operating results in the Media & Data Network reportable segment for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
Media & Data Network$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$139,015 $161,451 $(22,436)(13.9)%
Operating expenses
Cost of services sold98,633 71.0 %118,189 73.2 %(19,556)(16.5)%
Office and general expenses31,970 23.0 %35,654 22.1 %(3,684)(10.3)%
Depreciation and amortization4,376 3.1 %4,303 2.7 %73 1.7 %
Impairment and other losses11,760 8.5 %929 0.6 %10,831 NM
146,739 105.6 %159,075 98.5 %(12,336)(7.8)%
Operating income (loss)$(7,724)(5.6)%$2,376 1.5 %$(10,100)NM
Adjusted EBITDA$9,707 7.0 %$7,746 4.8 %$1,961 25.3 %
The decrease in revenue was primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The change in operating income (loss) was attributable to the decline in revenue,revenues, partially offset by lower operatinghigher expenses as outlined below.









31


The change in the categories of expenses as a percentage of revenue in the Media & Data Network reportable segment for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
Media & Data Network$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$35,864 25.8 %$43,232 26.8 %$(7,368)(17.0)%
Staff costs72,204 51.9 %85,627 53.0 %(13,423)(15.7)%
Administrative22,038 15.9 %24,846 15.4 %(2,808)(11.3)%
Deferred acquisition consideration375 0.3 %75 — %300 NM
Stock-based compensation122 0.1 %63 — %59 93.7 %
Depreciation and amortization4,376 3.1 %4,303 2.7 %73 1.7 %
Impairment and other losses11,760 8.5 %929 0.6 %10,831 NM
Total operating expenses$146,739 105.6 %$159,075 98.5 %$(12,336)(7.8)%
    Direct costs declined in connection with the reduction in revenue.
The decline in staff costs was attributable to a reduction in staff to combat the impact of the COVID-19 pandemic on the business.
Administrative costs were lower due to a decline in spending resulting from the orders to work-from-home given the COVID-19 pandemic and related cost containment initiatives.
For the twelve months ended December 31, 2020, the impairment and other losses included an $11.8 million charge to reduce the carrying value of goodwill and a $5.3 million charge for the acceleration of variable lease expenses of $6.5 million associated with the exit of a property in New York as part of the centralization of the Company’s New York real estate portfolio.
    For the twelve months ended December 31, 2019, an impairment charge of $0.9 million was recognized, in connection with the sublet of a leased property, to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
Adjusted EBITDA in 2020 remained was higher compared to 2019 as the decline in operating expenses more than offset the decline in revenue.detailed above.
All Other
The change incomponents of operating results in the All Other category for the twelve monthsyear ended December 31, 2020 and 2019 was2022 compared to the year ended December 31, 2021 were as follows:
20202019Change
All Other$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$244,759 $330,534 $(85,775)(26.0)%
Operating expenses
Cost of services sold164,840 67.3 %231,301 70.0 %(66,461)(28.7)%
Office and general expenses50,127 20.5 %64,322 19.5 %(14,195)(22.1)%
Depreciation and amortization7,478 3.1 %8,695 2.6 %(1,217)(14.0)%
Impairment and other losses45,335 18.5 %11 — %45,324 NM
267,780 109.4 %304,329 92.1 %(36,549)(12.0)%
Operating income (loss)$(23,021)(9.4)%$26,205 7.9 %$(49,226)NM
Adjusted EBITDA$30,755 12.6 %$37,618 11.4 %$(6,863)(18.2)%
The decrease in revenue was primarily attributable to lower spending by clients due to the COVID-19 pandemic and the reduction in revenues in connection with the sale of Sloane in 2020.
32
Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Revenue$19,962 $25,843 $(5,881)(22.8)%
Operating Expenses
Cost of services10,007 13,866 (3,859)(27.8)%
Office and general expenses10,951 12,785 (1,834)(14.3)%
Depreciation and amortization5,234 2,498 2,736 NM
Impairment and other losses19,041 — 19,041 100.0 %
$45,233 $29,149 $16,084 55.2 %
Operating loss$(25,271)$(3,306)$(21,965)NM

Year Ended December 31,
20222021Change
(dollars in thousands)
$%
Net Revenue$19,962 $25,843 $(5,881)(22.8)%
Revenue19,962 25,843 (5,881)(22.8)%
Staff costs14,011 16,454 (2,443)(14.8)%
Administrative costs3,894 9,481 (5,587)(58.9)%
Unbillable and other costs, net2,990 677 2,313 NM
Adjusted EBITDA(933)(769)(164)21.3 %
Stock-based compensation41 39 5.1 %
Depreciation and amortization5,234 2,498 2,736 NM
Impairment and other losses19,041 — 19,041 100.0 %
Other items, net22 — 22 100.0 %
Operating Loss$(25,271)$(3,306)$(21,965)NM
Revenue
Revenue for the year ended December 31, 2022 was $20.0 million compared to $25.8 million for the year ended December 31, 2021, a decrease of $5.9 million.
54

The change in operating income (loss) was attributable to a decline in revenue, partially offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the All Other category for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
All Other$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$44,098 18.0 %$67,868 20.5 %$(23,770)(35.0)%
Staff costs141,514 57.8 %186,785 56.5 %(45,271)(24.2)%
Administrative28,606 11.7 %38,263 11.6 %(9,657)(25.2)%
Deferred acquisition consideration445 0.2 %2,333 0.7 %(1,888)(80.9)%
Stock-based compensation304 0.1 %374 0.1 %(70)(18.7)%
Depreciation and amortization7,478 3.1 %8,695 2.6 %(1,217)(14.0)%
Impairment and other losses45,335 18.5 %11 — %45,324 NM
Total operating expenses$267,780 109.4 %$304,329 92.1 %$(36,549)(12.0)%
Direct costs declined in line with the reduction in revenues.
The decline in staff costs was primarily attributable to a reduction in staff to combat the impact on the business from the COVID-19 pandemic.
Administrative costs were lower due to a decline in spending resulting from the orders to work-from-home given the COVID-19 pandemic and other cost containment initiatives.
Deferred acquisition consideration change for the twelve months ended December 31, 2020 was primarily attributable to the aggregate performance of certain Partner Firms in 2020 relative to the previously projected expectations.
For the twelve months ended December 31, 2020, the impairment and other losses charge of $45.3 million was attributable to a $40.2 million charge to reduce the carrying value of goodwill, a $3.0 million impairment to reduce the carrying value of an intangible asset and a charge of $2.1 million to reduce the carrying value of right-of-use lease assets and related leasehold improvements as well as the acceleration of the variable lease expenses associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio.
Adjusted EBITDA declined in 2020 compared to 2019 as a result of the decline in revenue, partially offset by the reduction of operating expenses.
Corporate
The change in operating expenses for Corporate for the twelve months ended December 31, 2020 and 2019 was as follows:
20202019Change
Corporate$$$%
(Dollars in Thousands)
Staff costs$23,817 $29,434 $(5,617)(19.1)%
Administrative34,582 12,739 21,843 NM
Stock-based compensation2,982 1,880 1,102 58.6 %
Depreciation and amortization1,380 868 512 59.0 %
Impairment and other losses1,129 847 282 33.3 %
Total operating expenses$63,890 $45,768 $18,122 39.6 %
Adjusted EBITDA$(27,220)$(30,601)$3,381 (11.0)%
The reduction in staff costs is primarily driven by a severance charge in 2019 not repeated in 2020.
Administrative costs were higher primarily due to costs, primarily professional fees, associated with the combination of MDC with the Stagwell Entities.
33


The increase in stock-based compensation expense was driven by favorable operating results in connection with awards tied to performance and the grant of new awards in 2020.
The impairment was recognized to write-down the carrying value of a right-of-use lease asset to its fair value.
The increase in Adjusted EBITDA is a result of the change in operating expenses, and the exclusion of professional fees associated with restructuring activities and the occupancy costs associated with the centralization of our New York real estate portfolio.
YEAR ENDED DECEMBER 31, 2019 COMPARED TO YEAR ENDED DECEMBER 31, 2018
Consolidated Results of Operations
Revenues
Net Revenue was $1.42 billion for the twelve months ended December 31, 2019, compared to revenue of $1.48 billion for the twelve months ended December 31, 2018 representing a decrease of $59.3 million, or 4.0%.
The components of the fluctuations in revenuesnet revenue for the twelve monthsyear ended December 31, 20192022 compared to the year ended December 31, 20182021 were as follows:
TotalUnited StatesCanadaOther
$%$%$%$%
(Dollars in Thousands)
December 31, 2018$1,475,088 $1,152,399 $124,001 $198,688 
Components of revenue change:
Foreign exchange impact(12,697)(0.9)%— — %(2,390)(1.9)%(10,307)(5.2)%
Non-GAAP acquisitions (dispositions), net(1,563)(0.1)%11,339 1.0 %(15,483)(12.5)%2,581 1.3 %
Non-GAAP organic revenue growth (decline)(45,025)(3.1)%(47,693)(4.1)%(1,061)(0.9)%3,729 1.9 %
Total Change(59,285)(4.0)%(36,354)(3.2)%(18,934)(15.3)%(3,997)(2.0)%
December 31, 2019$1,415,803 $1,116,045 $105,067 $194,691 
Net Revenue - Components of ChangeChange
Year Ended December 31, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeYear Ended December 31, 2022OrganicTotal
(dollars in thousands)
All Other$25,843 $(835)$(4,616)$(430)$(5,881)$19,962 (1.7)%(22.8)%
Component % change(3.2)%(17.9)%(1.7)%(22.8)%
Organic net revenue remained relatively flat. The negative foreign exchange impact of $12.7 million or 0.9%decrease related to net acquisitions (divestitures) was primarily attributable to the fluctuationsale of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro and British Pound.Reputation Defender in 2021.
Operating Loss
The Company utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined above. For the twelve months ended December 31, 2019, organic revenue decreased by $45.0 million or 3.1%. The declineincrease in revenue from existing Partner Firms was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients. The change in revenueoperating loss was primarily driven by a decline in categories including healthcare, food and beverage and automotive, partially offset by growth in transportation, communications, and travel/lodging and technology.
The table below provides a reconciliation between the revenue from acquired/disposed businesses in the statement of operations to non-GAAP acquisitions (dispositions), net for the twelve months ended December 31, 2019:
Integrated Networks - Group BAll OtherTotal
(Dollars in Thousands)
GAAP revenue from 2018 and 2019 acquisitions$17,882 $4,163 $22,045 
Foreign exchange impact— 222 222 
Contribution to non-GAAP organic revenue growth (decline)(6,547)(1,780)(8,327)
Prior year revenue from dispositions— (15,503)(15,503)
Non-GAAP acquisitions (dispositions), net$11,335 $(12,898)$(1,563)
34


The geographic mixdecrease in revenues for the years ended December 31, 2019 and 2018 was as follows:
 20192018
United States78.8 %78.1 %
Canada7.4 %8.4 %
Other13.8 %13.5 %
Impairment and Other Losses
The Company recognized an impairment of goodwill and other assets charge of $8.6 million for the twelve months ended December 31, 2019 compared to $87.2 million for the twelve months ended December 31, 2018. The impairment consisted of the write-down of $4.9 million goodwill equal to the excess carrying value above the fair value of one reporting unit within the Integrated Networks - Group A, and a charge of $3.7 million to reduce the carrying value of right-of-use lease assets and related leasehold improvements.
Operating Income (Loss)
Operating income for the twelve months ended December 31, 2019 was $79.5 million, compared to $1.4 million for the twelve months ended December 31, 2018, representing a change of $78.0 million. The improvement was driven by a lower impairment charge in 2019 of $8.6 million associated with the write-down of the carrying value of goodwill, right-of-use lease assets and related leasehold improvements compared to $87.2 million in 2018 primarily in connection with a write-down of goodwill. In addition, the decline in revenues more than offset by the reduction in operating expenses also drove the change in operating income.
Adjusted EBITDA
Adjusted EBITDA for the twelve months ended December 31, 2019 was $174.2 million, compared to $161.5 million for the twelve months ended December 31, 2018, representing an increase of $12.7 million, principally resulting from a reduction in operating expenses that more than offset the decline in revenues.
Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the twelve months ended December 31, 2019 was $64.9 million compared to $67.1 million for the twelve months ended December 31, 2018, representing a decrease of $2.2 million, primarily driven by a decline in the average amounts outstanding under the Company’s revolving credit facility in 2019.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange gain for the twelve months ended December 31, 2019 was $8.8 million compared to loss of $23.3 million for the twelve months ended December 31, 2018. The change in foreign exchange was primarily attributable to the strengthening of the Canadian dollar against the U.S. dollar, in connection with a U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company.
Other, Net
Other, net for the twelve months ended December 31, 2019 was a loss of $2.4 million compared to income of $0.2 million for the twelve months ended December 31, 2018. In 2019, we recognized a loss of $4.3 million primarily on the sale of Kingsdale Partners LP and Kingsdale Shareholder Services US LLC (collectively, “Kingsdale”), partially offset by a gain of $2.3 million primarily related to the sale of certain investments.
Income Tax Expense (Benefit)
Income tax expense for the twelve months ended December 31, 2019 was $10.3 million (on income of $20.9 million resulting in an effective tax rate of 49.4%), driven by the taxation of foreign operations, base erosion and anti-abuse tax, and non-deductible stock compensation for which a tax benefit was not recognized. Income tax expense for the twelve months ended December 31, 2018 was $29.6 million (on a loss of $88.7 million resulting in an effective tax rate of negative 33.4%), driven by an increase in valuation allowance primarily attributed to Canadaimpairment and non-deductible impairments.
Equity in Earnings (Losses) of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates represents the income orother losses attributable to equity method investments. The Company recorded $0.4 million of income for the twelve months ended December 31, 2019 compared to $0.1 million of income for the twelve months ended December 31, 2018.


35


Noncontrolling Interests
The effect of noncontrolling interests for the twelve months ended December 31, 2019 was $16.2 million compared to $11.8 million for the twelve months ended December 31, 2018, attributable to an increase in operating results at Partner Firms with a noncontrolling interest.
Net Loss Attributable to MDC Partners Inc. Common Shareholders
As a result of the foregoing, and the impact of accretion on and net income allocated to convertible preferences shares, the net loss attributable to MDC Partners Inc. common shareholders for the twelve months ended December 31, 2019 was $17.6 million or $0.25 diluted loss per share, compared to a net loss of $138.4 million, or $2.42 diluted loss per share reported for the twelve months ended December 31, 2018.
Integrated Networks - Group A
The change in operating results in the Integrated Networks - Group A reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Integrated Networks - Group A$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$392,101 $393,890 $(1,789)(0.5)%
Operating expenses
Cost of services sold283,421 72.3 %263,005 66.8 %20,416 7.8 %
Office and general expenses60,012 15.3 %62,153 15.8 %(2,141)(3.4)%
Depreciation and amortization8,559 2.2 %9,602 2.4 %(1,043)(10.9)%
Impairment and other losses4,879 1.2 %— — %4,879 — %
356,871 91.0 %334,760 85.0 %22,111 6.6 %
Operating income$35,230 9.0 %$59,130 15.0 %$(23,900)(40.4)%
Adjusted EBITDA$74,822 19.1 %$75,609 19.2 %(787)(1.0)%
Revenue decline was primarily attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients of $0.2 million, or 0.0%, and unfavorable impact of foreign exchange of $2.0 million, or 0.5%.
The change in operating income was attributable to a decline in revenue, and higher operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Integrated Networks - Group A reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Integrated Networks - Group A$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$51,794 13.2 %$50,830 12.9 %$964 1.9 %
Staff costs221,456 56.5 %220,197 55.9 %1,259 0.6 %
Administrative44,029 11.2 %47,254 12.0 %(3,225)(6.8)%
Deferred acquisition consideration1,734 0.4 %1,085 0.3 %649 59.8 %
Stock-based compensation24,420 6.2 %5,792 1.5 %18,628 NM
Depreciation and amortization8,559 2.2 %9,602 2.4 %(1,043)(10.9)%
Impairment and other losses4,879 1.2 %— — %4,879 — %
Total operating expenses$356,871 91.0 %$334,760 85.0 %$22,111 6.6 %
The decrease in administrative costs was driven by lower spending across various categories in connection with savings initiatives.
36


The increase in stock-based compensation expense was driven by favorable operating results in connection with awards tied to performance.
For the twelve months ended December 31, 2019, an impairment charge of $4.9 million was primarily attributabledue to the write-downimpairment of goodwill equal to the excess carrying value above the fair value of a reporting unit.
Adjusted EBITDA in 2019 remained flat compared to 2018 as the decline in revenue was offset by the reduction in operating expenses.
Integrated Networks - Group B
The change in operating results in the Integrated Networks - Group B reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Integrated Networks - Group B$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$531,717 $551,317 $(19,600)(3.6)%
Operating expenses
Cost of services sold328,165 61.7 %355,346 64.5 %(27,181)(7.6)%
Office and general expenses124,298 23.4 %124,452 22.6 %(154)(0.1)%
Depreciation and amortization15,904 3.0 %19,032 3.5 %(3,128)(16.4)%
Impairment and other losses1,933 0.4 %17,828 3.2 %(15,895)(89.2)%
470,300 88.4 %516,658 93.7 %(46,358)(9.0)%
Operating income$61,417 11.6 %$34,659 6.3 %$26,758 77.2 %
Adjusted EBITDA$84,568 15.9 %$74,091 13.4 %$10,477 14.1 %
Revenue decline was primarily attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients of $26.2 million, or 4.8% and unfavorable impact of foreign exchange of $4.7 million, or 0.9%, offset by a contribution of $11.3 million, or 2.1%, from an acquired Partner Firm.
The change in operating income was attributable to a decline in revenue, more than offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Integrated Networks - Group B reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Integrated Networks - Group B$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$73,776 13.9 %$56,755 10.3 %$17,021 30.0 %
Staff costs306,549 57.7 %345,853 62.7 %(39,304)(11.4)%
Administrative66,574 12.5 %74,618 13.5 %(8,044)(10.8)%
Deferred acquisition consideration1,261 0.2 %(4,318)(0.8)%5,579 NM
Stock-based compensation4,303 0.8 %6,890 1.2 %(2,587)(37.5)%
Depreciation and amortization15,904 3.0 %19,032 3.5 %(3,128)(16.4)%
Impairment and other losses1,933 0.4 %17,828 3.2 %(15,895)(89.2)%
Total operating expenses$470,300 88.4 %$516,658 93.7 %$(46,358)(9.0)%
Direct costs were higher, inclusive of higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
The decrease in administrative costs was driven by lower spending across various categories in connection with savings initiatives.
37


Deferred acquisition consideration change for the twelve months ended December 31, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
The decrease in stock-based compensation expense was driven by operating results in connection with awards tied to performance.
For the twelve months ended December 31, 2019, an impairment charge of $1.9 million was attributable to an impairment in connection with the sublet of a leased property, to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
For the twelve months ended December 31, 2018, an impairment charge of $17.8 million primarily attributable to the write-down of goodwill equal to the excess carrying value above the fair value of a reporting unit.
The increase in Adjusted EBITDA in 2019 principally from a reduction in operating expenses that more than offset the decline in revenues.
Media & Data Network
The change in operating results in the Media & Data Network reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Media & Data Network$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$161,451 $183,287 $(21,836)(11.9)%
Operating expenses
Cost of services sold118,189 73.2 %129,296 70.5 %(11,107)(8.6)%
Office and general expenses35,654 22.1 %42,424 23.1 %(6,770)(16.0)%
Depreciation and amortization4,303 2.7 %3,820 2.1 %483 12.6 %
Impairment and other losses929 0.6 %59,188 32.3 %(58,259)(98.4)%
159,075 98.5 %234,728 128.1 %(75,653)(32.2)%
Operating income (loss)$2,376 1.5 %$(51,441)(28.1)%$53,817 NM
Adjusted EBITDA$7,746 4.8 %$12,205 6.7 %$(4,459)(36.5)%
The decrease in revenue was primarily attributable to client losses and a reduction in spending by certain clients.
The change in operating income (loss) was attributable to a decline in revenue, more than offset by lower operating expenses.
The change in the categories of expenses as a percentage of revenue in the Media & Data Network reportable segment for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Media & Data Network$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$43,232 26.8 %$43,363 23.7 %$(131)(0.3)%
Staff costs85,627 53.0 %101,267 55.3 %(15,640)(15.4)%
Administrative24,846 15.4 %26,452 14.4 %(1,606)(6.1)%
Deferred acquisition consideration75 — %318 0.2 %(243)(76.4)%
Stock-based compensation63 — %320 0.2 %(257)(80.3)%
Depreciation and amortization4,303 2.7 %3,820 2.1 %483 12.6 %
Impairment and other losses929 0.6 %59,188 32.3 %(58,259)(98.4)%
Total operating expenses$159,075 98.5 %$234,728 128.1 %$(75,653)(32.2)%
The decrease in staff costs was attributable to staffing reductions in connection with client losses.
38


    For the twelve months ended December 31, 2019, an impairment charge of $0.9 million was recognized, in connection with the sublet of a leased property, to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
    For the twelve months ended December 31, 2018, an impairment charge of $59.2 million was recognized, primarily attributable to the write-down of goodwill equal to the excess carrying value above the fair value of reporting unit.
goodwill. The decrease in Adjusted EBITDA iswas primarily driven by a decrease in revenue.
Corporate
The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows:
Year Ended December 31,

20222021Change
(dollars in thousands)
$%
Staff costs$25,109 $19,827 $5,282 26.6 %
Administrative costs18,002 817 17,185 NM
Adjusted EBITDA(43,111)(20,644)(22,467)NM
Stock-based compensation11,710 6,624 5,086 76.8 %
Depreciation and amortization6,925 3,775 3,150 83.4 %
Other items, net5,312 15,125 (9,813)(64.9)%
Operating Loss$(67,058)$(46,168)$(20,890)45.2 %
Operating expenses increased primarily in connection with the acquisition of MDC. In addition, stock-based compensation expense increased, primarily driven by awards issued to employees in the first quarter of 2022. Other items, net decreased primarily due to professional fees associated with the reductionacquisition of MDC in revenue, partially offset by lower operating expense.
All Other
The change in operating results in the All Other category for the years ended December 31, 2019 and 2018 was as follows:
20192018Change
All Other$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Revenue$330,534 $346,594 $(16,060)(4.6)%
Operating expenses
Cost of services sold231,301 70.0 %243,568 70.3 %(12,267)(5.0)%
Office and general expenses64,322 19.5 %67,932 19.6 %(3,610)(5.3)%
Depreciation and amortization8,695 2.6 %12,980 3.7 %(4,285)(33.0)%
Impairment and other losses11 — %7,871 2.3 %(7,860)(99.9)%
304,329 92.1 %332,351 95.9 %(28,022)(8.4)%
Operating income$26,205 7.9 %$14,243 4.1 %$11,962 84.0 %
Adjusted EBITDA$37,618 11.4 %$38,307 11.1 %$(689)(1.8)%
The change in revenue included contributions of $3.3 million, or 1.0%, and revenue from existing Partner Firms of $1.8 million, or 0.5%, more than offset by a negative revenue impact of $16.2 million, or 4.7%, from the disposition of a Partner Firm and unfavorable impact of foreign exchange of $4.9 million, or 1.4%. In addition, revenue from existing Partner Firms increased $1.8 million, or 0.5%, at certain Partner Firms.
The change in operating income was attributable to a decline in revenue, partially offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the All Other category for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
All Other$% of
Revenue
$% of
Revenue
$%
(Dollars in Thousands)
Direct costs$67,868 20.5 %$62,406 18.0 %$5,462 8.8 %
Staff costs186,785 56.5 %205,142 59.2 %(18,357)(8.9)%
Administrative38,263 11.6 %40,739 11.8 %(2,476)(6.1)%
Deferred acquisition consideration2,333 0.7 %2,458 0.7 %(125)(5.1)%
Stock-based compensation374 0.1 %755 0.2 %(381)(50.5)%
Depreciation and amortization8,695 2.6 %12,980 3.7 %(4,285)(33.0)%
Impairment and other losses11 — %7,871 2.3 %(7,860)(99.9)%
Total operating expenses$304,329 92.1 %$332,351 95.9 %$(28,022)(8.4)%
The decrease in staff costs was primarily attributable to staff reductions and the disposition of a Partner Firm.
The decrease in administrative costs was driven by lower spending across various categories in connection with savings initiatives.
The decrease in deferred acquisition consideration was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
392021.

55

For the twelve months ended December 31, 2019, the impairment charge was recognized in connection with the sublet of a leased property, to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
    For the twelve months ended December 31, 2018, the impairment charge was primarily attributable to the write-down of goodwill equal to excess carrying value above the fair value of a reporting unit.
Adjusted EBITDA in 2019 remained flat compared to 2018 as the decline in revenue was offset by the reduction in operating expenses.
Corporate
The change in operating expenses for Corporate for the twelve months ended December 31, 2019 and 2018 was as follows:
20192018Change
Corporate$$$%
(Dollars in Thousands)
Staff costs$29,434 $30,179 $(745)(2.5)%
Administrative12,739 17,240 (4,501)(26.1)%
Stock-based compensation1,880 4,659 (2,779)(59.6)%
Depreciation and amortization868 762 106 13.9 %
Impairment and other losses847 2,317 (1,470)(63.4)%
Total operating expenses$45,768 $55,157 $(9,389)(17.0)%
Adjusted EBITDA$(30,601)$(38,761)$8,160 (21.1)%
Staff costs declined in connection with a reduction in staff.
The decrease in administrative costs was primarily related to lower professional fees and various other costs in connection with cost savings initiatives.
Stock-based compensation was lower in the twelve months ended December 31, 2019 due to the reversal of expense previously recognized in connection with the forfeiture of a performance-based equity award.
The increase in Adjusted EBITDA is a result of the change in operating expenses and the exclusion of professional fees associated with restructuring activities and the occupancy costs associated with the centralization of our New York real estate portfolio.
Liquidity and Capital Resources:
Liquidity
The following table provides summary information about the Company’s liquidity position:
202020192018
(Dollars in Thousands)
Net cash provided by operating activities$32,559 $86,539 $17,280 
Net cash provided by (used in) investing activities$(8,287)$115 $(50,431)
Net cash provided by (used in) financing activities$(73,426)$(11,729)$21,434 
The effects of the COVID-19 pandemic negatively impacted the Company’s cash flows in 2020. The Company took various actions to combat the impact of COVID-19 as discussed in the Executive Summary section above. While it is difficult to predict the continued impact of the pandemic, the Company believes it is well positioned through the actions taken in 2020 to successfully work through the effects of COVID-19 in 2021.
Year Ended December 31,
20222021
(dollars in thousands)
Net cash provided by operating activities$347,586 $200,856 
Net cash (used in) provided by investing activities(116,275)163,952 
Net cash used in financing activities(186,736)(273,414)
The Company had cash and cash equivalents of $60.8$220.6 million and $106.9$184.0 million as of December 31, 20202022 and December 31, 2019,2021, respectively. The Company intendsexpects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months.months and subsequent periods. The Company has historically been able to maintainmaintained and expandexpanded its business using cash generated from operating activities, funds available under its Credit Agreement,revolving credit agreement, and other initiatives, such as obtaining additional debt and equity financing. AtOn December 31, 2020,2022, the Company had no$100.0 million of borrowings outstanding, $25.3 million of outstanding and $192.8undrawn letters of credit resulting in $374.7 million available under its $500.0 million Combined Credit Agreement (as defined and discussed in Note 11 of the Credit Agreement.Notes to the Audited Consolidated Financial Statements included herein).
The Company enters into agreements with third parties to accelerate the collection of certain accounts receivable by transferring ownership of those receivables to the third parties. Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to cash and a decrease to accounts receivable when proceeds from the transactions are received, with the proceeds being included in Cash flows from operating activities in the Consolidated Statements of Cash Flows.
40The amount transferred to the third parties under these arrangements was $176.5 million, $42.1 million and $44.2 million during the years ended December 31, 2022, 2021 and 2020, respectively. The amount collected and due to the third parties under the arrangements was $5.7 million as of December 31, 2022. No amounts were collected and due to third parties during the years ended December 31, 2021 and 2020. Fees for the arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $1.8 million, $0.1 million, and $0.2 million for the years ended December 31, 2022, 2021 and 2020. The fees are almost entirely offset by reduced interest expense from lower borrowings driven by the acceleration of cash collections.

On March 23, 2022, the Board authorized the Repurchase Program under which we may repurchase up to $125.0 million of shares of our outstanding Class A Common Stock. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase


Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
TableSee Note 1 of Contentsthe Notes included herein for information regarding amendments to the Repurchase Program.

As of December 31, 2022, there were 7.2 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $51.5 million. These were purchased at an average share price of $7.17 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $73.3 million as of December 31, 2022. On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of the Repurchase Program to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 7.50%5.625% Notes due 2024.and Combined Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under the Tax Receivables Agreement (“TRA”) (see Note 17 of the Notes included herein for additional details). The amount and timing of payments are contingent on the Company achieving certain 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 (each as defined in Note 15 of
56


the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA. Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under the Company’sCombined Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months.months and subsequent periods. The Company’s ability to make scheduled deferred acquisition consideration payments, to make principal and interest payments, to refinance indebtedness or to fund planned capital expenditures or other obligations will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this 2020 Form 10-K and in the Company’s other SEC filings.
Working Capital
At December 31, 2020, the Company had a working capital deficit of $204.1 million compared to a deficit of $197.7 million at December 31, 2019. The Company’s working capital is impacted by seasonality in media buying, amounts spent by clients, and timing of amounts received from clients and subsequently paid to suppliers. Media buying is impacted by the timing of certain events, such as major sporting competitions and national holidays, and there can be a quarter to quarter lag between the time amounts received from clients for the media buying are subsequently paid to suppliers. The Company intends to maintain sufficient cash or availability of funds under the Credit Agreement at any particular time to adequately fund working capital should there be a need to do so from time to time.
Cash Flows
Operating Activities
Cash flows provided by operating activities for the twelve monthsyear ended December 31, 2020 was $32.62022 were $347.6 million, primarily driven by cash flows from earnings partially offset by unfavorable working capital requirements, primarily driven by media and other supplier payments.
Cash flows provided by operating activities for the twelve months ended December 31, 2019 was $86.5 million, primarily driven by cash flows from earnings, accompanied by nominal unfavorableas well as favorable working capital requirements.
Cash flows provided by operating activities for the twelve monthsyear ended December 31, 2018 was $17.32021 were $200.9 million, primarily reflecting unfavorabledriven by earnings and favorable working capital requirements, driven by media and other supplier payments, and deferred acquisition consideration payments.requirements.
Investing Activities
During the twelve months ended December 31, 2020, cashCash flows used in investing activities was $8.3were $116.3 million whichfor the year ended December 31, 2022, primarily consisteddriven by $74.2 million in acquisitions and $22.7 million in capital expenditures.
Cash flows provided by investing activities were $164.0 million for the year ended December 31, 2021, primarily driven by the addition of proceeds$150.3 million of $19.6cash in connection with the acquisition of MDC, and $37.2 million from the sale of the Company’s equity interest in Sloane, offset by $24.3 million of capital expenditures and $1.8 million paid for acquisitions.
During the twelve months ended December 31, 2019, cash flows provided by investing activities was $0.1 million, which primarily consisted of proceeds of $23.1 million from the sale of the Company’s equity interest in Kingsdale,Reputation Defender, partially offset by $18.6 million of capital expenditures and $4.8 million paid for acquisitions.
During December 31, 2018, cash flows used in investing activities was $50.4 million, primarily consisting of cash paid of $32.7 million for acquisitions and capital expenditures of $20.3$8.8 million.
Financing Activities
During the twelve monthsyear ended December 31, 2020,2022, cash flows used in financing activities was $73.4were $186.7 million, primarily driven by $35.4$63.2 million inof deferred acquisition consideration payments, $22.0$39.2 million for the purchase of a portion of the Company’s Senior Notes and $16.0distributions to noncontrolling interests, $51.5 million in distribution payments.stock repurchases under the Repurchase Program, and $18.7 million related to shares acquired and cancelled in connection with the vesting of stock awards.
During the twelve monthsyear ended December 31, 2019,2021, cash flows used in financing activities was $11.7were $273.4 million, which primarily driven by $98.6consisted of $884.4 million for the repurchase of the Company’s 7.50% Senior Notes due 2024, $202.4 million in proceeds, net payments under the Company’s previous revolving credit agreement, and distributions of fees,$233.2 million to Stagwell Media, offset by receipt of $1.1 billion from the issuance of common and preferred shares, more than offset by $68.1 million in net repayments under the Credit Agreement, $30.2 million in deferred acquisition consideration payments and $12.0 million in distribution payments.
During December 31, 2018, cash flows provided by financing activities was $21.4 million, primarily driven by $68.1 million in net borrowing under the Credit Agreement, offset by $32.2 million of deferred acquisition consideration payments and $14.5 million in distribution payments.5.625% Notes.
Total Debt
Debt, net of debt issuance costs, was $843.2 million as of December 31, 20202022 was $1,184.7 million as compared to $887.6$1,191.6 million outstanding at December 31, 2019. The decline of $44.4 million was primarily a result of the repurchase of a portion of the Company’s Senior Notes and the capitalization of consent fees due to all holders of the Senior Notes in connection with the consent to the
41


consummation of the combination of MDC with the Stagwell Entities.2021. See Note 11 ofto the Notes to theAudited Consolidated Financial Statements included herein for information regarding the Company’s $870.3 million aggregate principal amount of its Senior5.625% Notes, and $211.5the Combined Credit Agreement, which provides for a $500.0 million senior secured revolving credit agreement due February 3, 2022 (the “Credit Agreement”).facility with a five-year maturity.
The Company is currently in compliance with all of the terms and conditions of the Combined Credit Agreement, and management believes, based on its current financial projections, that the Company will continue to be in compliance with its covenants over the next twelve months.
If the Company loses all or a substantial portion of its lines of credit under the Combined Credit Agreement, or if the Company uses the maximum available amount under the Credit Agreement,agreement, it will be required to seek other sources of liquidity. If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, or asset sales, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.
On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to the Secured Overnight Financing Rate (“SOFR”). Borrowings pursuant to the Combined Credit Agreement, as amended, bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50% and (c) SOFR plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time. Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $50.0 million in the aggregate, to increase the amount permitted for certain investments allowed under the Combined Credit Agreement, and, subject to certain conditions, to allow for the repurchase of
57


Stagwell Inc. stock in an amount not to exceed $100.0 million in any fiscal year. All other substantive terms of the Combined Credit Agreement remain unchanged.
On December 14, 2022, the Company amended the Combined Credit Agreement to allow for the sale of accounts receivable summarized above and in Note 2 of the Notes included herein. All other substantive terms of the Combined Credit Agreement remained unchanged.
Pursuant to the Combined Credit Agreement, the Company must comply with certain financial covenants including, among other things, covenants for (i) total senior leverage ratio, (ii) total leverage ratio, (iii) fixed charges ratio, and (iv) minimum earnings before interest, taxes and depreciation and amortization, in each case as such term is specificallymaintain a Total Leverage Ratio (as defined in the Combined Credit Agreement) below a threshold established in the Combined Credit Agreement. For the period ended December 31, 2020,2022, the Company’s calculation of each of these covenants,this ratio, and the specific requirementsmaximum permitted under the Combined Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
December 31, 2020
Total Senior Leverage Ratio(0.02)
Maximum per covenant2.00 
2022
Total Leverage Ratio4.42 2.42
Maximum per covenant6.25 4.50
Fixed Charges Ratio2.52 
Minimum per covenant1.00 
Earnings before interest, taxes, depreciation and amortization (in millions)$190.1 
Minimum per covenant (in millions)$120.0 
These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Combined Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Combined Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
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Contractual Obligations and Other Commercial Commitments
The following table provides a payment schedule of present and future obligations. Management anticipates that the obligations outstanding at December 31, 2020 will be repaid with new financing, equity offerings, asset sales and/or cash flow from operations:
Payments Due by Period
Contractual ObligationsTotalLess than
1 Year
1 – 3 Years3 – 5 YearsAfter
5 Years
(Dollars in Thousands)
Indebtedness (1)
$870,256 $— $— $870,256 $— 
Operating lease obligations425,208 68,375 117,094 88,789 150,950 
Interest on debt227,225 64,053 130,538 32,634 — 
Deferred acquisition consideration (2)
83,065 53,730 29,335 — — 
Other long-term liabilities5,185 2,870 2,315 — — 
Total contractual obligations (3)
$1,610,939 $189,028 $279,282 $991,679 $150,950 
(1)Indebtedness includes no borrowings under the Credit Agreement which is due in 2022.
(2)Deferred acquisition consideration excludes future payments with an estimated fair value of $3.1 million that are contingent upon employment terms as well as financial performance and will be expensed as stock-based compensation over the required retention period. The Company estimates all of the $3.1 million will be paid in 2022.
(3)Pension obligations of $17.5 million are not included since the timing of payments are not known.
Other-Balance Sheet Commitments
Media and ProductionMaterial Cash Requirements
The Company’s agenciesBrands enter into contractual commitments with media providers and agreements with production companies on behalf of its clients at levels that exceed the revenue from services. Some of our agenciesBrands purchase media for clients and act as an agent on behalf of their clients.for a disclosed principal. These commitments are included in AccrualsAccounts payable and other liabilitiesAccrued media when the media services are delivered by the media providers. MDCStagwell takes precautions against default on payment for these services and has historically had a very low incidence of default. MDCStagwell is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn.
Deferred Acquisition ConsiderationThe following table summarizes current and long-term requirements as of December 31, 2022. Management anticipates that the obligations outstanding at December 31, 2022 will be repaid with new financing, equity offerings, asset sales and/or cash flow from operations:
Payments Due by Period
Material Cash RequirementsTotalLess than
1 Year
1 – 3 Years3 – 5 YearsAfter
5 Years
(dollars in thousands)
Indebtedness (1)
$1,100,000 $— $— $— $1,100,000 
Operating lease obligations432,241 91,084 137,286 84,752 119,119 
Interest on debt433,125 61,875 123,750 123,750 123,750 
Deferred acquisition consideration161,323 90,183 66,937 4,203 — 
Total$2,126,689 $243,142 $327,973 $212,705 $1,342,869 
(1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Combined Credit Agreement.
Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, contingent and fixed retention payments tied to continued employment of specific personnel.payments. See Notes 2 andNote 9 of the Notes to the Consolidated Financial Statementsincluded herein for additional information regarding contingent deferred acquisition consideration.
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The following table presents the changes inDecember 31, 2022, approximately, $51.0 million of the deferred acquisition consideration by segment for the year ended December 31, 2020:
December 31, 2020
Integrated Networks - Group AIntegrated Networks - Group BMedia & Data NetworkAll OtherTotal
(Dollars in Thousands)
Beginning balance of contingent payments$36,124 $27,060 $— $11,487 $74,671 
Payments(28,538)(15,242)(375)(2,637)(46,792)
Additions - acquisitions and step-up transactions5,227 2,476 — — 7,703 
Redemption value adjustments (1)
44,073 (2,706)375 445 42,187 
Stock-based compensation (1)
1,195 1,611 — — 2,806 
Other2,179 52 — (4)2,227 
Ending balance of contingent payments60,260 13,251 — 9,291 82,802 
Fixed payments— 263 — — 263 
$60,260 $13,514 $— $9,291 $83,065 
(1)Redemption value adjustments are fair value changes from the Company’s initial estimatesis expected to be settled in shares of deferred acquisition payments and stock-based compensation charges are those that are tied to continued employment. Redemption value adjustments and stock-based compensation are recorded within Office and general expenses on the Consolidated Statements of Operations.
Redeemable Noncontrolling InterestClass A Common Stock.
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 balance sheet. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Notes 2 andNote 13 of the Notes to the Consolidated Financial Statements included herein for further information.additional information regarding noncontrolling interests and redeemable noncontrolling interests.
Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the
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obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Combined Credit Agreement (and(or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity. The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised.
Guarantees
Generally, the Company has indemnified the purchasers of certain of its assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amounts has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable.
Critical Accounting Policies and Estimates
MDCStagwell has prepared the consolidated financial statementsAudited Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”)GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”)SEC for reporting financial information on Form 10-K. Preparation of the Audited Consolidated Financial Statements and related disclosures requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed in the accompanying financial statements and footnotes. Our significant accounting policies are discussed in Note 2 of the Notes to the Consolidated Financial Statements.included herein. Our critical accounting policiesestimates are those that are considered by management to require significant judgment, use of estimates and that could have a significant impact on our financial statements. An understanding of our critical accounting policiesestimates is necessary to analyze our financial results.
Our critical accounting policiesestimates include our accounting for revenue recognition, business combinations, deferred acquisition consideration, redeemable noncontrolling interests, goodwill and intangible assets, income taxes and stock-based compensation. The financial statements are evaluated on an ongoing basis and estimates are based on historical experience, current conditions
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and various other assumptions believed to be reasonable under the circumstances. Actual results can differ from those estimates, and it is possible that the differences could be material.
Revenue Recognition. The Company’s revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 5 of the Notes to the Consolidated Financial Statements included herein for further information.
Business Combinations. The Company has historically made,Combinations. Business combinationsare accounted for using the acquisition method and may continue to make, selective acquisitions of marketing communications businesses. In making acquisitions,accordingly, the price paid is determined by various factors, including service offerings, competitive position, reputationassets acquired (including identified intangible assets), the liabilities assumed and geographic coverage, as well as prior experience and judgment. Due toany noncontrolling interest in the nature of advertising, marketing and corporate communications services companies, the companies acquired frequently have significant identifiable intangible assets, which primarily consist of customer relationships.business are recorded at their acquisition date fair values.
For each ofacquisition, the Company’s acquisitions,Company undertakes a detailed review is undertaken to identify other intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. Like most service businesses, aA substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets that the Company acquiresacquired is derived from customer relationships, including the related customer contracts, as well as trademarks.trademarks, developed technology and other intangible assets.
Deferred Acquisition Consideration. MostCertain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions isare recorded as a deferred acquisition consideration liability,liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity and are based on predetermined formulas.entity. These various contractual valuation formulasarrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period,period. At each reporting date, the Company models each business’ future performance, including revenue growth and in some cases,free cash flows, to estimate the currency exchange rate on the datevalue of payment.each deferred acquisition consideration liability. The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. In addition, changes in various contractual valuation formulas as well as adjustments to present value impact quarterly adjustments. These adjustments are recorded in resultsthe Consolidated Statements of operations.Operations. In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Consolidated Statements of Operations.
Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase such noncontrolling shareholders’ incremental ownership interests under certain circumstances and thecircumstances. The Company has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period. In the event that an incremental purchase may be required ofby the Company, the amounts are recorded as redeemable noncontrolling interestsin Redeemable Noncontrolling Interests in mezzanine equity on the Consolidated Balance SheetSheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Common stock and other paid-inRetained earnings or Paid-in capital (when at an accumulated deficit) in the Consolidated Balance Sheets (but not less than their initial redemption value),
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except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values.
Goodwill. GoodwillThe Company reviews goodwill. Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. The Company performs its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit.
For the annual impairment testing,test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.
If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, and for reporting units for which the qualitative assessment is not performed, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired and additional analysis is not required.impaired. However, if the carrying amount of the net
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assets assigned to the reporting unit exceeds the fair value of the reporting unit thenis lower than the recognitioncarrying amount of the net assets assigned to the reporting unit, an impairment charge is required.recognized equal to the excess of the carrying amount over the fair value.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. ForThe Company uses a combination of the 2020 annual impairment test, the Company used an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach requiresand the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective. The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, and demand trends and appropriate discount rates based on a reporting unitsunit’s weighted average cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations. We
At each reporting period, the Company assesses whether it is more likely than not that the carrying amount of its reporting units exceed their fair value. As of October 1, 2022 (the annual impairment test date) and December 31, 2022, the Company performed this assessment and determined that certain reporting units’ carrying values exceeded their fair value. As of October 1, 2022, the Company performed a quantitative impairment test in 2020. See Note 8for all reporting units (37) and as of December 31, 2022, the Notes to the Consolidated Financial Statements for additional information regarding the Company’sCompany performed a quantitative impairment test for certain reporting units that were determined to be more likely than not impaired. As a result of these tests, management concluded there to be 8 reporting units with a carrying value in excess of their fair value resulting in an impairment of $116.7 million in 2022. The difference in carrying value versus fair value was primarily due to a combination of changes in fair value measures such as an increase in interest rates and impairment charges recognized.
decrease in market multiples of comparable public companies and financial forecasts below previous forecasts. The Company utilized a long-term average growth ratesrate ranging from 1% to 4% and a WACC forranging from 11.50% to 20.00%. Of the Company’sremaining reporting units, ranging from 0% to 3% and 11% to 21%, respectively, in our annual goodwill impairment test.
For the 2020 annual goodwill impairment test, the Company had 23 reporting units, all of which were subject to the quantitative goodwill impairment test. The excess ofapproximately 50% have fair value over the carrying amount ("headroom") for the Company’s reporting units ranged from 2% tovalues that are substantially in excess of 100%. The Companythe carrying amounts. For the other reporting units, we performed a sensitivity analysis using the latest impairment assessment performed, which included a 1%an approximate 2% increase in the WACC which resulted in a nominal impairment for(with the exception of one reporting unit where we utilized 1%), and concluded that this would not result in an impairment.
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Based on our December 31, 2022 assessment, the fair value of two reporting units, with a headroomgoodwill of 2%approximately $13 million, exceeded their carrying value by less than 20%.
The Company believes the estimates and assumptions used in the calculations are reasonable. However, if there waswere an adverse change in the facts and circumstances, then an impairment charge may be necessary in the future. Specifically, as mentioned above,As a result, to the extent that, among other factors, (i) there is underperformance in one or more reporting units, (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of these reporting unit, with goodwill of approximately $89 million, exceeded itsunits could fall below their carrying value, by 2% and therefore is highly sensitive to adverse changes in the facts and circumstances that could resultresulting in a possible future impairment. Should the fair value of any of the Company’s reporting units fall below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or other conditions, charges forgoodwill impairment may be necessary.charge. The Company monitors its reporting units to determine if there is an indicator of potential impairment.
Income Taxes. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense.
Stock-basedStock-Based CompensationThe fair value method is applied to all awards granted, modified or settled. Under the fair value method, compensationCompensation cost is measured at fair value at the date of grant and is expensed over the service period, that isgenerally the award’s vesting period. AwardsThe Company recognizes forfeitures as they occur.
Certain of our awards are settled in cash (stock appreciation awards) and are recorded at fair value on the date of grant and remeasured as each reporting period. The measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing model and is recorded in Operating income over the service period, in this case the award’s vesting period. The assumption for expected volatility is based on the historical volatility of a peer group of market participants as the Company has limited historical volatility.
The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions are recorded as compensation expenseunder the straight-line attribution method when theit is probable that such performance conditions are expected towill be met. See Note 15 of the Notes to the Consolidated Financial Statements for further information.
From time to time, certain acquisitions and step-up transactions include an element of compensation related payments. The Company accounts for those payments as stock-based compensation.
New Accounting Pronouncements
Information regarding new accounting pronouncements can be foundIn March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, and in Note 3January 2021 subsequently issued ASU 2021-01, Facilitation of the NotesEffects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, through December 31, 2022. The Combined Credit Agreement is the Consolidated Financial Statements included herein.Company’s only contractual arrangement that referenced LIBOR and is impacted by ASU 2020-04. On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to SOFR. Based on the Company’s assessment, the Company has elected to apply the optional expedient and treat the contract modifications as a continuation of an existing contract. This election does not have a material effect on our results of operations or financial position.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
TheIn the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.
Debt Instruments: At December 31, 2020,2022, the Company’s debt obligations consisted of amounts outstanding under its Combined Credit Agreement and Seniorthe 5.625% Notes. The Senior5.625% Notes bear a fixed 7.50%5.625% interest rate. The Credit Agreementrevolving credit agreement bears interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the Euro rate, U.S. bank prime rate and U.S. base rate, atduration of the Company’s option.borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication. Given that there were no borrowings under
On April 28, 2022, the Company amended the Combined Credit Agreement as of December 31, 2020,Agreement. This amendment replaced references to LIBOR with references to SOFR. With regard to our variable rate debt, a 1.0%10% increase or decrease in the weighted average interest rate, which was 2.94% at December 31, 2020,rates would have nochange our annual interest rate impact.expense by $0.9 million.
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Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies. The Company’s results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of its non-U.S. operations. The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 of the Company’s Audited Consolidated Financial Statements included in this Annual Report on2022 Form 10-K for the year ended December 31, 2020.10-K. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This minimizesreduces the impact that fluctuations in exchange rates will have on profit margins. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net earningsincome (loss). The Company generally does not enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
The Company is exposed to foreign currency fluctuations relating to its intercompany balances between the U.S. and Canada. For every one cent change in the foreign exchange rate between the U.S. and Canada, the impact to the Company’s financial statements would be approximately $2.0 million.
Impairment Risk: AtFor the year ended December 31, 2020,2022, the Company had goodwill of $668.2 millionrecognized an impairment and other losses charge of $122.2 million, primarily related to the impairment of goodwill, right-of-use leases assets and intangible assetsassets.
The Company recognized an impairment charge of $33.8 million.$116.7 million to write-down the carrying value of goodwill in excess of the fair value. The Company reviews goodwill for impairment annually as of October 1st of each year or more frequently if indicators of potential impairment exist. To the extent that, among other factors, (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill impairment charge.
In addition, the Company recorded an impairment charge of $1.4 million to reduce the carrying value of intangible assets and $2.6 million to reduce the carrying value of four right-of-use lease assets and related leasehold improvements.
See the Critical Accounting Policies and Estimates section abovein “Management’s Discussion and Note 8Analysis of Financial Condition and Results of Operations” for information related to impairment testing and the Notes to the Consolidated Financial Statements for further information.


risk of potential impairment charges in future periods.

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Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

MDC PARTNERS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
MDC Partnersof Stagwell Inc.
New York, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MDC PartnersStagwell Inc. and subsidiaries (the “Company”) and subsidiaries as of December 31, 20202022 and 2019,2021, the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit,equity, and cash flows for each of the three years in the period ended December 31, 2020,2022, and the related notes and schedules presentedlisted in the Index at Item 15 (collectively referred to as the “consolidated financial“financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries atas of December 31, 20202022 and 2019,2021, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 2020,2022, in conformity with accounting principles generally accepted in the United States of America.

We have also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2020,2022, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 16, 20216, 2023, expressed an unqualifiedadverse opinion thereon.on the Company’s internal control over financial reporting because of material weaknesses.

Change in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases on January 1, 2019 due to the adoption of Accounting Standards Codification, Leases (“ASC 842”).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current periodcurrent-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

As described in— Refer to Notes 2 and 5 to the consolidated financial statements
Critical Audit Matter Description
The Company’s revenue is primarily derived from the Company provides an extensive rangeprovision of marketing and communications services which includes strategy, creative and production for advertising campaigns, public relations services including strategy, editorial, crisis support or issues management, online fundraising, media training, influencer engagement and events management, media-based solutions to its clients offeringdrive brand performance, including buying and planning, experiential marketing and application/website design and development. Each of the Company’s operating companies (referred to as Brands) generate revenue from one or more of these services. The Brands have numerous customers and contracts, under a variety of marketingcontract terms and communication capabilities.provisions. The volume of such contracts and the diversity of the terms in such contracts introduces significant complexity in assessing the accounting under the revenue accounting standard. This complexity includes the critical judgements around defining performance obligations and the recognition of revenue when or as the customer obtains control of the promised services in an amount that reflects the consideration expected to be received in exchange for those services, including the determination of presentation as principal or agent.
Given the volume and diversity of the Company’s contracts, performing audit procedures to evaluate whether revenue was appropriately recorded, required a high degree of auditor judgement and an increased extent of audit effort and is therefore considered a critical audit matter.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the testing of the Company’s application of revenue accounting standard to their revenue contracts included the following, among others:
Assessed the nature and amount of revenue recorded by Brand and evaluated the overall application of the revenue accounting standard,
Selected a sample of contracts, specifically including individually material revenue contracts, across the Brands and types of contracts. Testing included consideration of the specific application of the revenue accounting standard, including the identification of the performance obligation(s), the evaluation of the methods applied in the recognition and measurement of revenue, and the verification of the timing of delivery, transaction price and performance of services related to the revenue recorded, including the determination of presentation as principal or agent
Tested the mathematical accuracy of revenue recorded for each selection based on audit evidence obtained.
Goodwill — Refer to Notes 2 and 8 to the financial statements
Critical Audit Matter Description
The Company’s goodwill has been derived from numerous acquisitions, including but not limited to the merger with MDC Partners in August 2021. As a result, the Company has over 30 reporting units, each having similar but different revenue streams and business models. Management performed a quantitative impairment analysis for a number of reporting units to determine their fair values using the income approach and market approach. This determination of the Company’s performance obligations is specific to the services included within each revenue contract. Based on the services to be provided to a client within a contract, and how those services are provided, multiple services could represent separate performance obligations or be combined and considered as one performance obligation. Revenue is typically recognized based on the measure of progress of each distinct performance obligation, as services are performed. Revenue is typically recognized using input methods (including direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract.

We identified the determination of the measure of progress of performance obligations as a critical audit matter. The determination of the total estimated cost and progress toward completionfair value requires management to make significant estimates and assumptions. A higher
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degree of auditor judgment was required to evaluate the keySuch assumptions used to estimate costs to complete the contracts, including the labor hours, materials,include forecasted business performance (both revenue and third-party costs to complete the contracts. Changes in these estimates can have a significant impactearnings before interest, taxes, depreciation and amortization (EBITDA) based on the strategic operating plan), discount rates, and market multiples.
Given the volume of reporting units where a quantitative impairment analysis was performed and differences in their underlying revenue recognized each period. Auditing these aspects involved especially challenging auditor judgment due to the naturestreams and extent ofbusiness models, performing audit effort requiredprocedures to evaluate the reasonableness of management’sthe Company’s estimates and assumptions within the goodwill impairment assessment required a high degree of auditor judgment and estimates over the durationan increased extent of these contracts.

The primary procedures we performed to address thiseffort and is therefore considered a critical audit matter included:matter.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the testing of the Company’s goodwill impairment assessment included the following, among others:

Assessed the amount of goodwill by reporting unit and evaluated the sensitivity of changes in the assumptions on the results of the impairment test for the reporting unit,
a.Testing the operating effectiveness ofBased on this assessment, within certain controls relating to management’s estimation of the measure of progress of each performance obligation within revenue contracts including: (i) development of contract budgets, (ii) ongoing assessment and revisions to contract budgets, and (iii) ongoing review of contract status including nature of activities to complete.reporting units, we
b.Assessing the reasonableness of management’s estimation of the measure of progress for a sample of contracts through: (i) corroborating measure of progress against relevant evidence outside the accounting function, (ii) performing retrospective review of the estimated costs to complete to assess the reasonableness of management’s judgments, (iii) testing a sample of revenue contracts and underlying documents to determine the accuracy of key cost inputs, such as labor hours, materials, and third-party costs, and (iv) assessingAssessed the reasonableness of the measure of progress of performance obligations through testing of a sample of costs incurredCompany’s forecasted revenue growth and EBITDA margin by comparing the forecasts to datehistorical results and estimated costs to complete.external economic data including peers, industry data and wider economic forecasts,

Goodwill Impairment Assessment

As described in Notes 2 and 8 to the consolidated financial statements,Evaluated the Company’s consolidated goodwill balance as of December 31, 2020 was $668.2 million. The Company tests for impairment annually on a reporting unit basis or more often when impairment indicators exist. As a result of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the second quarter of 2020 that resulted in a goodwill impairment charge of $13.4 million. In connection with the Company’s annual impairment assessment performed as of October 1, 2020 the Company recorded an additional impairment charge of $48.3 million. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unitability to its carrying value. The Company determines the fair value of its reporting units using a discounted cash flow model. The determination of the fair value using the discounted cash flow model requires management to make significant estimatesaccurately forecast future revenue and assumptions related to the amount and timing of expected future cash flows, assumed terminal values and appropriate discount rates.

We identified the valuation of certain reporting units during the impairment assessment of goodwill as a critical audit matter. The principal considerations for our determination are: (i) for certain reporting units, the deterioration of economic conditions led to an increased sensitivity to estimates due to the decline in the excess of fair value over book value as of the annual testing date of October 1, 2020, as such, the assumptions and judgments used were more sensitive to management’s estimates, and (ii) inherent uncertainties exist related to the Company’s forecasts and how various economic and other factors, including the projected impact from the COVID-19 pandemic, could affect the Company’s forecasted assumptions of future cash flows and the selection of the discount rate included in the income approach. Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:
Evaluating the reasonableness of management’s forecasts of future cash flows given the inherent uncertainty of COVID-19 through: (i)EBITDA by comparing actual results to management’sthe Company's historical forecasts, and industry data, (ii) corroborating
Evaluated whether the consistency of assumptions utilized in management forecasts with other internal information andwere consistent with evidence obtained in other areas of the audit, such as reviewing historical operating results of the reporting unit and reviewing revenue contracts and supporting documentation for cost reductions such as headcount analysis to support future projections, (iii) performing sensitivity analyses of reporting units’ cash flow projections, and (iv) performing procedures to assess the completeness, accuracy and relevance of the underlying data used in the discounted cash flow analysis.
Utilizing personnel with specialized knowledge and skill in valuation to assist in: (i) evaluatingWith the appropriatenessassistance of the methodologies and the valuation models utilized by management to determine theour fair values of the reporting units, and (ii) assessingvalue specialists, evaluated the reasonableness of certain assumptions incorporated into the valuation models including terminal growthdiscount rates and market multiples used by evaluating the methodology selected by the Company and by:
Testing the source information underlying the determination of the market multiples and discount rates.rates and testing the mathematical accuracy of the calculations.
Developing a range of independent estimates and comparing those to the discount rate selected by the Company.
Assessing the methodology applied in the discount rate calculation against market practice valuation techniques.
Comparing the market multiples selected for each reporting unit to that of its guideline peer companies.

/s/ BDO USA,Deloitte & Touche LLP
New York, NY
March 6, 2023
We have served as the Company'sCompany’s auditor since 2006.
New York, New York
March 16, 20212020.
50

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, of United States dollars, except per share amounts)
 Years Ended December 31,
 202020192018
Revenue:
Services$1,199,011 $1,415,803 $1,475,088��
Operating Expenses:
Cost of services sold769,899 961,076 991,198 
Office and general expenses341,565 328,339 349,056 
Depreciation and amortization36,905 38,329 46,196 
Impairment and other losses96,399 8,599 87,204 
 1,244,768 1,336,343 1,473,654 
Operating income (loss)(45,757)79,460 1,434 
Other Income (Expenses):
Interest expense and finance charges, net(62,163)(64,942)(67,075)
Foreign exchange gain (loss)(982)8,750 (23,258)
Other, net20,500 (2,401)230 
 (42,645)(58,593)(90,103)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(88,402)20,867 (88,669)
Income tax expense116,555 10,316 29,615 
Income (loss) before equity in earnings of non-consolidated affiliates(204,957)10,551 (118,284)
Equity in earnings (losses) of non-consolidated affiliates(2,240)352 62 
Net income (loss)(207,197)10,903 (118,222)
Net income attributable to the noncontrolling interest(21,774)(16,156)(11,785)
Net loss attributable to MDC Partners Inc.(228,971)(5,253)(130,007)
Accretion on and net income allocated to convertible preference shares(14,179)(12,304)(8,355)
Net loss attributable to MDC Partners Inc. common shareholders$(243,150)$(17,557)$(138,362)
Loss Per Common Share:
Basic
Net loss attributable to MDC Partners Inc. common shareholders$(3.34)$(0.25)$(2.42)
Diluted
Net loss attributable to MDC Partners Inc. common shareholders$(3.34)$(0.25)$(2.42)
Weighted Average Number of Common Shares Outstanding:
  Basic72,862,178 69,132,100 57,218,994 
  Diluted72,862,178 69,132,100 57,218,994 
 Year Ended December 31,
 202220212020
Revenue$2,687,792 $1,469,363 $888,032 
Operating Expenses
Cost of services1,673,576 906,856 571,588 
Office and general expenses601,536 424,038 191,679 
Depreciation and amortization131,273 77,503 41,025 
Impairment and other losses122,179 16,240 — 
2,528,564 1,424,637 804,292 
Operating Income159,228 44,726 83,740 
Other income (expenses):
Interest expense, net(76,062)(31,894)(6,223)
Foreign exchange, net(2,606)(3,332)(721)
Other, net(7,059)50,058 544 
(85,727)14,832 (6,400)
Income before income taxes and equity in earnings of non-consolidated affiliates73,501 59,558 77,340 
Income tax expense7,580 23,398 5,937 
Income before equity in earnings of non-consolidated affiliates65,921 36,160 71,403 
Equity in income (loss) of non-consolidated affiliates(79)(240)58 
Net income65,842 35,920 71,461 
Net income attributable to noncontrolling and redeemable noncontrolling interests(38,573)(14,884)(15,105)
Net income attributable to Stagwell Inc. common shareholders$27,269 $21,036 $56,356 
Income Per Common Share:
Basic
Net income attributable to Stagwell Inc. common shareholders$0.22 $(0.04)N/A
Diluted
Net income attributable to Stagwell Inc. common shareholders$0.17 $(0.04)N/A
Weighted Average Number of Common Shares Outstanding:
Basic124,262 90,426 N/A
Diluted296,596 90,426 N/A
See notes to the audited Consolidated Financial Statements.Statements.
51

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(thousands of United States dollars)amounts in thousands)
 Years Ended December 31,
 202020192018
Comprehensive Income (Loss)
Net income (loss)$(207,197)$10,903 $(118,222)
Other comprehensive income (loss), net of applicable tax:
Foreign currency translation adjustment9,092 (6,691)3,158 
Benefit plan adjustment, net of income tax expense (benefit) of ($519) for 2020, ($740) for 2019 and $223 for 2018(1,354)(1,911)555 
Other comprehensive income (loss)7,738 (8,602)3,713 
Comprehensive income (loss) for the period(199,459)2,301 (114,509)
Comprehensive income attributable to the noncontrolling interests(22,504)(16,543)(8,824)
Comprehensive loss attributable to MDC Partners Inc.$(221,963)$(14,242)$(123,333)
 Year Ended December 31,
 202220212020
COMPREHENSIVE INCOME
Net income$65,842 $35,920 $71,461 
Other comprehensive loss
Foreign currency translation adjustment(37,751)(6,000)2,371 
Benefit plan adjustment4,088 722 — 
Net unrealized loss on available for sale investment— — (5,156)
Other comprehensive loss(33,663)(5,278)(2,785)
Comprehensive income for the period32,179 30,642 68,676 
Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests(38,573)(14,884)(15,105)
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders$(6,394)$15,758 $53,571 
See notes to the audited Consolidated Financial Statements.Statements.
52

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars)amounts in thousands)
December 31, 2020December 31, 2019 December 31,
2022
December 31, 2021
 
ASSETSASSETS  ASSETS  
Current Assets:  
Current AssetsCurrent Assets  
Cash and cash equivalentsCash and cash equivalents$60,757 $106,933 Cash and cash equivalents$220,589 $184,009 
Accounts receivable, less allowance for doubtful accounts of $5,473 and $3,304374,892 449,288 
Accounts receivable, netAccounts receivable, net645,846 696,937 
Expenditures billable to clientsExpenditures billable to clients10,552 30,133 Expenditures billable to clients93,077 63,065 
Other current assetsOther current assets40,939 35,613 Other current assets71,443 61,830 
Total Current AssetsTotal Current Assets487,140 621,967 Total Current Assets1,030,955 1,005,841 
Fixed assets, at cost, less accumulated depreciation of $136,166 and $129,57990,413 81,054 
Right-of-use assets - operating leases214,188 223,622 
Fixed assets, netFixed assets, net98,878 97,516 
Right-of-use lease assets - operating leasesRight-of-use lease assets - operating leases273,567 311,654 
GoodwillGoodwill668,211 731,691 Goodwill1,566,956 1,652,723 
Other intangible assets, netOther intangible assets, net33,844 54,893 Other intangible assets, net907,529 958,782 
Deferred tax assets179 84,900 
Other assetsOther assets17,339 30,179 Other assets115,447 29,064 
Total AssetsTotal Assets$1,511,314 $1,828,306 Total Assets$3,993,332 $4,055,580 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT  
Current Liabilities:  
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITYLIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current LiabilitiesCurrent Liabilities
Accounts payableAccounts payable$168,398 $200,148 Accounts payable$357,253 $271,769 
Accrued mediaAccrued media240,506 237,794 
Accruals and other liabilitiesAccruals and other liabilities274,968 353,575 Accruals and other liabilities248,477 272,533 
Advance billingsAdvance billings152,956 171,742 Advance billings337,034 361,885 
Current portion of lease liabilities - operating leasesCurrent portion of lease liabilities - operating leases41,208 48,659 Current portion of lease liabilities - operating leases76,349 72,255 
Current portion of deferred acquisition considerationCurrent portion of deferred acquisition consideration53,730 45,521 Current portion of deferred acquisition consideration90,183 77,946 
Total Current LiabilitiesTotal Current Liabilities691,260 819,645 Total Current Liabilities1,349,802 1,294,182 
Long-term debtLong-term debt843,184 887,630 Long-term debt1,184,707 1,191,601 
Long-term portion of deferred acquisition considerationLong-term portion of deferred acquisition consideration29,335 29,699 Long-term portion of deferred acquisition consideration71,140 144,423 
Long-term lease liabilities - operating leasesLong-term lease liabilities - operating leases247,243 219,163 Long-term lease liabilities - operating leases294,049 342,730 
Deferred tax liabilities, netDeferred tax liabilities, net40,109 103,093 
Other liabilitiesOther liabilities82,065 25,771 Other liabilities69,780 57,147 
Total LiabilitiesTotal Liabilities1,893,087 1,981,908 Total Liabilities3,009,587 3,133,176 
Redeemable Noncontrolling InterestsRedeemable Noncontrolling Interests27,137 36,973 Redeemable Noncontrolling Interests39,111 43,364 
Commitments, Contingencies and Guarantees (Note 14)Commitments, Contingencies and Guarantees (Note 14)00Commitments, Contingencies and Guarantees (Note 14)
Shareholders’ Deficit:
Convertible preference shares, 145,000 authorized, issued and outstanding at December 31, 2020 and 2019152,746 152,746 
Common stock and other paid-in capital104,367 101,469 
Accumulated deficit(709,751)(480,779)
Accumulated other comprehensive income (loss)2,739 (4,269)
MDC Partners Inc. Shareholders' Deficit(449,899)(230,833)
Shareholders' EquityShareholders' Equity
Common shares - Class A & BCommon shares - Class A & B132 118 
Common shares - Class CCommon shares - Class C
Paid-in capitalPaid-in capital491,899 382,893 
Accumulated income (deficit)Accumulated income (deficit)29,445 (6,982)
Accumulated other comprehensive lossAccumulated other comprehensive loss(38,941)(5,278)
Stagwell Inc. Shareholders' EquityStagwell Inc. Shareholders' Equity482,537 370,753 
Noncontrolling interestsNoncontrolling interests40,989 40,258 Noncontrolling interests462,097 508,287 
Total Shareholders' Deficit(408,910)(190,575)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit$1,511,314 $1,828,306 
Total Shareholders' EquityTotal Shareholders' Equity944,634 879,040 
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' EquityTotal Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity$3,993,332 $4,055,580 
See notes to the audited Consolidated Financial Statements.Statements.
53

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of United States dollars)amounts in thousands)

 Years Ended December 31,
202020192018
Cash flows from operating activities:  
Net income (loss)$(207,197)$10,903 $(118,222)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Stock-based compensation14,179 31,040 18,416 
Depreciation and amortization36,905 38,329 46,196 
Impairment and other losses96,399 8,599 87,204 
Adjustment to deferred acquisition consideration42,187 5,403 (374)
Deferred income taxes (benefits)108,556 4,791 21,585 
Gain on sale of assets and other771 (4,107)22,451 
Changes in working capital:
Accounts receivable72,453 (37,763)31,326 
Expenditures billable to clients19,581 12,236 (11,223)
Prepaid expenses and other current assets24,840 3,474 (17,189)
Accounts payable, accruals and other current liabilities(144,123)(14,077)(18,222)
Acquisition related payments(13,330)(5,223)(29,141)
Cash in trusts(656)
Advance billings(18,662)32,934 (14,871)
Net cash provided by operating activities32,559 86,539 17,280 
Cash flows from investing activities:
Capital expenditures(24,310)(18,596)(20,264)
Proceeds from sale of assets19,616 23,050 2,082 
Acquisitions, net of cash acquired(1,816)(4,823)(32,713)
Other(1,777)484 464 
Net cash provided by (used in) investing activities(8,287)115 (50,431)
Cash flows from financing activities:  
Repayment of borrowings under revolving credit facility(550,135)(1,303,350)(1,625,862)
Proceeds from borrowings under revolving credit facility550,135 1,235,205 1,694,005 
Proceeds from issuance of common and convertible preference shares, net of issuance costs98,620 
Acquisition related payments(35,391)(30,155)(32,172)
Distributions to noncontrolling interests and other(16,036)(12,049)(14,537)
Repurchase of Bonds(21,999)
Net cash provided by (used in) financing activities(73,426)(11,729)21,434 
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts2,978 77 
Net increase (decrease) in cash, cash equivalents, and cash held in trusts including cash classified within assets held for sale(46,176)74,926 (11,640)
Change in cash and cash equivalents held in trusts classified within held for sale(3,307)(8,298)
Change in cash and cash equivalents classified within assets held for sale4,441 
Net increase (decrease) in cash and cash equivalents(46,176)76,060 (19,938)
Cash and cash equivalents at beginning of period106,933 30,873 50,811 
Cash and cash equivalents at end of period$60,757 $106,933 $30,873 

 Year Ended December 31,
202220212020
Cash flows from operating activities:
Net income$65,842 $35,920 $71,461 
Adjustments to reconcile net income to cash provided by operating activities:
Stock-based compensation33,152 75,032 — 
Depreciation and amortization131,273 77,503 41,025 
Impairment and other losses122,179 16,240 — 
Provision for bad debt expense7,755 2,031 6,222 
Deferred income taxes(18,319)(3,818)(5,463)
Adjustment to deferred acquisition consideration(13,405)18,721 4,520 
Gain on sale of asset— (43,440)— 
Interest from preferred investments— — (600)
Transaction costs contributed by Stagwell Media LP— — 10,160 
Foreign currency translation loss on foreign denominated debt— — 721 
Other, net(5,692)(1,463)1,271 
Changes in working capital:
Accounts receivable37,780 (30,784)(26,805)
Expenditures billable to clients(32,366)(35,371)10,078 
Other assets1,179 3,997 (10,461)
Accounts payable98,871 (46,356)5,606 
Accrued expenses and other liabilities(42,808)61,974 22,922 
Advance billings(27,062)76,021 7,423 
Deferred acquisition related payments(10,793)(5,351)— 
Net cash provided by operating activities347,586 200,856 138,080 
Cash flows from investing activities:
Capital expenditures(22,663)(8,797)(4,690)
Current period acquisitions, net of cash acquired(74,234)150,346 (14,732)
Proceeds from sale of business, net— 37,232 — 
Capitalized software and other(19,378)(14,829)(9,599)
Net cash (used in) provided by investing activities(116,275)163,952 (29,021)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility(1,266,000)(719,088)(126,994)
Proceeds from borrowings under revolving credit facility1,255,500 516,669 167,000 
Shares acquired and cancelled(18,729)(841)— 
Distributions to noncontrolling interests and other(39,197)— — 
Payment of deferred consideration(63,170)— (1,000)
Contributions— — 1,554 
Purchase of noncontrolling interest(3,600)(37,500)(1,559)
Proceeds from issuance of the 5.625% Notes— 1,100,000 — 
Debt issuance costs— (15,053)(3,099)
Payment of contingent consideration— — (500)
Distributions— (233,203)(115,543)
54

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(thousands of United States dollars)amounts in thousands)

Years Ended December 31, Year Ended December 31,
202020192018202220212020
Supplemental disclosures:  
Repurchase of 7.50% Senior NotesRepurchase of 7.50% Senior Notes(884,398)— 
Repurchase of Common StockRepurchase of Common Stock(51,540)— — 
Net cash used in financing activitiesNet cash used in financing activities(186,736)(273,414)(80,141)
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents(7,995)158 (321)
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents36,580 91,552 28,597 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period184,009 92,457 63,860 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$220,589 $184,009 $92,457 
Supplemental Cash Flow Information:Supplemental Cash Flow Information:
Cash income taxes paidCash income taxes paid$7,946 $2,296 $3,836 Cash income taxes paid$46,275 $58,578 $10,714 
Cash interest paidCash interest paid$57,752 $62,223 $64,012 Cash interest paid70,935 23,528 9,287 
Non-cash investing and financing activities:Non-cash investing and financing activities:
Acquisitions of businessAcquisitions of business1,178 425,752 23,720 
Acquisitions of noncontrolling interestAcquisitions of noncontrolling interest1,000 170,266 — 
Issuance of redeemable noncontrolling interestIssuance of redeemable noncontrolling interest— 27,820 — 
Net unrealized gain on available for sale investmentNet unrealized gain on available for sale investment— — 5,156 
Establishment of a deferred tax asset related to the exchangeEstablishment of a deferred tax asset related to the exchange32,890 — — 
Establishment of Tax Receivables Agreement liabilityEstablishment of Tax Receivables Agreement liability28,694 — — 
Conversion of Class C to Class A sharesConversion of Class C to Class A shares47,930 — — 
Finalization of Stagwell, Inc’s tax basis in Stagwell Global, LLCFinalization of Stagwell, Inc’s tax basis in Stagwell Global, LLC119,470 — — 
Non-cash contributionsNon-cash contributions— 12,372 93,880 
Non-cash distributions to Stagwell Media LPNon-cash distributions to Stagwell Media LP— 13,000 — 
Non-cash payment of deferred acquisition considerationNon-cash payment of deferred acquisition consideration989 7,080 64,345 
Conversion of preferred sharesConversion of preferred shares— 209,947 — 
See notes to the audited Consolidated Financial Statements.Statements.
55

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MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICITEQUITY
(thousands of United States dollars, except per share amounts)amounts in thousands)

Twelve Months Ended
December 31, 2020
 Convertible Preference SharesCommon SharesCommon Stock and Other Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)MDC Partners Inc. Shareholders' DeficitNoncontrolling InterestsTotal Shareholder's Deficit
 
SharesAmountShares
Balance at December 31, 2019145,000 $152,746 72,154,603 $101,469 $(480,779)$(4,269)$(230,833)$40,258 $(190,575)
Net income attributable to MDC Partners Inc.— — — — (228,971)— (228,971)— (228,971)
Other comprehensive income— — — — — 7,008 7,008 730 7,738 
Vesting of restricted awards— — 1,808,984 — — — — — 
Shares acquired and cancelled— — (430,739)(905)— — (905)— (905)
Stock-based compensation— — — 6,629 — — 6,629 — 6,629 
Changes in redemption value of redeemable noncontrolling interests— — — (2,800)— — (2,800)— (2,800)
Business acquisitions and step-up transactions, net of tax— — — 1,626 — — 1,626 — 1,626 
Other— — — (1,652)(1)— (1,653)(1,652)
Balance at December 31, 2020145,000 $152,746 73,532,848 $104,367 $(709,751)$2,739 $(449,899)$40,989 $(408,910)

Twelve Months Ended
December 31, 2019
 Convertible Preference SharesCommon SharesCommon Stock and Other Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeMDC Partners Inc. Shareholders' DeficitNoncontrolling InterestsTotal Shareholder's Deficit
 
SharesAmountShares
Balance at December 31, 201895,000 $90,123 57,521,323 $58,579 $(475,526)$4,720 $(322,104)$64,514 $(257,590)
Net income attributable to MDC Partners Inc.— — — — (5,253)— (5,253)— (5,253)
Other comprehensive income (loss)— — — — — (8,989)(8,989)387 (8,602)
Issuance of common and convertible preference shares50,000 62,623 14,285,714 35,997 — — 98,620 — 98,620 
Vesting of restricted awards— — 576,932 — — — — — — 
Shares acquired and cancelled— — (229,366)(601)— — (601)— (601)
Stock-based compensation— — — 3,655 — — 3,655 — 3,655 
Changes in redemption value of redeemable noncontrolling interests— — — 3,160 — — 3,160 — 3,160 
Business acquisitions and step-up transactions, net of tax— — — 1,911 — — 1,911 — 1,911 
Changes in ownership interest— — — (91)— — (91)(24,642)(24,733)
Other— — — (1,141)— (1,141)(1)(1,142)
Balance at December 31, 2019145,000 $152,746 72,154,603 $101,469 $(480,779)$(4,269)$(230,833)$40,258 $(190,575)






56



MDC PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT - (continued)
(thousands of United States dollars, except per share amounts)

Twelve Months Ended
December 31, 2018
 Convertible Preference SharesCommon SharesCommon Stock and Other Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeMDC Partners Inc. Shareholders' DeficitNoncontrolling InterestsTotal Shareholder's Deficit
 
SharesAmountShares
Balance at December 31, 201795,000 $90,220 56,375,131 $38,191 $(344,349)$(1,954)$(217,892)$58,030 $(159,862)
Net loss attributable to MDC Partners Inc.— — — — (130,007)— (130,007)— (130,007)
Other comprehensive income (loss)— — — — — 6,674 6,674 (2,961)3,713 
Expenses for convertible preference shares— (97)— — — — (97)— (97)
Vesting of restricted awards— — 243,529 — — — — — 
Shares acquired and cancelled— — (108,898)(776)— — (776)— (776)
Shares issued, acquisitions— — 1,011,561 7,030 — — 7,030 — 7,030 
Stock-based compensation— — — 8,165 — — 8,165 — 8,165 
Changes in redemption value of redeemable noncontrolling interests— — — (4,171)— — (4,171)— (4,171)
Business acquisitions and step-up transactions, net of tax— — — 10,140 — — 10,140 15,410 25,550 
Changes in ownership interest— — — — — (5,965)(5,965)
Cumulative effect of adoption of ASC 606— — — — (1,170)— (1,170)— (1,170)
Balance at December 31, 201895,000 $90,123 57,521,323 $58,579 $(475,526)$4,720 $(322,104)$64,514 $(257,590)

See notes to the Consolidated Financial Statements.
57




MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)





Year Ended December 31, 2022
 Common Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated Income (Deficit)Accumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmount
Balance at December 31, 2021118,252 $118 179,970 $2 $382,893 $(6,982)$(5,278)$370,753 $508,287 $879,040 
Net income— — — — — 27,269 — 27,269 30,438 57,707 
Other comprehensive loss— — — — — — (33,663)(33,663)— (33,663)
Distributions to noncontrolling interests— — — — — — — — (29,957)(29,957)
Purchases of noncontrolling interests— — — — (1,000)— — (1,000)(3,600)(4,600)
Acquisition of noncontrolling interest— — — — — — — — 2,667 2,667 
Shares issued (Acquisition)175 — — — 1,178 — — 1,178 — 1,178 
Changes in redemption value of RNCI— — — — 8,711 — 8,711 — 8,711 
Restricted awards granted or vested3,940 — — (4)— — — — — 
Shares repurchased and cancelled (withheld for payroll taxes)(2,531)(3)— — (18,729)— — (18,732)— (18,732)
Restricted shares forfeited(221)— — — — — — — — — 
Shares repurchased and cancelled (Approved plan)(7,194)(7)— — (51,540)— — (51,547)— (51,547)
Stock-based compensation— — — — 34,974 — — 34,974 — 34,974 
Conversion of Class C to Class A shares19,061 19 (19,061)— 47,911 — — 47,930 (47,930)— 
Finalization of Stagwell, Inc’s tax basis in Stagwell Global, LLC— — — — 119,470 — — 119,470 — 119,470 
Finalization of MDC acquisition accounting and associated impact on Stagwell Inc.— — — — (16,294)— — (16,294)2,301 (13,993)
Other242 — — (6,960)447 — (6,512)(109)(6,621)
Balance at December 31, 2022131,724 $132 160,909 $2 $491,899 $29,445 $(38,941)$482,537 $462,097 $944,634 

See notes to the audited Consolidated Financial Statements.

71


STAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(amounts in thousands)

Year Ended December 31, 2021
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated Income (Deficit)Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2020$358,756  $  $  $ $ $ $ $358,756 $39,787 $398,543 
Net income prior to reorganization24,742 — — — — — — — — — 24,742 2,693 27,435 
Other comprehensive loss(375)— — — — — — — — — (375)— (375)
Contributions250 — — — — — — — — — 250 — 250 
Distributions, net(204,929)— — — — — — — — — (204,929)— (204,929)
Distributions to noncontrolling interests— — — — — — — — — — — (11,936)(11,936)
Changes in redemption value of RNCI(72)— — — — — — — — — (72)— (72)
Other— — — — — — — — — — — (300)(300)
Effect of reorganization(178,372)123,849 209,980 78,794 77 179,970 110,555 — — 142,242 636,416 778,658 
Reclass NCI to Liability— — — — — — — — — — (8,475)(8,475)
Impact of PPA adjustment to noncontrolling interests— — — — — — 8,845 — — 8,846 (1,549)7,297 
Net income (loss) attributable to Stagwell Inc.— — — — — — — — (3,706)— (3,706)12,602 8,896 
Other comprehensive loss— — — — — — — — — (5,278)(5,278)— (5,278)
Distributions to noncontrolling interests— — — — — — — — — — — (16,338)(16,338)
Changes in redemption value of RNCI— — — — — — — — (3,834)— (3,834)— (3,834)
Restricted awards granted or vested— — — 1,962 — — (2)— — — — — 
Shares acquired and cancelled— — — (14)— — — (841)— — (841)— (841)
Stock-based compensation— — — — — — — 70,427 — — 70,427 — 70,427 
Reclass noncontrolling interests to RNCI— — — — — — — (25,236)— — (25,236)(2,719)(27,955)
Purchases of noncontrolling interests— — — 4,476 — — (14,138)— — (14,133)(143,134)(157,267)
Tax impact on step up transactions— — — — — — — 23,108 — — 23,108 — 23,108 
Conversion of shares— (123,849)(209,980)33,035 33 — — 209,947 — — — — — 
Other— — — — — — — 228 558 — 786 1,240 2,026 
Balance at December 31, 2021$  $ 118,252 $118 179,970 $2 $382,893 $(6,982)$(5,278)$370,753 $508,287 $879,040 

See notes to the audited Consolidated Financial Statements

72


STAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(amounts in thousands)

Year Ended December 31, 2020
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated Income (Deficit)Other Comprehensive IncomeStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
 
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2019$316,960  $  $  $ $ $ $ $316,960 $31,577 $348,537 
Net income attributable to Stagwell Inc.56,356 — — — — — — — — — 56,356 18,231 74,587 
Other comprehensive loss(2,785)— — — — — — — — — (2,785)— (2,785)
Contributions95,434 — — — — — — — — — 95,434 — 95,434 
Distributions(108,468)— — — — — — — — — (108,468)(7,075)(115,543)
Changes in redemption value of RNCI(128)— — — — — — — — — (128)— (128)
Other1,387 — — — — — — — — — 1,387 (2,946)(1,559)
Balance at December 31, 2020$358,756  $  $  $ $ $ $ $358,756 $39,787 $398,543 

See notes to the audited Consolidated Financial Statements
73

STAGWELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)
1. Business and Basis of Presentation
Stagwell Inc. (the “Company,” “we,” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and Recent Developmentstheir Brands (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity.Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.
The accompanying audited consolidated financial statements include the accounts of MDC Partners Inc. (the “Company” or “MDC”),Stagwell and its subsidiaries and variable interest entities for which the Company is the primary beneficiary. MDCsubsidiaries. Stagwell has prepared the audited consolidated financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting financial information on this Annual Report on Form 10-K.10-K (this “Form 10-K”). The preparation of financial statements in conformity with GAAP requires us to make judgments, assumptions and estimates about current and future results of operations and cash flows that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions.
On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The COVID-19 pandemic negatively impactedStagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing” or “SMG”) and its direct and indirect subsidiaries.
On August 2, 2021, we completed the Company’scombination of MDC and the operating businesses and subsidiaries of Stagwell Media and a series related transactions (such combination and transactions, the “Transactions”). The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. The results of operations, financial position, and cash flows in 2020. The Company took actions to addressMDC are included within the impactConsolidated Statements of Operations for the period beginning on the date of the pandemic, such as working closely with our clients, reducing our expenses and monitoring liquidity. The impactacquisition through the end of the pandemicrespective period presented and the corresponding actionsresults of SMG are reflected in our judgments, assumptions and estimates inincluded for the preparationentire period presented. See Note 4 of the financial statements. IfNotes included herein for information in connection with the durationacquisition of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the judgments, assumptions and estimates will be updated and could result in different results in the future.MDC.
The accompanying financial statements reflect all adjustments, consisting of normallynormal recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein.
Intercompany balances and transactions have been eliminated in consolidation.Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.
We have revised the presentation of Current Liabilities to separately present Accrued media, which was previously included in Accruals and other liabilities, of $237,794 as of December 31, 2021. As a result, the accompanying Consolidated Balance Sheet has been revised to correct the immaterial classification error by decreasing the previously reported amount for Accruals and other liabilities as of December 31, 2021, by the $237,794 of Accrued media. The Company reorganized its management structurerevision had no effect on our previously reported Total Current Liabilities, or on any other previously reported amounts in 2020 which resulted in a change to our reportable segments. Prior periods presented have been recast to reflect the change in reportable segments. See Note 20 of the Notes to theAudited Consolidated Financial Statements included herein.
Nature of Operations
MDC Partners Inc., incorporated underfor the laws of Canada, is a leading provider of global marketing, advertising, activation, communications and strategic consulting solutions. Through its Networks (and underlying agencies generally referred to as “Partner Firms”), MDC delivers a wide range of customized services in order to drive growth and business performance for its clients.
The Company operates in North America, Europe, Asia, South America, and Australia.year ended December 31, 2021.
Recent Developments
On December 21, 2020, MDCMarch 1, 2023, the board of directors authorized an extension and Stagwell Media LP, a Delaware limited partnership (“Stagwell”), announced that they entered into a definitive transaction agreement (the “Transaction Agreement”) providing for$125,000 increase in the combination of MDC with the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (the “Stagwell Entities”). Under the termssize of the Transaction Agreement, the combination between MDC and the Stagwell Entities will be effected using an “Up-C” partnership structure. Through a series of steps and transactions (collectively, the “Transactions”), including the domestication of MDC to a Delaware corporation and the merger of MDC Delaware with one of its indirect wholly owned subsidiariesstock repurchase program (the “MDC Merger”), MDC Delaware will become a direct subsidiary (from and after the merger, “OpCo”“Repurchase Program”) of a newly-formed, Delaware-organized, NASDAQ-listed corporation (“New MDC”). Following the MDC Merger, (i) OpCo will convert into a limited liability company that will hold MDC’s operating assets and to which Stagwell will contribute the equity interests of the Stagwell Entities (the “Stagwell Contribution”) in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) Stagwell will contribute to New MDC an aggregate amount of cash equal$250,000, with any previous purchases under the Repurchase Program continuing to $100 in exchange for shares of a new Class C series of voting-only common stock (the “New MDC Class C Stock”) equal in number to the Stagwell OpCo Units. On a pro forma basis, without giving effect to any outstanding preference shares of MDC, the existing holders of MDC’s Class A and Class B shares would receive interests equal to approximately 26% of the combined company and Stagwell would be issued New MDC Class C Stock equivalent to approximately 74% of the voting rights of the combined company and exchangeable, together with Stagwell OpCo Units, into Class A shares of New MDCcount against that limit. The Repurchase Program, as amended, will expire on a 1-for-one basis at Stagwell’s election. The number of Stagwell OpCo Units and shares of New MDC Class C Stock that Stagwell will receive in the Transactions, and the percentage of the combined company that Stagwell will hold following the consummation of the Transactions, will be reduced, and the percentage of the combined company that existing MDC shareholders will hold will be proportionally increased, if Stagwell is unable to effect certain restructuring transactions prior to the closing of the Transactions.



MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
1. Basis of Presentation and Recent Developments - (continued)
On December 21, 2020, MDC and Broad Street Principal Investments, L.L.C., an affiliate of Goldman Sachs (“Broad Street”), entered into a letter agreement, pursuant to which Broad Street consented to the Transactions subject to entry with MDC into a definitive agreement reflecting revised terms of MDC’s issued and outstanding Series 4 convertible preference shares (the “Goldman Letter Agreement”). The revised terms of the Series 4 convertible preference shares would (subject to the closing of the Transactions) reduce the conversion price from $7.42 to $5.00 and extend accretion for two years beyond the date on which accretion would have otherwise ceased, at a reduced rate of 6%. In connection with the closing of the Transactions, Broad Street will have the right to redeem up to $30 million of its preference shares in exchange for a $25 million subordinated note or loan with a 3-year maturity (i.e., exchange at an approximately 17% discount to face value). The $25 million note or loan will accrue interest at 8.0% per annum and is, pre-payable any time at par without penalty.
On December 21, 2020, MDC entered into consent and support agreements (the “Consent and Support Agreements”) with holders of more than 50% of the aggregate principal amount of its Senior Notes to consent to the consummation of the combination of MDC with the Stagwell Entities. Pursuant to the Consent and Support Agreements, MDC agreed to increase the interest rate on the Senior Notes by 1% per annum effective as of the date of the Consent and Support Agreements and to pay a consent fee of 2% to all holders of Notes upon a successful consent solicitation, or 3% if a supplemental indenture with the waivers and amendments is executed and becomes operative and the combination of MDC with the Stagwell Entities is consummated. On February 5, 2021, MDC announced it had received and accepted consents from holders of at least a majority in principal amount of the Senior Notes, and on February 8, 2021, MDC entered into a supplemental indenture providing for waivers and amendments in connection with the combination of MDC with the Stagwell Entities.
On February 8, 2021, MDC filed a proxy statement/prospectus on Form S-4, which describes the Transaction Agreement, the Transactions, and ancillary agreements related thereto in more detail.March 1, 2026.
2. Significant Accounting Policies
The Company’s significant accounting policies are summarized as follows:
Principles of Consolidation. The accompanying consolidated financial statements include the accounts of MDC PartnersStagwell Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of the audited consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use lease assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and
74

various other assumptions believed to be reasonable under the circumstances. These estimates require the use of assumptions about future performance, which are uncertain at the time of estimation. To the extent actual results differ from the assumptions used, results of operations and cash flows could be materially affected.
Fair Value. The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use lease assets and other identifiable intangible assets. See Note 18 of the Notes to the Consolidated Financial Statements included herein for additional information regarding fair value measurements.
Concentration of Credit Risk. The Company provides marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit risk. No client accounted for more than 10% of the Company’s consolidated accounts receivable as of December 31, 2020 or December 31, 2019.risk. No sales to an individual client or country other than in the United States accounted for more than 10%7% of revenue for the fiscal years ended December 31, 2020, 2019, or 2018. As the Company operates in foreign markets, it is always considered at least reasonably possible foreign operations will be disrupted in the near term.2022, 2021, and 2020.
Cash and Cash Equivalents. The Company’s cash equivalents are primarily comprised ofmay comprise investments in overnight interest-bearing deposits, money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts.



MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts unless otherwise stated)
2. Significant Accounting Policies - (continued)
and international cash balances that may not qualify for foreign government insurance programs. To date, the Company has not experienced any losses on cash and cash equivalents.
Allowance for Doubtful Accounts. Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions. Allowance for doubtful accounts was $10,369 and $5,638 at December 31, 2022 and December 31, 2021, respectively.
Sale of Accounts Receivable. The Company transfers certain of its trade receivable assets to third parties under agreements to sell certain of its accounts receivables. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer. Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to cash and a decrease to accounts receivable when the receivables are transferred, with the proceeds being included in cash flows from operating activities in the Consolidated Statements of Cash Flows.
The trade receivables transferred to the third parties under these arrangements were $176,497, $42,097 and $44,172, during the years ended December 31, 2022, 2021 and 2020, respectively. The amount collected and due to the third parties under these arrangements was $5,703 as of December 31, 2022. No amounts were collected and due to third parties as of December 31, 2021 and 2020. Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $1,817, $110, and $185 for the years ended December 31, 2022, 2021 and 2020, respectively.
Expenditures Billable to Clients. Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the production process.period.
Fixed Assets. Fixed assets are stated at cost, net of accumulated depreciation. Computers and furniture and fixtures are depreciated on a straight-line basis over periods of three to seventen years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Accumulated depreciation was $59,445 and $35,895 at December 31, 2022 and December 31, 2021, respectively.
Leases. Effective January 1, 2019, the Company adopted Accounting Standards Codification, Leases (“ASC 842”). As a result, the 2018 fiscal year has not been adjusted and continues to be reported under ASC 840, Leases. The Company recognizes on the balance sheetConsolidated Balance Sheets, at the time of lease commencement, a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. All right-of-use lease assets are reviewed for impairment. See Note 10 of the Notes to the Consolidated Financial Statements included herein for further information on leases.
Impairment of Long-lived Assets. A long-lived asset or asset group is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of such asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate.
Equity Method Investments.  Equity method investments are investments in entities in which the Company has an ownership interest of less than 50% and has significant influence, or joint control by contractual arrangement, (i) over the operating and financial policies of the affiliate or (ii) has an ownership interest greater than 50%; however, the substantive participating rights of the noncontrolling interest shareholders preclude the Company from exercising unilateral control over the operating and financial policies of the affiliate. The Companys proportionate share of the net income or loss of equity method investments is included in the results of operations and any dividends and distributions reduce the carrying value of the investments. The Company’s equity method investments, include various interests in investment funds. The carrying amount for these investments, which are included in Other assets within the Consolidated Balance Sheets as of December 31, 2020 and 2019 was $3,947 and $6,161, respectively. The Company’s management periodically evaluates these investments to determine if there has been a decline in value that is other than temporary.
Other Investments.  From time to time, the Company makes investments in start-ups, such as advertising technology and innovative consumer product companies, where the Company does not exercise significant influence over the operating and financial policies of the investee. Non-marketable equity investments do not have a readily determinable fair value and are recorded at cost, less any impairment, adjusted for qualifying observable investment balance changes. The carrying amount for these investments, which are included in Other assets within the Consolidated Balance Sheets as of December 31, 2020 and 2019 was $7,257 and $9,854, respectively.
The Company is required to measure these other investments at fair value and recognize any changes in fair value within net income or loss. For investments that don’t have readily determinable fair values, and don’t qualify for certain criteria, an alternative for measurement exists. The alternative is to measure these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company has elected to measure these investments under the alternative method. The Company performs a qualitative assessment to review these investments for impairment by identifying any impairment indicators, such as significant deterioration of earnings or significant change in the industry. If the qualitative assessment indicates an investment is impaired, the Company estimates the fair value and reduces the carrying value of the investment down to its fair value with the loss recorded within net income or loss.

75


MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
2. Significant Accounting Policies - (continued)
Goodwill. Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization isamortized but rather tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist.
For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.
If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, and for reporting units for which the qualitative assessment is not performed, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. ForThe Company uses a combination of the 2020 annual impairment test, the Company used an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach requiresand the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective. The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s WACC as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations. See Note 8 of the Notes to the Consolidated Financial Statements included herein for additional information regarding the Company’s impairment test.
Definite Lived Intangible Assets. Definite lived intangible assets are subject to amortization over their useful lives. TheA straight-line amortization method is used over the estimated useful life which is representative of amortization selected reflects the pattern in whichof how the economic benefits of the specific intangible asset is consumed or otherwise used. If that pattern cannot be reliably determined, a straight-line amortization method is used over the estimated useful life.consumed. Intangible assets that are subject to amortization are reviewed for potential impairment at least annually or whenever events or circumstances indicate that carrying amounts may not be recoverable. ForRecoverability is measured by a comparison of the 2020 annual impairment test,carrying amount of an intangible asset to estimated undiscounted future cash flows expected to be generated from use of the Company usedasset and its eventual disposition. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, a quantitative assessment is performed using an income approach, which incorporates the use of the discounted cash flow (“DCF”)DCF method. See Note 8 of the Notes to the Consolidated Financial Statements included herein for further information.
Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values.
For each acquisition, the Company undertakes a detailed review to identify other intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible assets value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trademarks.
Deferred Acquisition Consideration. MostCertain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the Consolidated Balance Sheets, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity and are



MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
2. Significant Accounting Policies - (continued)
based on predetermined formulas.entity. These various contractual valuation formulasarrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period. Contingent purchase price obligations are recorded asAt each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration on the balance sheet at the acquisition date fair value and are remeasured at each reporting period.liability. The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information
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will have on future results included in the calculation of the estimated liability. In addition, changes in various contractual valuation formulas as well as adjustments to present value impact quarterly adjustments. These adjustments are recorded in deferred acquisition consideration expense within Office and general expenses in the resultsConsolidated Statement of operations.Operations. In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in Office and general expenses in the Consolidated Statements of Operations.
Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase such noncontrolling shareholders’ incremental ownership interests under certain circumstances. The Company hasmay have similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period. In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interestsin Redeemable Noncontrolling Interests in mezzanine equity on the Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Common stock and other paid-inRetained earnings or Paid-in capital (when at an accumulated deficit) in the Consolidated Balance Sheets (but not less than their initial redemption value), except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. See Note 13 of the Notes to the Consolidated Financial Statements for detail on the impact on the Company’s earnings (loss) per share calculation.
Control to Control Subsidiary and Equity Investment Stock Transactions.Purchases. Transactions involving the purchase, sale or issuance of stockinterests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price and noncontrolling interest is recorded to Common stock and other paid-inPaid-in capital in the Consolidated Balance Sheets. In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the results of operations.Consolidated Statement Operations.
Revenue Recognition. The Company’s revenue is recognized when control of the promised goods or services isare transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 5 of the Notes to the Consolidated Financial Statements included herein for additional information.
Cost of Services Sold. Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients. Cost of services sold does not include depreciation, charges for fixed assets.amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements.
Interest ExpenseDeferred Financing Costs. The Company uses the effective interest method to amortize deferred financing costs and any original issue premium or discount, if applicable. The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs on the Credit Agreement.costs.
Income Taxes. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense.Theexpense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense.
Stock-Based CompensationUnder the fair value method, compensationCompensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period. The Company uses its historical volatility derived over the expected term
Certain of the award to determine the volatility factor used in determining the fair value of the award. The Company recognizes forfeitures as they occur.
Stock-basedour awards that are settled in cash or equity at the option of the Company(stock appreciation awards) and are recorded at fair value on the date of grant.grant and remeasured at each reporting period. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option



MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
2. Significant Accounting Policies - (continued)
pricing-model or other acceptable method pricing model and is recorded in Operating income over the service period, in this case the award’s vesting period. The assumption for expected volatility is based on the historical volatility of a peer group of market participants as the Company has limited historical volatility.
The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met.
From time to time, certain acquisitions and step-up transactions include an elementShare Buybacks. In 2022, the Company began repurchasing its own Class A common stock, par value $.001 per share (the “Class A Common Stock”), as part of compensation related payments.a publicly announced stock repurchase plan. The Company accounts for those payments as stock-based compensation.these
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repurchases by reducing the value of our Class A Common Stock for the par value of the shares repurchased and account for the difference between the price paid for the Class A Common Stock, excluding fees, and the par value of such stock to Paid-in capital. See Note 15 of the Notes included herein for further details of our share buyback plan.
Retirement Costs. Several of the Company’s subsidiaries offer employees access to certain defined contribution retirement programs. Under the defined contribution plans, these subsidiaries, in some cases, make annual contributions to participants’ accounts which are subject to vesting. The Company’s contribution expense pursuant to these plans was $8,203, $11,909approximately $19,000, $10,000, and $11,136$4,000 for the years ended December 31, 2020, 2019,2022, 2021, and 2018,2020, respectively. The Company also has a defined benefit pension plan. See Note 12 of the Notes to the Consolidated Financial Statements included herein for additional information on the defined benefit plan.
Income (Loss) per Common Share. Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Diluted income (loss) per common share is based on the above, in addition, if dilutive, common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units.and restricted stock units as well as shares of Class C Common Stock. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.
The Company has 145,000 authorized and issued convertible preference shares. The two-class method is applied to calculate basic net income (loss) attributable to MDC Partners Inc. per common share in periods in which shares of convertible preference shares are outstanding, as shares of convertible preference shares are participating securities due to their dividend rights. See Note 15 of the Notes to the Consolidated Financial Statements included herein for additional information. The two-class method is an earnings allocation method under which earnings per share is calculated for common stock considering a participating security’s rights to undistributed earnings as if all such earnings had been distributed during the period. Either the two-class method or the if-converted method is applied to calculate diluted net income per common share, depending on which method results in more dilution. The Company’s participating securities are not included in the computation of net loss per common share in periods of net loss because the convertible preference shareholders have no contractual obligation to participate in losses.
Foreign Currency Translation. The functional and reporting currency of the Company is the Canadian dollar; however, it has decided to use U.S. dollars as its reporting currency for consolidated reporting purposes.dollar. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly,Assets and liabilities are translated at the currency impacts ofexchange rates in effect at the translation ofbalance sheet date, and revenues and expenses are translated at the Consolidated Balance Sheets ofaverage exchange rates during the Company and its non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulativeperiod presented. The resulting translation adjustments inare recorded as a component of Accumulated other comprehensive income (loss). in the Shareholders’ equity section of our Consolidated Balance Sheets. Foreign currency transaction unrealized and realized gains or losses are recognized as incurred in the Consolidated Statements of Operations in Foreign, exchange, net. Translation of intercompany debt,transactions, which isare not intended to be repaid, issettled, are included in cumulative translation adjustments. Cumulative translation adjustments are not included in net earnings (loss) unless they are actually realized through a sale or upon complete, or substantially complete, liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in net earnings (loss). The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The Consolidated Statements of Operation of the Company and its non-U.S. dollar based subsidiaries are translated at average exchange rates for the period.
Gains and losses arising from the Company’s foreign currency transactions are reflected in net earnings. Unrealized gains or losses arising on the translation of certain intercompany foreign currency transactions that are of a long-term nature (that is settlement is not planned or anticipated in the future) are included as cumulative translation adjustments in Accumulated other comprehensive (loss) income.
3. New Accounting PronouncementPronouncements
In December 2019,March 2020, the FASBFinancial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, and in January 2021 subsequently issued ASU 2019-12, Income Taxes,2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to simplify the accountingprovide optional expedients and exceptions for income taxes, including amending the rules for performing intra-period tax allocationsapplying GAAP to contracts, hedging relationships, and calculating income taxes in interim periods, the accounting forother transactions that result in a step-up in the tax basis of goodwill, as well as other amendments.affected by reference rate reform if certain criteria are met. ASU 2019-122020-04 is effective January 1, 2021. We doupon issuance, through December 31, 2022. The Combined Credit Agreement (as defined in Note 11 of the Notes included herein) is the Company’s only contractual arrangement that referenced LIBOR and is impacted by ASU 2020-04. On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to the Secured Overnight Financing Rate (“SOFR”). Based on the Company’s assessment, the Company has elected to apply the optional expedient and treat the contract modifications as a continuation of an existing contract. This election does not expect the adoption of ASU 2019-12 will have a material effect on our results of operations andor financial position. See Note 11 of the Notes included herein for more information.
4. Acquisitions
2022 Acquisitions
Acquisition of Brand New Galaxy
On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $20,695 of cash consideration, as well as contingent consideration up to a maximum value of $50,000. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and 33% payable in Stagwell Inc. Class A Common Stock.

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The consideration has been allocated to the assets acquired and assumed liabilities of ContentsBNG based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
Cash and cash equivalents$2,766 
Accounts receivable10,147 
Other current assets671 
Fixed assets1,587 
Identifiable intangible assets12,740 
Other assets1,583 
Accounts payable(4,771)
Accruals and other liabilities(6,880)
Advance billings(1,159)
Other liabilities(3,642)
Net assets assumed13,042 
Goodwill24,423 
Purchase price consideration$37,465
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of BNG. Goodwill of $24,423 was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.
Intangible assets consist of trade names, customer relationships and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Customer relationships$6,150 10
Trade names5,500 10
Developed technology1,090 7
Total acquired intangible assets$12,740 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,
20222021
Revenue$2,698,018 $1,501,568 
Net income65,097 36,863 
79

Revenue and net loss attributable to BNG, included within the year ended December 31, 2022 Consolidated Statements of Operations was $20,544 and $67, respectively.
The purchase price accounting is not yet final as the Company may still make adjustments due to changes in working capital.
Acquisition of TMA Direct, Inc.
On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $17,247 of cash consideration and approximately $457 of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13,330.
The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon estimated fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
Amount
Accounts receivable$582 
Other current assets669 
Identifiable intangible assets13,200 
Accounts payable(379)
Other liabilities(270)
Noncontrolling interests(2,667)
Net assets assumed11,135 
Goodwill6,569 
Purchase price consideration$17,704
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of TMA Direct. Goodwill of $6,569 was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:

Fair ValueEstimated Useful Life in Years
Customer relationships$11,400 10
Trade names1,800 10
Total acquired intangible assets$13,200 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,
20222021
Revenue$2,691,622 $1,481,727 
Net income67,195 39,386 
Revenue and net income attributable to TMA Direct, included within the year ended December 31, 2022 Consolidated Statements of Operations was $7,659 and $889, respectively.
Acquisition of Maru Group Limited Ltd.
On October 3, 2022, the Company acquired Maru Group Limited Ltd. (“Maru”) for approximately £23,000 (approximately $25,793) in cash consideration.
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The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
Cash and cash equivalents$1,033 
Accounts receivable7,374 
Other current assets899 
Fixed assets157 
Identifiable intangible assets13,500 
Other assets1,920 
Accounts payable(4,087)
Accruals and other liabilities(9,154)
Advance billings(6,462)
Other liabilities(3,591)
Net assets assumed1,589 
Goodwill24,204 
Purchase price consideration$25,793
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Maru and the expected growth related to new customer relationships and geographic expansion. Goodwill of $24,204 was assigned to the All Other reportable segment. The goodwill is partially deductible for income tax purposes.
Intangible assets consist of trade names, customer relationships, and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately eight years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Customer relationships$4,700 10
Trade names3,500 10
Developed technology5,300 2-7
Total acquired intangible assets$13,500 


Pro Forma Financial Information (unaudited)
MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousandsThe unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of United States dollars, except per share amounts, unless otherwise stated)
January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,
20222021
Revenue$2,717,667 $1,512,791 
Net Income51,841 15,167 
4. Acquisitions
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Revenue and Dispositionsnet loss attributable to Maru, included within the year ended December 31, 2022 Consolidated Statements of Operations was $8,786 and $2,135, respectively.
2020 Acquisition of Wolfgang, LLC.
On July 1, 2020,October 3, 2022, the Company acquired the remaining 10%80% interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $3,750 in cash consideration and 175 shares of Class A Common Stock with a fair value of $1,178, subject to post-closing adjustments.
The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
Cash and cash equivalents$1,606 
Accounts receivable1,180 
Other current assets100 
Identifiable intangible assets1,055 
Other assets46 
Current liabilities(278)
Net assets assumed3,709 
Goodwill2,451 
Purchase price consideration including fair value of previously owned interest$6,160
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Wolfgang. Goodwill of $2,451 was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes.
Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Customer relationships$1,055 5
Total acquired intangible assets$1,055 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,
20222021
Revenue$2,696,733 $1,474,303 
Net income67,196 36,538 
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Revenue and net loss attributable to Wolfgang, included within the year ended December 31, 2022 Consolidated Statements of Operations was $2,072 and $297, respectively.
Acquisition of Epicenter Experience LLC.
On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $9,864 in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of $5,000. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in Class A Common Stock.
The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon preliminary estimated fair values. The preliminary purchase price allocation is as follows:
Amount
Accounts receivable$901 
Other current assets45 
Identifiable intangible assets7,300 
Accounts payable(148)
Other current liabilities(650)
Net assets assumed7,448 
Goodwill4,416 
Purchase price consideration$11,864
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Epicenter. Goodwill of $4,416 was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes.
The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Developed technology$7,300 5
Total acquired intangible assets$7,300 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,
20222021
Revenue$2,690,969 $1,473,183 
Net income65,450 35,810 
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Revenue and net loss attributable to Epicenter, included within the year ended December 31, 2022 Consolidated Statements of Operations was $1,028 and $1,183, respectively.
Other Acquisitions
On July 12, 2022, the Company acquired PEP Group Holdings B.V. (“PEP Group”), an omnichannel content creation and adaption production company for approximately $521 in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of €2,553. The contingent consideration is subject to meeting certain future earnings targets through 2025.
On July 15, 2022, the Company acquired Apollo Program II Inc. (“Apollo”), a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2,300 in cash consideration, subject to post-closing adjustments, as well as guaranteed deferred payments of $1,000 and $1,500 on or prior to July 1, 2023 and July 1, 2024, respectively.
2021 Acquisitions
Acquisition of MDC
On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Subject Entities. The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries.
On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC, and subsequently to Stagwell Global LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.
In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the FASB’s Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC Topic 805-10, Business Combinations, with MDC treated as the legal acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of Veritas69.55% ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed.
On August 2, 2021, an aggregate of 179,970 shares of the Company’s Class C common stock, par value $0.00001 per share (the “Class C Common Stock”), were issued to Stagwell Media in exchange for $1.80. The Class C Common Stock does not participate in the earnings of the Company. Additionally, an aggregate of 179,970 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”).
The fair value of the purchase consideration was $429,062, consisting of approximately 80,000 shares of the Company’s Class A Common Stock, Class B common stock, par value $0.001 per share (the “Class B Common Stock”), and common stock equivalents based on a per share price of approximately $5.42, the closing stock price on the date of the combination.

ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation. The purchase price valuation was completed during the third quarter of 2022.
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The purchase price allocation is as follows:
Amount
Cash and cash equivalents$130,197 
Accounts receivable398,736 
Other current assets41,291 
Fixed assets81,343 
Right-of-use lease assets - operating leases252,739 
Identifiable intangible assets810,900 
Other assets18,282 
Accounts payable(139,590)
Accruals and other liabilities(307,439)
Advance billings(211,212)
Current portion of lease liabilities(54,009)
Current portion of deferred acquisition consideration(53,054)
Long-term debt(901,736)
Revolving credit facility(109,954)
Long-term portion of deferred acquisition consideration(8,056)
Long-term portion of lease liabilities(283,637)
Other liabilities(139,026)
Redeemable noncontrolling interests(25,990)
Preferred shares(209,980)
Noncontrolling interests(151,090)
Net liabilities assumed(861,285)
Goodwill1,290,347 
Purchase price consideration$429,062
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $932,582, $285,396 and $72,369 was assigned to the Integrated Agencies Network, the Brand Performance Network and the Communications Network reportable segments, respectively. The majority of the goodwill is non-deductible for income tax purposes. Goodwill has been updated from the previously reported amount of $1,299,374 as of December 31, 2021 to reflect a change in certain assets and liabilities. There has been no change that impacts the Consolidated Statement of Operations.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately thirteen years. The following table presents the details of identifiable intangible assets acquired:
Fair ValueEstimated Useful Life in Years
Trade Names$98,000 10
Customer Relationships712,900 6-15
Total Acquired Intangible Assets$810,900 
85

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
Years Ended December 31,
20212020
Revenue$2,224,343 $2,087,025 

The pro forma net loss was nominal for the years ended December 31, 2021 and 2020.
Revenue attributable to MDC, included within the year ended December 31, 2021 Consolidated Statements of Operations was $605,448. The net loss included within the year ended December 31, 2021 Consolidated Statements of Operations was nominal.
Transaction expenses were approximately $15,000 for the twelve months ended December 31, 2021.
Acquisition of GoodStuff Holdings Limited
On December 31, 2021, the Company acquired GoodStuff Holdings Limited (“Goodstuff”) for approximately £21,000 (approximately $28,188) of cash consideration as well as contingent consideration up to a maximum of £22,000. The cash consideration included an initial payment of £8,000, an excess working capital payment of approximately £9,000 and approximately £4,000 of deferred payments. The contingent consideration is tied to employees’ service and will be recognized as deferred acquisition consideration expense through 2026. Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of Goodstuff based upon their fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
Amount
Cash and cash equivalents$30,985 
Accounts receivable28,685 
Other current assets3,207 
Fixed assets237 
Right-of-use lease assets - operating leases2,060 
Identifiable intangible assets14,974 
Other assets55 
Accounts payable(6,344)
Accruals and other liabilities(27,353)
Advance billings(15,956)
Current portion of lease liabilities(857)
Income taxes payable(967)
Long-term portion of lease liabilities(3,744)
Other liabilities(1,204)
Net assets assumed23,778 
Goodwill4,410 
Purchase price consideration$28,188
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Goodstuff. Goodwill of $4,410 was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired:

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Fair ValueEstimated Useful Life in Years
Trade Names$1,349 15
Customer Relationships13,625 10
Total Acquired Intangible Assets$14,974 
Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Years Ended December 31,
20212020
Revenue$1,488,532 $902,577 
Net Income38,719 72,715 
2022 Purchases of Noncontrolling Interests
On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $2,187,$4,600, comprised of which $1,087a closing cash payment of $3,600 and a contingent deferred acquisition payment of $1,000. The contingent deferred payment was a deferred cash payment. As a resultbased on the financial results of the transaction,underlying business through the end of 2022 with the payment due in 2023.
2021 Purchases of Noncontrolling Interests
On October 1, 2021, the Company reduced noncontrollingentered into an agreement to purchase the approximate 27% remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3% on October 1, 2021 and the remaining 13.3% on July 31, 2023, with the option for the seller to delay the second purchase until July 31, 2025. The purchase price of $73,898 was comprised of a contingent deferred acquisition payment and redeemable noncontrolling interests by $2,651.interest with estimated present values at the acquisition date of $46,618 and $27,280, respectively. The difference betweencontingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through July 2023 and July 2025, respectively. In addition, at the option of the Company, up to 50% of the total purchase price can be paid in shares of Class A Common Stock and in no event may the purchase price and the noncontrolling interest of $464 was recorded in Common stock and other paid-in capital in the Consolidated Balance Sheets.exceed $135,000.
On March 19, 2020,December 1, 2021, the Company acquired the approximate 27% remaining 22.5% ownership interest of KWT GlobalConcentric it did not already own for an aggregate purchase price of $2,118,$8,058, comprised of a closing cash payment of $729$1,581 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $1,389.$6,477. The contingent deferred payments arewere based on the financial results of the underlying business from 2019 to 2020through 2022 with final payment due in 2021. As a result of the transaction, the Company reduced redeemable noncontrolling interests by $1,615. The difference between the purchase price and the redeemable noncontrolling interest of $503 was recorded in Common stock and other paid-in capital in the Consolidated Balance Sheets.
2020 Disposition2023.
On February 14, 2020, the Company sold substantially all the assets and certain liabilities of Sloane and Company LLC (“Sloane”), an indirectly wholly owned subsidiary of the Company, to an affiliate of The Stagwell Group LLC (“Stagwell”), for an aggregate sale price of $26,696, consisting of cash received at closing plus contingent deferred payments expected to be paid over the next two years. The sale resulted in a gain of $16,827, which is included in Other, net within the Consolidated Statement of Operations. Sloane was included within Allison & Partners which is included within the All Other category.
2019 Acquisitions
On November 15, 2019,December 31, 2021, the Company acquired the approximate 49% remaining 35% ownership interest of Laird + PartnersInstrument it did not already own for an aggregate purchase price of $2,389,$157,072, comprised of a closing cash payment of $1,588$37,500 in cash and contingent$37,500 in shares of Class A Common Stock and deferred acquisition payments with an estimated present value at the acquisition date of $801.$82,072, with approximately 40% to be paid in shares of Class A Common Stock. The contingent deferred payments are based on the financial results of the underlying business from 2018 to 2020 with final payment duenot contingent and will be paid in 2021. As a result of the transaction,2023 and 2024.
2021 Disposition
On September 15, 2021, the Company reduced redeemable noncontrolling interests by $5,045. The difference between the purchase price and the redeemable noncontrolling interest of $2,656 was recorded in common stock and other paid-in capital in the Consolidated Balance Sheets.
Effective April 1, 2019, the Company acquired the remaining 35% ownership interest of HPR Partners LLC (Hunter) it did not ownsold Reputation Defender to a strategic buyer for an aggregate purchase price of $10,234, comprised of a closing cash payment of $3,890 and additional contingent deferred acquisition payments with an estimated present value at the acquisition date of $6,344. The contingent deferred payments are based on the financial results of the underlying business from 2018 to 2020 with final payment due in 2021. As a result of the transaction, the Company reduced redeemable noncontrolling interests by $9,486. The difference between the purchase price and the noncontrolling interest of $745 was recorded in common stock and other paid-in capital in the Consolidated Balance Sheets.
2019 Disposition
On March 8, 2019, the Company consummated the sale of Kingsdale, an operating segment with operations in Toronto and New York City that provides shareholder advisory services. As consideration for the sale, the Company received cash plus the assumption of certain liabilities totaling approximately $50,000 in the aggregate. The sale resulted$40,000 resulting in a lossgain of approximately $3,000, which$43,000. The gain was included inrecognized within Other, net within the Consolidated StatementStatements of Operations.
2020 Acquisitions
On February 14, 2020, the Company acquired Sloane & Company (“Sloane”) for approximately $24,400 of total consideration. Total consideration included a cash payment of $19,600 and contingent deferred acquisition consideration of $4,800.
On August 14, 2020, the Company acquired Kettle Solutions, LLC (“Kettle”) for approximately $5,400 of total consideration. Total consideration included a cash payment of $4,900, plus an additional $500 due upon the finalization of Kettle’s working capital accounts, as outlined in the purchase agreement. The purchase agreement also offers the previous owners of Kettle an additional $11,900 in deferred consideration.
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On October 30, 2020, the Company acquired TrueLogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L. (collectively referred to as “Truelogic”), for approximately $17,300 of total consideration. Total consideration included a cash payment of $8,900, the acquisition date fair value of the contingent deferred acquisition consideration of $7,900, and an additional $500 due upon the finalization of Truelogic’s working capital accounts, as outlined in the purchase agreement.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition:
2020
SloaneKettleTruelogicTotal
Cash, cash equivalents and restricted cash$— $49 $90 $139 
Accounts receivable and other current assets2,768 2,732 2,958 8,458 
Other noncurrent assets— 172 10 182 
Intangible assets5,900 1,930 9,500 17,330 
Property and equipment72 58 50 180 
Right-of-use lease assets – operating leases— 533 201 734 
Accounts payable and other current liabilities(469)(552)(1,063)(2,084)
Advanced billings(130)(310)(429)(869)
Operating lease liabilities— (533)(201)(734)
Goodwill16,275 1,323 6,184 23,782 
Total net assets acquired$24,416 $5,402 $17,300 $47,118 

Goodwill recognized on the Sloane, Kettle and Truelogic acquisitions is fully-deductible for income tax purposes.
The following table reports the fair value of intangible assets acquired, including the corresponding weighted average amortization periods, as of the date of each acquisition:

2020
Weighted Average Amortization PeriodSloaneKettleTruelogicTotal
Customer relationships10 years$4,600 $1,600 $9,100 $15,300 
Trade names11 years1,300 330 400 2,030 
Total$5,900 $1,930 $9,500 $17,330 

The following table summarizes the total revenue and net income included in the Consolidated Statements of Operations for the year ended December 31, 2020 from the date of each acquisition:

Year Ended December 31, 2020
Revenue$22,381 
Net Income2,685 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the 2020 acquisitions as if they had occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily
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indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time:
Year Ended December 31, 2020
Revenue$911,203 
Net Income75,767 

5. Revenue
The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The MDCStagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
5. Revenue - (continued)

management, online fundraising, media training, influencer engagement and events management. We also provide mediamedia-based solutions to drive brand performance, including buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development.
The primary source of the Company’s revenue is from agencyBrand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses, depending on the terms of the client contract. In all circumstances, revenue is only recognized when collection is reasonably assured. Certain of the Company’s contractual arrangements have more than one performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its relative stand-alone selling price. Stand-alone selling prices are determined based on the prices charged to clients or using expected cost plus margin.
The determination of our performance obligations is specific to the services included within each contract. Based on a client’s requirements within the contract, and how these services are provided, multiple services could represent separate performance obligations or be combined and considered one performance obligation. Contracts that contain services that can be provided on a stand-alone basis, that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are typically considered separate performance obligations. Typically, we consider media planning, media buying,these services are creative (or strategy), production, and experiential marketing, services to bemedia planning and media buying.
Certain of the Company’s contracts consist of a single performance obligation. In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations if included inbecause its services are highly interrelated, and the same contract as eachintegration of the various components is essential to the overall promise to the Company’s customer. Typically, these services can be provided on a stand-alone basis, and do not significantly modify or customize each other. Publicare public relations, services and application/website design and developmentdevelopment. In other instances, the Company is engaged to provide marketing services, such online fundraising and brand performance media solutions, that include a variety of distinct activities performed throughout the contract term that are typically each consideredsubstantially the same and that are satisfied over time, and therefore the Company considers these to be one performance obligation as there is a significant integration of these services into a combined output.obligation.

We typically satisfy our performance obligations over time, as services are performed. Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract. To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting. For client contracts when the Company has a stand-ready obligation to perform services, the Company recognizes revenue ratably using a time-based measure. In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term. Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation.
Revenue is recognized net of sales and other taxes due to be collected and remitted to governmental authorities. The Company’s contracts typically provide for termination by either party within 30 to 90 days. Although payment terms vary by client, they are typically within 30 to 60 days. In addition, the Company generally has the right to payment for all services provided through the end of the contract or termination date.
Within each contract, we identify whether the Company is principal or agent at the performance obligationservice level. In arrangements where the Company has substantive control over the service before transferring it to the client, and is primarily responsible for integrating the services into the final deliverables, we act as principal. In these arrangements, revenue is recorded at the gross amount billed. Accordingly, for these contracts the Company has included reimbursed expenses in revenue. In other arrangements
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where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned. The role of MDC’s agenciesStagwell’s Brands under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines. The obligation of MDC’s agenciesStagwell’s Brands under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan. WeTypically, we do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services.                                    
A small portion of the Company’s contractual arrangements with clients include performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. Incentive compensation is primarily estimated using the most likely amount method and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which the performance incentives are related.
Disaggregated Revenue Data
The Company provides a broad range of services to a large base of clients across the full spectrum of industry verticals on a global basis.globally. The primary source of revenue is from agencyBrand 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 Partner Firms.Brands. Representation of a client rarely means


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
5. Revenue - (continued)

that MDCStagwell handles marketing communications for all brandsBrands or product lines of the client in every geographical location. The Company’s Partner firmsBrands often cooperate with one another through referrals and the sharing of both services and expertise, which enables MDCStagwell 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 MDCStagwell network.
The following table presents revenue disaggregated by client industry verticalour principal capabilities for the twelve monthsyears ended December 31, 2020, 20192022, 2021, and 2018:2020:
Twelve Months Ended December 31,
IndustryReportable Segment202020192018
Food & BeverageAll$205,939 $280,094 $313,368 
RetailAll148,293 148,851 152,552 
Consumer ProductsAll165,105 167,324 162,524 
CommunicationsAll77,443 184,870 178,410 
AutomotiveAll67,339 78,985 88,807 
TechnologyAll181,057 118,169 104,479 
HealthcareAll100,727 102,221 127,547 
FinancialsAll91,438 112,351 110,069 
Transportation and Travel/LodgingAll44,510 88,958 86,419 
OtherAll117,160 133,980 150,913 
$1,199,011 $1,415,803 $1,475,088 
Year Ended December 31,
Principal CapabilitiesReportable Segment202220212020
Digital TransformationAll Segments$784,667 $400,857 $374,689 
Creativity and CommunicationsIntegrated Agencies Network, Brand Performance Network, Communications Network1,221,855 561,538 152,499 
Performance Media and DataBrand Performance Network456,640 341,730 253,011 
Consumer Insights and StrategyIntegrated Agencies Network224,630 165,238 107,833 
$2,687,792 $1,469,363 $888,032 
MDCStagwell 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 looking for help to grow their businesses in newinternational markets. MDC’s Partner FirmsStagwell’s Brands are located in the United States Canada, and an additional elevenUnited Kingdom, and more than 32 other countries around the world. In the past, 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 twelve monthsyears ended December 31, 2020, 20192022, 2021, and 2018:2020:
Twelve Months Ended December 31,Year Ended December 31,
Geographic LocationReportable Segment202020192018
Geographical LocationGeographical LocationReportable Segment202220212020
United StatesUnited StatesAll$959,636 $1,116,045 $1,152,399 United StatesAll$2,218,681 $1,219,816 $804,418 
CanadaAll81,930 105,067 124,001 
United KingdomUnited KingdomAll181,764 105,961 41,489 
OtherOtherAll157,445 194,691 198,688 OtherAll287,347 143,586 42,125 
$1,199,011 $1,415,803 $1,475,088 $2,687,792 $1,469,363 $888,032 

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Contract assetsAssets and liabilitiesLiabilities
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 $49,110$116,381 and $65,004$116,558 at December 31, 20202022 and December 31, 2019,2021, respectively, and are included as a component of Accounts receivable, net on the Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $10,552$93,077 and $30,133$63,065 at December 31, 20202022 and December 31, 2019,2021, respectively, and are included on the Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
5. Revenue - (continued)

Contract liabilities consistrepresent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent. Such fees billed to clients in excessand reimbursements of fees recognized as revenue andthird-party costs are classified as Advance billings and within Accruals and other liabilities on the Company’s Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the revenue recognition related to the contract liability is presented on a net basis within the Consolidated Statements of Operations. Advance billings at December 31, 20202022 and December 31, 20192021 were $152,956$337,034 and $171,742,$361,885, respectively. The decrease in the advanceAdvance billings balance of $18,786$24,851 for the twelve monthsyear ended December 31, 20202022 was primarily driven by $345,277 of revenues recognized that were included in the Advance billings balances as of December 31, 2021 and reductions due to the incurrence of third-party costs, partially offset by the acquisition of certain contract liabilities (as detailed below) and cash payments received or due in advance of satisfying our performance obligations, offset by $152,361obligations.
In 2022, the Company acquired $3,195 in contract assets and $7,620 in contract liabilities in connection with the acquisitions of revenues recognized that wereBNG, Wolfgang, and Maru. See Note 4 of the Notes included in the advance billings balances as of December 31, 2019 and reductions dueherein for additional information related to the incurrence of third-party costs. Contract liabilities classified within Accruals and other liabilities at December 31, 2020 and December 31, 2019 were $112,755 and $216,931, respectively. The decrease in the balance of $104,176 for the twelve months ended December 31, 2020 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $210,078 of revenues recognized that were included in the balance as of December 31, 2019 and reductions due to the incurrence of third-party costs.these acquisitions.
Changes in the contract asset and liability balances during the twelve monthsyear ended December 31, 2020 and December 31, 20192022 were not materially impacted by write offs, impairment losses or any other factors.factors outside of the above acquisitions.
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 $6,105$52,613 of unsatisfied performance obligations as of December 31, 2020,2022 of which we expect to recognize approximately 92%82% in 2021,2023, 16% in 2024 and 8%2% in 2022.2025.
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6. Income (Loss) Per Common Share
The following table sets forth the computationcomputations of basic and diluted lossincome per common share:
 Twelve Months Ended December 31,
 202020192018
Numerator:
Net loss attributable to MDC Partners Inc.$(228,971)$(5,253)$(130,007)
Accretion on convertible preference shares(14,179)(12,304)(8,355)
Net loss attributable to MDC Partners Inc. common shareholders$(243,150)$(17,557)$(138,362)
Denominator:
Basic weighted average number of common shares outstanding72,862,178 69,132,100 57,218,994 
Dilutive effect of equity awards
Diluted weighted average number of common shares outstanding72,862,178 69,132,100 57,218,994 
Basic$(3.34)$(0.25)$(2.42)
Diluted$(3.34)$(0.25)$(2.42)
share for the year ended December 31, 2022:
Anti-dilutive stock awards                  5,341,846 5,450,426 1,442,518

Year Ended December 31,
2022
Income Per Share - Basic
Numerator:
Net income$65,842 
Net income attributable to Class C shareholders(24,452)
Net income attributable to other equity interest holders(14,121)
Net income attributable to noncontrolling and redeemable noncontrolling interests(38,573)
Net income attributable to Stagwell Inc. common shareholders$       27,269 
Denominator:
Weighted Average number of common shares outstanding124,262 
Income Per Share - Basic$       0.22
Income Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders$       27,269 
Net income attributable to Class C shareholders24,452 
$51,721 
Denominator:
Basic - Weighted Average number of common shares outstanding124,262 
Dilutive shares:
Stock appreciation rights1,896 
Restricted share and restricted unit awards4,467 
Class C shares165,971 
Diluted - Weighted average number of common shares outstanding296,596 
Income Per Share - Diluted$       0.17
Restricted stock and restricted stock unit awards of 642,837, 135,386 and 1,012,6372,292 as of December 31, 2020, 2019 and 2018 respectively,2022 are excluded from the computation of diluted lossincome per common share because the performance contingency necessary for vesting hashad not been met as of the reporting date. In addition, there were 145,000, 145,000,
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The following table sets forth the computations of basic and 95,000 Preference Shares outstanding which were convertible into 28,853,621, 26,656,285, and 10,970,714 Class A common shares at December 31, 2020, 2019, and 2018, respectively. These Preference Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted loss per common share calculation.for the year ended December 31, 2021:
Year Ended December 31,
2021
Numerator:
Net loss attributable to Stagwell Inc. common shareholders$(3,706)
Denominator:
Weighted average number of common shares outstanding90,426 
Loss Per Share - Basic & Diluted$ (0.04)
Anti-dilutive:
Class C shares179,970 
Stock Appreciation Rights and Restricted Awards9,509 


On September 23, 2021, the Company provided notices of conversion to each holder of record of each share of the Company’s Series 6 and Series 8 Preferred Stock. Pursuant to the notices, the 50,000 issued and outstanding shares of Series 6 Preferred Stock were converted into 12,087 shares of Class A Common Stock, in the aggregate, on October 7, 2021, and the 73,849 issued and outstanding shares of Series 8 Preferred Stock were converted into 20,949 shares of Class A Common Stock, in the aggregate, on November 8, 2021.

SMG’s equity structure, prior to the combination with MDC, was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members’ Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within the Consolidated Statements of Operations.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)

7. Fixed Assets

The following is a summary of the Company’s fixed assets as of December 31:
2020201920222021
CostAccumulated DepreciationNet Book ValueCostAccumulated DepreciationNet Book ValueCostAccumulated DepreciationNet Book ValueCostAccumulated DepreciationNet Book Value
Computers, furniture and fixturesComputers, furniture and fixtures$93,850 $(74,766)$19,084 $93,224 $(69,687)$23,537 Computers, furniture and fixtures$56,788 $(27,689)$29,099 $41,839 $(18,136)$23,703 
Leasehold improvementsLeasehold improvements132,729 (61,400)71,329 117,409 (59,892)57,517 Leasehold improvements101,535 (31,756)69,779 91,572 (17,759)73,813 
$226,579 $(136,166)$90,413 $210,633 $(129,579)$81,054 $158,323 $(59,445)$98,878 $133,411 $(35,895)$97,516 
The table above has been revised to reclassify previously reported gross capitalized software and accumulated amortization of $29,844 and $8,757, respectively, as of December 31, 2021 that should have been classified within intangible assets rather than fixed assets to more closely align these net assets with the category of assets they represent.

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 2019,was $26,510, $15,416 and 2018 was $24,598, $25,133 and $27,111,$7,026, respectively.
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8. Goodwill and Intangible Assets
As of December 31, goodwill was as follows:
GoodwillIntegrated Networks - Group AIntegrated Networks -Group BMedia & Data NetworkAll OtherTotal
Balance at December 31, 2018$139,452 $267,059 $101,768 $224,473 $732,752 
Integrated Agencies NetworkBrand Performance NetworkCommunications NetworkAll OtherTotal
Balance at December 31, 2019Balance at December 31, 2019$88,094 $177,073 $33,258 $26,760 $325,185 
Acquired goodwillAcquired goodwill1,025 1,025 Acquired goodwill7,070 235 16,275 195 23,775 
Impairment loss recognized(4,879)(4,879)
Transfer of goodwill between segments (1)
(120)3,612 (3,492)
Foreign currency translation423 217 2,153 2,793 
Balance at December 31, 2019$134,573 $268,387 $105,597 $223,134 $731,691 
Acquired goodwill(1)
Disposition(7,074)(7,074)
Impairment loss recognized(16,137)(5,287)(40,237)(61,661)
Transfer of goodwill between segments19,696 4,546 (24,242)
Foreign currency translationForeign currency translation212 538 4,505 5,255 Foreign currency translation— 3,331 — (566)2,765 
Balance at December 31, 2020Balance at December 31, 2020$134,573 $272,158 $105,394 $156,086 $668,211 Balance at December 31, 2020$95,164 $180,639 $49,533 $26,389 $351,725 
Acquired goodwillAcquired goodwill1,058,411 178,994 66,244 — 1,303,649 
DispositionDisposition— — — (935)(935)
Foreign currency translationForeign currency translation(502)(1,020)— (194)(1,716)
Balance at December 31, 2021Balance at December 31, 2021$1,153,073 $358,613 $115,777 $25,260 $1,652,723 
Acquired goodwill(1)Acquired goodwill(1)3,330 26,176 6,569 29,387 65,462 
ImpairmentImpairment(49,840)(49,314)— (17,560)(116,714)
Transfer of goodwill between segments (2)
Transfer of goodwill between segments (2)
(111,065)111,065 — — — 
Foreign currency translationForeign currency translation(11,422)(13,467)(753)— (25,642)
Other (3)
Other (3)
(15,682)685 6,124 — (8,873)
Balance at December 31, 2022Balance at December 31, 2022$968,394 $433,758 $127,717 $37,087 $1,566,956 
(1) For the year ended December 31, 2022, the Company’s acquisitions resulted in goodwill of $65,462. See Note 4 of the Notes included herein for information related to the acquisitions.
(2)Transfers of goodwill relate Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments. Specifically, Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro Brands, previously within the Integrated Agencies Network, are now within the Brand Performance Network. See Note 20 of the Notes included herein for additional information related to these changes.
For(3) Other represents adjustments associated with the twelve months ended December 31, 2020, thefinalization of purchase price accounting for acquisitions occurring in 2021.
The Company recognized an impairment and other losses charge of $61,661$122,179 for the year ended December 31, 2022, primarily related to the impairment of goodwill totaling $116,714. The goodwill impairment was to write-down the carrying value of goodwill in excess of the fair value at foureight reporting units, onetwo in the Integrated Networks - Group B reportable segment,Agencies Network, five in the Brand Performance Network and one in Media & Data Network reportable segment and two within the All Other category. The charge was recorded within Impairment and other losses on the Consolidated Statements of Operations.
At each reporting period, the Company assesses whether it is more likely than not that the carrying amount of its reporting units exceed their fair value. As of October 1, 2022 (the annual impairment test date) and December 31, 2022, the Company performed this assessment and determined that certain reporting units’ carrying values exceeded their fair value. As of October 1, 2022, the Company performed a quantitative impairment test for all reporting units and as of December 31, 2020,2022, the Company performed a quantitative impairment test for certain reporting units that were determined to be more likely than not impaired. As a result of these tests, management concluded there were twoto be certain reporting units with negative net asseta carrying value in the Integrated Networks - Group A reportable segment and the All Other category. The goodwill allocated to these reporting units is $14,854 and $5,479, respectively.
For the twelve months ended December 31, 2019, the Company recognized an impairment charge of $4,879 to write-down the carrying value of goodwill in excess of thetheir fair value at one reporting unit within the Integrated Networks - Group A.
For the twelve months ended December 31, 2018, the Company recognizedresulting in an impairment of goodwill and other assets of $87,204 primarily to write-down the$116,714 in 2022. The difference in carrying value and fair value was primarily due to a combination of goodwillchanges in excessfair value measures such as an increase in interest rates and decrease in market multiples of comparable public companies, as well as current financial forecasts below the previous forecast.
In its assessment, the Company uses a combination of the fair value at three reporting units, one in eachincome approach, which incorporates the use of the Integrated Networks - Group B reportable segment,discounted cash flow method, and the Media & Data Network reportable segmentmarket approach, which incorporates the use of earnings and withinrevenue multiples based on market data. The Company generally applies an equal weighting to the All Other category.income and market approaches for the impairment test. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
The totalThere was $116,714 of accumulated goodwill impairment charges as of December 31, 2020 and 2019, were $238,965 and $177,304, respectively.2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
8. Goodwill and Intangible Assets - (continued)

The gross and net amounts of acquired intangible assets other than goodwill as of December 31, are as follows:
Intangible Assets20202019
Trademark (indefinite life)$0 $14,600 
Customer relationships – gross$52,594 $58,211 
Less accumulated amortization(32,667)(32,671)
Customer relationships – net$19,927 $25,540 
Trademarks (definite life) – gross$32,711 $28,695 
Less accumulated amortization(18,794)(13,942)
Trademarks (definite life) – net$13,917 $14,753 
Total intangible assets$85,305 $101,506 
Less accumulated amortization(51,461)(46,613)
Total intangible assets – net$33,844 $54,893 
Intangible Assets20222021
Customer relationships – gross$875,160 $875,541 
Accumulated amortization(150,655)(92,746)
Customer relationships – net$724,505 $782,795 
Trade names – gross$197,037 $190,162 
Accumulated amortization(53,150)(36,775)
Trade names – net$143,887 $153,387 
Developed technology and other intangible assets – gross$63,565 $37,550 
Accumulated amortization(24,428)(14,950)
Developed technology and other intangible assets – net$39,137 $22,600 
Total intangible assets$1,135,762 $1,103,253 
Accumulated amortization(228,233)(144,471)
Total intangible assets – net$907,529 $958,782 
DuringThe table above has been revised to reclassify previously reported gross capitalized software and accumulated amortization of $29,844 and $8,757, respectively, as of December 31, 2021 that should have been classified within intangible assets rather than fixed assets to more closely align these net assets with the first quartercategory of 2020,assets they represent.
For the Company reassessed its estimate of the useful life of a trademark in the amount of $14,600, acquired as a result of a business combination. The Company revised the useful life to five years from indefinite lived.
During the fourth quarter of 2020,year ended December 31, 2022, the Company recognized an impairment charge of two trademarks totaling $12,071, equal$1,400 to reduce the excess carrying value above the fair value for a reporting unitvalues of intangible assets within the Integrated Networks - Group BAgencies Network and Brand Performance Network reportable segment and a reporting unitsegments primarily in connection with the abandonment of certain trade names as part of the integration of certain entities. For the year ended December 31, 2021, the Company recognized an impairment charge of $16,187 to reduce the carrying values of intangible assets within the All Other category. The intangible assets impairment is includedIntegrated Agencies Network and Brand Performance Network reportable segments in connection with the abandonment of certain trade names as part of the rebranding of certain Brands. These charges were recorded as Impairment and other losses inon the Consolidated StatementStatements of Operations.
The weighted average amortization period for customer relationships is eightfourteen years, trade names is twelve years, and trademarksdeveloped technology and other intangible assets is ninethree years. In total, the weighted average amortization period is eightthirteen years. Amortization expense related to amortizable intangible assets for the years ended December 31, 2022, 2021, and 2020 2019,was $103,060, $61,054, and 2018 was $11,260, $11,828, and $17,290,$33,999, respectively.
The estimated amortization expense for the five succeeding years is as follows:
YearYearAmortizationYearAmortization
2021$8,514 
20228,062 
202320237,711 2023$101,734 
202420244,558 202496,245 
2025202595,380 
2026202684,089 
2027202782,007 
ThereafterThereafter4,999 Thereafter448,074 
9. Deferred Acquisition Consideration
Deferred acquisition consideration on the balance sheetConsolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through Operating income, for contingent purchase price payments, or net interest expense, for fixed purchase price payments. The Company accounts for retention payments, tied to continued employment, through Operating income as stock-based compensation overwithin Office and general expenses on the required retention period.Consolidated Statements of Operations.
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The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the balance sheetsConsolidated Balance Sheets as of December 31, 20202022 and December 31, 2019.2021:


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
9. Deferred Acquisition Consideration - (continued)

December 31,
20202019
Beginning balance of contingent payments$74,671 $82,598 
Payments(46,792)(30,719)
Redemption value adjustments (1)
44,993 15,451 
Additions - acquisitions and step-up transactions7,703 7,145 
Other2,227 196 
Ending balance of contingent payments$82,802 $74,671 
Fixed payments263 549 
$83,065 $75,220 
December 31,
2022
December 31, 2021
Beginning balance$222,369 $17,847 
Payments(73,963)(12,431)
Adjustments to deferred acquisition consideration (1)
(12,779)18,721 
Additions (2)
26,594 198,937 
Currency translation adjustment(759)— 
Other(139)(705)
Ending balance (3)
$161,323 $222,369 
(1) Redemption value adjustments areAdjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments and stock-based compensation charges relatingpayments. Adjustments to deferred acquisition payments that are tied to continued employment. Redemption value adjustmentsconsideration are recorded within Office and general expenses on the Consolidated Statements of Operations.
The following table presents the impact to the Company’s Statements(2) In 2021, approximately $61,000 of operations due to the redemption value adjustments for the contingentadditions represent deferred acquisition consideration acquired in connection with the acquisition of MDC. Approximately $136,000 of additions represent deferred acquisition consideration acquired in connection with the purchases of noncontrolling interests. See Note 4 of the Notes included herein for additional information related to the twelve months endedpurchases of Concentric, Targeted Victory, and Instrument. In 2022, approximately $24,000 of additions represent deferred acquisition consideration acquired in connection with the acquisitions of BNG, Apollo, PEP Group and Epicenter. See Note 4 of the Notes included herein for additional information related to these acquisitions.
(3) As of December 31, 2020 and 2019:
20202019
Loss attributable to fair value adjustments$42,187 $5,403 
Stock-based compensation2,806 10,048 
Redemption value adjustments$44,993 $15,451 

2022, approximately, $51,000 of the deferred acquisition consideration is expected to be settled in the Company’s Class A Common Stock.
10. Leases

The Company leases office space in North America, Europe, Asia, South America, Africa, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 20212023 through 2032.2034. The Company’s finance leases are immaterial.
The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of noncancellablenon-cancellable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease costs are recognized in the Consolidated StatementStatements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. 
Some of the Company’s leases contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, anotherand other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances on which the variable lease payments are based upon occur.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
10. Leases - (continued)

Some of the Company’s leases include options to extend or renew the leaseleases through 2040.2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.
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From time to time, the Company enters into sublease arrangements both with unrelated third parties and with our partner agencies.parties. These leases are classified as operating leases and expire between 2021years 2023 through 2025.2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America Asia, Europe and Australia.Europe.
As of December 31, 2020,2022, the Company has entered into 3two operating leases for which the commencement date has not yet occurred asprimarily because of the premises are in the process of being prepared for occupancy by the landlord. Accordingly, these 3two leases represent an obligation of the Company that is not reflected within the Consolidated Balance SheetSheets as of December 31, 2020.2022. The aggregate future liability related to these leases is approximately $25,900.$3,266.
The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.
The following table presents lease costs and other quantitative information for the twelve monthsyears ended December 31:31, 2022, 2021, and 2020:
Twelve Months Ended December 31,Twelve Months Ended December 31, Year Ended December 31,
20202019 202220212020
Lease Cost:Lease Cost:Lease Cost:
Operating lease costOperating lease cost$71,257 $67,044 Operating lease cost$75,190$46,019$25,507 
Variable lease costVariable lease cost14,640 18,879 Variable lease cost18,57510,6853,843 
Sublease rental incomeSublease rental income(11,329)(8,965)Sublease rental income(14,446)(7,367)(3,777)
Total lease costTotal lease cost$74,568 $76,958 Total lease cost$79,319$49,337$25,573 
Additional information:Additional information:Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leasesCash paid for amounts included in the measurement of lease liabilities for operating leasesCash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flowsOperating cash flows$70,277 $69,735 Operating cash flows$91,300$53,360$20,942 
Right-of-use assets obtained in exchange for operating lease liabilities and other non-cash adjustments$45,663 $269,801 
Weighted average remaining lease term (in years) - Operating leases7.25.3
Weighted average discount rate - Operating leases10.6 8.6 
Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustmentsRight-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments$27,761$373,179$2,952 
As of December 31, 2022, the weighted average remaining lease term (in years) and weighted average discount rate were 6.4 and 4.5%, respectively.
Operating lease expense is included in office and general expenses in the Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.
In the twelve monthsyear ended December 31, 2020,2022, the Company recorded a charge of $22,667, of which $9,969 was$2,582 to reduce the carrying value of three of its right-of-use lease assets and related leasehold improvements of certain of itsimprovements. These right-of-use lease assets related to agencies within itsthe Integrated Networks - Group AAgencies Network and Integrated Networks - Group B reportable segments and leasedthe Brand Performance Network. As a result of subleasing or abandoning the space, of Corporate. The remaining $12,698 was related to the acceleration of the variable lease expenses associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio. The Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using adjusted quoted market pricesthe sublease income to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value. This impairment charge is included in Impairment and other losses within the Consolidated StatementStatements of Operations.
In the twelve months ended December 31, 2019, the Company recorded an impairment charge of $3,700 to reduce the carrying value of four of its right-of-use lease assets and related leasehold improvements.
Operating lease expense is included in Office and general expenses in the Consolidated Statement of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.
Rental expense for the twelve months ended December 31, 2018 was $65,093, offset by $3,671, in sublease rental income.
The following table presents minimum future rental payments under the Company’s leases at December 31, 20202022 and their reconciliation to the corresponding lease liabilities:
 Maturity Analysis
2023$91,084 
202477,438 
202559,848 
202644,589 
202740,163 
Thereafter119,119 
Total432,241 
Less: Present value discount(61,843)
Lease liability$370,398 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
10. Leases - (continued)

 Maturity Analysis
2021$68,375 
202260,252 
202356,842 
202449,909 
202538,880 
2026 and thereafter150,950 
Total425,208 
Less: Present value discount(136,757)
Lease liability$288,451 
11. Debt
As of December 31, 20202022 and 2019,December 31, 2021, the Company’s indebtedness was comprised as follows:
December 31, 2020December 31, 2019
Revolving credit agreement$$
Senior Notes870,256 900,000 
Debt issuance costs(27,072)(12,370)
 $843,184 $887,630 
December 31,
2022
December 31, 2021
Revolving credit facility$100,000 $110,165 
5.625% Notes1,100,000 1,100,000 
Debt issuance costs(15,293)(18,564)
Total long-term debt$1,184,707 $1,191,601 
Interest expense related to long-term debt included in Interest expense, net on the Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020 2019,was $73,788, $29,594, and 2018 was $59,147, $62,210 and $64,420,$5,472, respectively.
The amortization of debt issuance costs included in interestInterest expense, net on the Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020 2019$2,358, $2,693, and 2018 was $3,529, $3,346 and 3,193,$831, respectively.
Revolving Credit Agreement
On November 18, 2019, the Company entered into a debt agreement (“JPM Syndicated Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A (“JPM”). The JPM Syndicated Facility consisted of a five-year revolving credit facility of $265,000 (“JPM Revolver”) with the right to be increased by an additional $150,000. On March 18, 2020, the Company increased the commitments on the JPM Revolver by $60,000 to $325,000.
On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (as further amended on April 28, 2022 and December 14, 2022, the “Combined Credit Agreement”) with a syndicate of banks led by JPM to increase commitments on the existing JPM Revolver. The Combined Credit Agreement consists of a $500,000 senior secured revolving credit facility with a five-year maturity.
The Combined Credit Agreement contains sub-limits for revolving loans denominated in pounds and euros not to exceed U.S. dollar equivalent of $50,000 in pounds and $50,000 in euros and $100,000 in the aggregate. Additionally, the Combined Credit Agreement contains a $15,000 sub-limit for letters of credits denominated in pounds or euros. It also includes an accordion feature under which the Company may request, subject to lender approval and certain conditions, to increase the amount of the commitments to an aggregate amount not to exceed $650,000.

On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to SOFR. Borrowings pursuant to the Combined Credit Agreement, as amended, bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50% and (c) SOFR plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time. Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $50,000 in the aggregate, increased the amount permitted for certain investments allowed under the Combined Credit Agreement, and, subject to certain conditions, to allow for the repurchase of Stagwell Inc. stock in an amount not to exceed $100,000 in any fiscal year. All other substantive terms of the Combined Credit Agreement remain unchanged.
Prior to April 28, 2022, borrowings under the Combined Credit Agreement bore interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest announced from time to time by JPM, (b) the federal funds effective rate from time to time plus 0.50% and (c) the LIBOR rate plus 1%, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time.
The Company transfers certain of its trade receivable assets to third parties under sales agreements. On December 14, 2022, the Company amended its Combined Credit Agreement to allow for the sale of accounts receivable with JPM. Refer to Note 2 of the Notes included herein for further detail of this agreement. All other substantive terms of the Combined Credit Agreement remained unchanged.
Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Combined Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Combined Credit Agreement are due and payable in full at maturity within five years of the date of the Combined Credit Agreement.
If an event of default occurs under the Combined Credit Agreement or any future secured indebtedness, the holders of such secured indebtedness will have a prior right to our assets securing such indebtedness, to the exclusion of the holders of the
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5.625% Notes (as defined below), even if we are in default with respect to the 5.625% Notes. In that event, our assets securing such indebtedness would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under the Combined Credit Agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of the 5.625% Notes and other unsecured indebtedness.
The Combined Credit Agreement contains a number of financial and nonfinancial covenants and is a variable rate debt,guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions.
The Company was in compliance with all covenants at December 31, 2022.
A portion of the carrying valueCombined Credit Agreement in an amount not to exceed $50,000 is available for the issuance of which approximates fair value. The Company’s Senior Notes are a fixed rate debt instrument recorded at carrying value.standby letters of credit. At December 31, 2022 and December 31, 2021, the Company had issued undrawn outstanding letters of credit of $25,305 and $24,332, respectively.
Senior Notes
On March 23, 2016, MDC entered into an indenture (the “Indenture”) among MDC, its existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure,In August 2021, the Credit Agreement (as defined below), as guarantors (the “Guarantors”) and The BankCompany issued $1,100,000 aggregate principal amount of New York Mellon, as trustee, relating to5.625% senior notes (“5.625% Notes”). A portion of the proceeds from the issuance by MDC of $900,000the 5.625% Notes was used to redeem $870,300 aggregate principal amount of the senior notesoutstanding 7.50% Senior Notes due 2024 (the “Senior“Existing Notes”). The Senior Notes were sold in for a private placement in reliance on exceptions from registration under the Securities Actprice of 1933. The Senior Notes bear interest, payable semiannually in arrears on May 1 and November 1, at a rate of 7.50% per annum. The Senior Notes mature on May 1, 2024, unless earlier redeemed or repurchased.
In April 2020, the Company repurchased $29,744$904,200. This price is equal to 101.625% of the Senioroutstanding principal amount of the Existing Notes at a weighted average price equal to 73.9% ofbeing redeemed, plus, accrued, and unpaid interest on the principal amount totaling $21,999,of such Existing Notes. The Company did not recognize a gain or loss on redemption.
The 5.625% Notes are due August 15, 2029 and accruedbear interest of $946. As a result5.625% to be paid on February 15 and August 15 of the repurchase, we recognized an extinguishment gain of $7,388.
In connection with the Consent and Support Agreements, beginning December 21, 2020, the Company began to accrue interest at a rate of 7.50% and accrued $17.4 million for the 2% consent fees. The consent fees were capitalized as an offset to the carrying value of the Senior Notes and will be recognized through interest expense over the remaining maturity term of the Senior Notes.each year, commencing on February 15, 2022.
The Senior5.625% Notes are guaranteed on a senior unsecured basis by substantially all of MDC’s existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure, the Credit Agreement.Company’s subsidiaries. The Senior5.625% Notes are unsecured and unsubordinated obligations of MDC and rank (i) equally in right of payment with all of MDC’sthe Company’s or any Guarantor’sguarantor’s existing and future seniorunsubordinated indebtedness, (ii) senior in right of payment to MDC’sthe Company’s or any Guarantor’sguarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to allany of MDC’sthe Company’s or any Guarantor’sguarantor’s existing and future secured indebtedness to the


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
11. Debt - (continued)

extent of the collateral securing such indebtedness, including the Combined Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of MDC’sthe Company’s subsidiaries that are not Guarantors.guarantors.
MDCOur obligations under the 5.625% Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. Borrowings under the Combined Credit Agreement are secured by substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.
The Company may, at its option, redeem the Senior5.625% Notes in whole at any time or in part from time to time, on and after August 15, 2024 at varying prices based on the timinga redemption price of 102.813% of the redemption.principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2024, at a redemption price of 101.406% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100% of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40% of the 5.625% Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625% of the principal amount thereof.
If MDCthe Company experiences certain kinds of changes of control (as defined in the Indenture)indenture), holders of the Senior5.625% Notes may require MDCthe Company to repurchase any Senior5.625% Notes held by them at a price equal to 101% of the principal amount of the Senior5.625% Notes plus accrued and unpaid interest. In addition, if MDCthe Company sells assets under certain circumstances, it must apply the proceeds from such sale and offer to repurchase the Senior5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus accrued and unpaid interest.
The Indentureindenture includes covenants that, among other things, restrict MDC’sthe Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture)indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC;the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from MDC’sthe Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of MDC’sthe Company’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The Senior5.625% Notes are also subject to customary events of default, including a cross-payment default and cross-acceleration provision.provisions. The Company was in compliance with all covenants at December 31, 2020.2022.
Revolving Credit Agreement
The Company is party to a $211,500 secured revolving credit facility due February 3, 2022. The Company had 0 amounts outstanding under the revolving credit facility as of December 31, 2020 and December 31, 2019.
On May 29, 2020, the Company, Maxxcom Inc., a subsidiary of the Company (“Maxxcom”), and each of their subsidiaries party thereto entered into an amendment (the “Second Amendment”) to the existing senior secured revolving credit facility, dated as of May 3, 2016 (as amended, the “Credit Agreement”), among the Company, Maxxcom, each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent (“Wells Fargo”), and the lenders from time to time party thereto. Advances under the Credit Agreement are to be used for working capital and general corporate purposes, in each case pursuant to the terms of the Credit Agreement.
The Second Amendment reduced the aggregate maximum amount of revolving commitments provided by the lenders to $211,500 from $250,000, extended the maturity date of the Credit Agreement from May 3, 2021 to February 3, 2022, and expanded the eligibility criteria for certain of the Company’s receivables to be included in the borrowing base.
Advances under the Credit Agreement, as amended by the Second Amendment, will bear interest as follows: (i) Non-Prime Rate Loans bear interest at the Non-Prime Rate plus the Non-Prime Rate Margin and (ii) all other Obligations bear interest at the Prime Rate, plus the Prime Rate Margin. The Non-Prime Rate Margin and Prime Rate Margin will range from 2.50% to 3.00% for Non-Prime Rate Loans and from 1.75% to 2.25% for Prime Rate Loans. In addition to paying interest on outstanding principal under the Credit Agreement, MDC is required to pay an unused revolver fee to lenders under the Credit Agreement in respect of unused commitments thereunder.
The Second Amendment increased the required minimum earnings before interest, taxes and depreciation and amortization from $105,000 to $120,000 measured on a trailing 12-month basis. The total leverage ratio applicable on each testing date through the period ending December 31, 2020 remained at 6.25:1.0. The total leverage ratio applicable on each testing date after December 31, 2020 will be 5.5:1.0.
The Credit Agreement, which includes financial and non-financial covenants, is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions, and collateralized by a portion of MDC’s outstanding receivable balance. The Company was in compliance with all of the terms and conditions of its Credit Agreement as of December 31, 2020.
At December 31, 2020 and December 31, 2019, the Company had issued undrawn outstanding letters of credit of $18,651 and $4,836, respectively.
Future Principal Repayments
Future principal repayments on the Senior Notes in the aggregate principal amount of $870,256 are due in 2024.

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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
12. Employee Benefit PlansPlan
A subsidiary of the Company, sponsors a defined benefit plan with benefits based on each employee’s years of service and compensation. The benefits under the defined benefit pension plan are frozen.
Net Periodic Pension Cost and Pension Benefit Obligation
Net periodic pension costbenefit consists of the following components for the years ended December 31:
Pension Benefits
  202020192018
Service cost$$$
Interest cost on benefit obligation1,426 1,640 1,641 
Expected return on plan assets(1,924)(1,604)(1,948)
Curtailment and settlements2,333 626 1,039 
Amortization of actuarial (gains) losses340 266 258 
Net periodic benefit cost$2,175 $928 $990 
Pension Benefits
20222021
Interest cost on benefit obligation$1,104 $441 
Expected return on plan assets(1,659)(697)
Net periodic benefit income$(555)$(256)
Settlement gain(198)— 
Total periodic benefit income$(753)$(256)
The above costscomponents are included within Other, net on the Consolidated Statements of Operations.
The following weighted average assumptions were used to determine net periodic costs at December 31:
Pension BenefitsPension Benefits
20202019201820222021
Discount rateDiscount rate3.39 %4.42 %3.83 %Discount rate2.82 %2.62 %
Expected return on plan assetsExpected return on plan assets7.00 %7.00 %7.00 %Expected return on plan assets6.50 %6.50 %
Rate of compensation increaseRate of compensation increaseN/AN/AN/ARate of compensation increaseN/AN/A
The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes.
Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the years ended December 31:
Pension Benefits
  202020192018
Current year actuarial (gain) loss$2,213 $2,917 $(520)
Amortization of actuarial loss(340)(266)(258)
Total recognized in other comprehensive (income) loss1,873 2,651 (778)
Total recognized in net periodic benefit cost and other comprehensive loss$4,048 $3,579 $212 
Pension Benefits
20222021
Current year actuarial gain$(4,088)$(722)
Total recognized in other comprehensive (income)(4,088)(722)
Total recognized in net periodic benefit income and other comprehensive loss$(4,841)$(978)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
12. Employee Benefit Plans - (continued)

The following table summarizes the change in benefit obligationsobligation and fair values of plan assets for the years ended December 31:
  202020192018
Change in benefit obligation:    
Benefit obligation, Beginning balance$43,012 $37,938 $43,750 
Interest Cost1,426 1,640 1,641 
Actuarial (gains) losses5,301 6,127 (3,522)
Benefits paid(6,728)(2,693)(3,931)
Benefit obligation, Ending balance43,011 43,012 37,938 
Change in plan assets:    
Fair value of plan assets, Beginning balance27,206 23,181 27,977 
Actual return on plan assets2,678 4,188 (2,093)
Employer contributions2,325 2,530 1,228 
Benefits paid(6,728)(2,693)(3,931)
Fair value of plan assets, Ending balance25,481 27,206 23,181 
Unfunded status$17,530 $15,806 $14,757 
Pension Benefits
20222021
Change in benefit obligation:
Benefit obligation, beginning balance (1)
$40,005 $41,206 
Interest cost1,104 441 
Actuarial gains(10,930)(1,091)
Benefits paid(2,135)(551)
Benefit obligation, ending balance28,044 40,005 
Change in plan assets:
Fair value of plan assets, beginning balance (1)
26,355 26,578 
Actual loss on plan assets(4,985)328 
Benefits paid(2,135)(551)
Fair value of plan assets, ending balance19,235 26,355 
Funded status$8,809 $13,650 
(1) Benefit obligation assumed in connection with the acquisition of MDC. Beginning balance is as of July 31, 2021.
Amounts recognized in the balance sheetConsolidated Balance Sheets at December 31 consist of the following:
Pension BenefitsPension Benefits
2020201920222021
Non-current liabilityNon-current liability$17,530 $15,806 Non-current liability$8,809 $13,650 
Net amount recognizedNet amount recognized$17,530 $15,806 Net amount recognized$8,809 $13,650 
Amounts recognized in Accumulated Other Comprehensive Lossother comprehensive loss before income taxes consists of the following components for the years ended December 31:
Pension BenefitsPension Benefits
2020201920222021
Accumulated net actuarial losses$17,403 $15,530 
Accumulated net actuarial gainsAccumulated net actuarial gains$4,810 $722 
Amount recognizedAmount recognized$17,403 $15,530 Amount recognized$4,810 $722 

In 2021,2023, the Company estimates that it will recognize $413 of$66 in amortization of net actuarial lossesgains from accumulatedAccumulated other comprehensive loss, net into net periodic cost related to the pension plan.
The following weighted average assumptions were used to determine benefit obligations as of December 31:
Pension BenefitsPension Benefits
2020201920222021
Discount rateDiscount rate2.55 %3.39 %Discount rate5.47 %2.82 %
Rate of compensation increaseRate of compensation increaseN/AN/ARate of compensation increaseN/AN/A
The discount rate assumptions at December 31, 20202022 and 20192021 were determined independently. The discount rate was derived from the effective interest rate of a hypothetical portfolio of high-quality bonds, whose cash flows match the expected future benefit payments from the plan as of the measurement date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
12. Employee Benefit Plans - (continued)

Fair Value of Plan Assets and Investment Strategy
The fair value of the plan assets as of December 31, is as follows:
December 31, 2020Level 1Level 2Level 32022Level 1Level 2Level 3
Asset Category:Asset Category:        Asset Category:
Money market fund – Short term investments$1,039 $1,039 $$
ReceivablesReceivables$15 $15 $— $— 
Money market fund – Short-term investmentsMoney market fund – Short-term investments804 804 — — 
Mutual fundsMutual funds24,442 24,442 Mutual funds18,416 18,416 — — 
TotalTotal$25,481 $25,481 $$Total$19,235 $19,235 $— $— 

December 31, 2019Level 1Level 2Level 32021Level 1Level 2Level 3
Asset Category:Asset Category:        Asset Category:
Money market fund – Short term investments$1,275 $1,275 $$
Money market fund – Short-term investmentsMoney market fund – Short-term investments$937 $937 $— $— 
Mutual fundsMutual funds25,931 25,931 Mutual funds25,418 25,418 — — 
TotalTotal$27,206 $27,206 $$Total$26,355 $26,355 $— $— 

See Note 18 of the Notes included herein for additional information regarding the fair value hierarchy.
The pension plans weighted-averageplan’s weighted average asset allocation for the years ended December 31, 20202022 and 2019 are2021 were as follows:
Target AllocationActual AllocationTarget AllocationActual Allocation
202020202019202220222021
Asset Category:Asset Category:      Asset Category:
Equity securitiesEquity securities65.0 %69.0 %66.7 %Equity securities65.0 %67.4 %69.1 %
Debt securitiesDebt securities30.0 %27.0 %28.6 %Debt securities30.0 %28.4 %27.3 %
Cash/cash equivalents and Short term investments5.0 %4.0 %4.7 %
100.0 %  100.0 %  100.0 %
Cash/cash equivalents and Short-term investmentsCash/cash equivalents and Short-term investments5.0 %4.2 %3.6 %
TotalTotal100.0 %100.0 %100.0 %
The goals of the pension plan investment program are to fully fund the obligation to pay retirement benefits in accordance with the plan documents and to provide returns that, along with appropriate funding from the Company, maintain an asset/liability ratio that is in compliance with all applicable laws and regulations and assures timely payment of retirement benefits.
Equity securities primarily include investments in large-cap and mid-cap companies located in the United States. Debt securities are diversified across different asset types with bonds issued in the United States as well as outside the United States. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the preceding tables.
Cash Flows
The pension plan contributions are deposited into a trust, and the pension plan benefit payments are made from trust assets. During 2020,2022 and 2021, the Company contributed $2,325did not make any contributions to the pension plan. The Company estimates that it will make approximately $2,415$787 in contributions to the pension plan in 2021.2023. Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefit costs and contributions in future periods.
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The following estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years ending December 31:
PeriodAmount
2023$1,794 
20242,014 
20251,932 
20261,958 
20271,903 
Thereafter10,022 


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
12. Employee Benefit Plans - (continued)

PeriodAmount
2021$1,802 
20221,769 
20231,983 
20242,231 
20252,171 
Thereafter10,796 
13. Noncontrolling and Redeemable 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 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 common stock and other paid-in capital (but not less than their initial redemption value), except for foreign currency translation adjustments. On occasion, the Company may initiate a renegotiation to acquire an incremental ownership interest and the amount of consideration paid may differ materially from the amounts recorded in the Company’s Consolidated Balance Sheets.
Noncontrolling Interests
ChangesWhen 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 within Shareholder’s Equity in the Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts due toare recorded as Redeemable noncontrolling interest holders includedinterests in Accruals and other liabilities onmezzanine equity in the Consolidated Balance Sheets at their estimated acquisition date redemption value and adjusted at each reporting period for the twelve months ended December 31, 2020 and 2019 were as follows:
Noncontrolling
Interests
Balance, December 31, 2018$9,278 
Income attributable to noncontrolling interests16,156 
Distributions made(11,392)
Other(14)
Balance, December 31, 2019$14,028 
Income attributable to noncontrolling interests21,774 
Distributions made(15,192)
Other94 
Balance, December 31, 2020$20,704 
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 ourits less than 100% owned subsidiaries during the three years ended December 31, 2022, 2021, and 2020 were as follows:
 Year Ended December 31,
 202220212020
Net income attributable to Stagwell Inc. common shareholders$27,269 $21,036 $56,356 
Transfers from the noncontrolling interest:
Change in Stagwell Inc. Paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests(1,000)(26,538)— 
Change in Stagwell Inc. Paid-in-Capital for conversion of Class C to Class A shares47,911 — — 
Net transfers from noncontrolling interests46,911 (26,538)— 
Change from net income (loss) attributable to Stagwell Inc. and transfers to noncontrolling interests$74,180 $(5,502)$56,356 
The following table presents net income attributable to noncontrolling interests between holders of Class C Common Stock and other equity interest holders for the years ended December 31, 2022, 2021, and 2020:
Year Ended December 31,
202220212020
Net income attributable to Class C shareholders$24,452 $6,126 $— 
Net income attributable to other equity interest holders5,986 9,170 18,231 
Net income attributable to noncontrolling interests$30,438 $15,296 $18,231 

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Table
The following table presents noncontrolling interests between holders of ContentsClass C Common Stock and other equity interest holders as of December 31, 2022 and December 31, 2021:

December 31,
2022
December 31, 2021
Noncontrolling interest of Class C shareholders$428,406 $475,373 
Noncontrolling interest of other equity interest holders33,691 32,914 
NCI attributable to noncontrolling interests$462,097 $508,287 
MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousandsThe table above has been revised to reclassify approximately $45,422 from previously reported non-controlling interests to additional paid-in capital that should have been recognized as a result of United States dollars, except per share amounts, unless otherwise stated)
13. Noncontrolling & Redeemable Noncontrolling Interests - (continued)


 Years Ended December 31,
 202020192018
Net loss attributable to MDC Partners Inc.$(228,971)$(5,253)$(130,007)
Transfers from the noncontrolling interest:
Increase in MDC Partners Inc. paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests1,626 1,911 10,140 
Net transfers from noncontrolling interests$1,626 $1,911 $10,140 
Change from net loss attributable to MDC Partners Inc. and transfers to noncontrolling interests$(227,345)$(3,342)$(119,867)
the exchange of Paired Units for shares of the Company’s Class A common stock in February 2022.
Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
December 31,
2022
December 31, 2021
Beginning balance$43,364 $604 
Redemptions(4,222)(15,231)
Acquisitions (1)
— 53,270 
Changes in redemption value(8,711)3,834 
Net income (loss) attributable to redeemable noncontrolling interests8,135 (412)
Other545 1,299 
Ending balance$39,111 $43,364 
(1) In 2021, approximately $26,000 represents redeemable noncontrolling interests asacquired in connection with the acquisition of December 31, 2020 and 2019:
Years Ended December 31,
20202019
Beginning Balance$36,973 $51,546 
Redemptions(12,289)(14,530)
Granted
Changes in redemption value2,800 (3,163)
Currency translation adjustments(347)
Other3,117 
Ending Balance$27,137 $36,973 
MDC. Approximately $27,000 represents redeemable noncontrolling interests acquired in connection with the purchase of the noncontrolling interest of Targeted Victory. See Note 4 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 20212022 to 2025.2027. 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 $27,137$39,111 as of December 31, 2020,2022, consists of $17,184$35,206, assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings levelcurrent profit levels, and such rights are exercised, $9,953$3,905 upon termination of such owner’s employment with the applicable subsidiary or death and $0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries.death.
These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. For the twelve months ended December 31, 2020, 2019, and 2018, there wasThere is no related impact on the Company’s lossincome per share calculation.  calculations.
14. Commitments, Contingencies, and Guarantees
Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. Additionally, whileWhile any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.
Deferred Acquisition Consideration and Options to Purchase. See Notes 9 and 13 of the Notes to the Consolidated Financial Statements included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries.
Natural Disasters. Certain of the Company’s operations are located in regions of the United States which typically are subject to hurricanes. During the twelve months ended December 31, 2020, 2019, and 2018 these operations did not incur any material costs related to damages resulting from hurricanes.


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
14. Commitments, Contingencies, and Guarantees - (continued)

Guarantees. Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying audited consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable.
Commitments. At December 31, 2020,2022, the Company had $18,651$25,305 of undrawn letters of credit.credit outstanding.
The Company entered into two operating leases for which the commencement date has not yet occurred as of December 31, 2020.2022. See Note 10 of the Notes to the Consolidated Financial Statements included herein for additional information.
104

In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of December 31, 2022, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $5,893, $1,804, $1,304, $1,066, and $44 for 2023, 2024, 2025, 2026, and 2027, respectively.
15. Share Capital
On March 23, 2022, the board of directors authorized the Repurchase Program under which we may repurchase up to $125,000 of shares of our outstanding Class A Common Stock.
Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
As of December 31, 2022, there were 7,194 shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $51,547. These were purchased at an average share price of $7.17 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $73,309 as of December 31, 2022.
On March 1, 2023, the Board authorized an extension and a $125,000 increase in the size of the Repurchase Program to an aggregate of $250,000, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.
The authorized and outstanding share capital of the Company is as follows:below.
Series 6 Convertible Preference Shares
On March 14, 2019 (the “Series 6 Issue Date”), the Company entered into a securities purchase agreement with Stagwell Agency Holdings LLC (“Stagwell Holdings”), an affiliate of Stagwell, pursuant to which Stagwell Holdings agreed to purchase (i) 14,285,714 newly authorized Class A shares (the “Stagwell Class A Shares”) for an aggregate contractual purchase price of $50,000 and (ii) 50,000 newly authorized Series 6 convertible preference shares (“Series 6 Preference Shares”) for an aggregate contractual purchase price of $50,000. The Company received proceeds of approximately $98,620, net of fees and estimated expenses, which were primarily used to pay down existing debt under the Company’s credit facility and for general corporate purposes. The proceeds allocated to the Stagwell Class A Shares were $35,997 and to Series 6 Preference Shares were $62,623 based on their relative fair value calculated by utilizing a Monte Carlo Simulation model. In connection with the closing of the transaction, the Company increased the size of its Board and appointed two nominees designated by Stagwell Holdings. Except as required by law, the Series 6 Preference Shares do not have voting rights andCommon Stock
There are not redeemable at the option of Stagwell Holdings.
The holders of the Series 6 Preference Shares have the right to convert their Series 6 Preference Shares in whole at any time and from time to time, and in part at any time and from time to time, into a number1,000,000 shares of Class A Shares equal to the then-applicable liquidation preference divided by the applicable conversion price at such time (the “Conversion Price”). The initial liquidation preference per shareCommon Stock, authorized, of each Series 6 Preference Share is $1,000. The initial Conversion Price is $5.00 per Series 6 Preference Share, subject to customary adjustments for share splitswhich 131,720 shares were issued and combinations, dividends, recapitalizations and other matters, including weighted average anti-dilution protection for certain issuances of equity or equity-linked securities.
The Series 6 Preference Shares’ liquidation preference accretes at 8.0% per annum, compounded quarterly until the five-year anniversary of the Series 6 Issue Date. During the twelve months ended December 31, 2020 and 2019, the Series 6 Preference Shares accreted at a monthly rate of $7.54 and $6.96 per Series 6 Preference Share, for total accretion of $4,390 and $3,261, respectively, bringing the aggregate liquidation preference to $57,651outstanding as of December 31, 2020. The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc. common shareholders.
Holders of the Series 6 Preference Shares are entitled to dividends in an amount equal to any dividends that would otherwise have been payable on the Class A Shares issued upon conversion of the Series 6 Preference Shares. The Series 6 Preference Shares are convertible at the Company’s option (i) on and after the two-year anniversary of the Series 6 Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least 125% of the Conversion Price or (ii) after the fifth anniversary of the Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least equal to the Conversion Price.
Following certain change in control transactions of the Company in which holders of Series 6 Preference Shares are not entitled to receive cash or qualifying listed securities with a value at least equal to the liquidation preference plus accrued and unpaid dividends, (i) holders will be entitled to cash dividends on the liquidation preference at an increasing rate (beginning at 7%), and (ii) the Company will have a right to redeem the Series 6 Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value.
Series 4 Convertible Preference Shares


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per2022. Each share amounts, unless otherwise stated)
15. Share Capital - (continued)

On March 7, 2017 (the “Series 4 Issue Date”), the Company issued 95,000 newly created Preference Shares (“Series 4 Preference Shares”) to affiliates of The Goldman Sachs Group, Inc. (collectively, the “Purchaser”) pursuant to a $95,000 private placement. The Company received proceeds of approximately $90,123, net of fees and estimated expenses, which were primarily used to pay down existing debt under the Company’s credit facility and for general corporate purposes. In connection with the closing of the transaction, the Company increased the size of its Board and appointed one nominee designated by the Purchaser. Except as required by law, the Series 4 Preference Shares do not have voting rights and are not redeemable at the option of the Purchaser. See Note 1 of the Notes to the Consolidated Financial Statements for information regarding revised terms of the Series 4 Preference Shares subject to closing of the combination between MDC and the Stagwell Entities.
Subsequent to the ninetieth day following the Series 4 Issue Date, the holders of the Series 4 Preference Shares have the right to convert their Series 4 Preference Shares in whole at any time and from time to time and in part at any time and from time to time into a number of Class A Shares equal to the then-applicable liquidation preference divided by the applicable conversion price at such time (the “Conversion Price”). The initial liquidation preference per share of each Series 4 Preference Share is $1,000. The Conversion Price of a Series 4 Preference Share is subject to customary adjustments for share splitsCommon Stock carries one vote and combinations, dividends, recapitalizations and other matters, including weighted average anti-dilution protection for certain issuances of equity or equity-linked securities. In connection with the anti-dilution protection provision triggered by the issuance of equity securities to Stagwell Holdings, the Conversion Price per Series 4 Preference Share was reduced to $7.42 from the initial Conversion Price of $10.00.
The Series 4 Preference Shares’ liquidation preference accretes at 8.0% per annum, compounded quarterly until the five-year anniversary of the Series 4 Issue Date. During the twelve months ended December 31, 2020 and 2019, the Series 4 Preference Shares accreted at a monthly rate of approximately $8.84 and $8.17 per Series 4 Preference Share, for total accretion of $9,789 and $9,043, respectively, bringing the aggregate liquidation preference to $128,539 as of December 31, 2020. The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc. common shareholders.
Holders of the Series 4 Preference Shares are entitled to dividends in an amount equal to any dividends that would otherwise have been payable on the Class A Shares issued upon conversion of the Series 4 Preference Shares. The Series 4 Preference Shares are convertible at the Company’s option (i) on and after the two-year anniversary of the Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least 125% of the Conversion Price or (ii) after the fifth anniversary of the Series 4 Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least equal to the Conversion Price.
Following certain change in control transactions of the Company in which holders of Series 4 Preference Shares are not entitled to receive cash or qualifying listed securities with a value at least equal to the liquidation preference plus accrued and unpaid dividends, (i) holders will be entitled to cash dividends on the liquidation preference at an increasing rate (beginning at 7%), and (ii) the Company will have a right to redeem the Series 4 Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value.
Class A Common Shares (“Class A Shares”)
These are an unlimited number of subordinate voting shares, carrying 1 vote each, with a par value of $0, entitledentitles its holder to dividends equal to or greater than each share of Class B Shares, convertible at the option of the holder into one Common Stock.
Class B Share for each Class A Share after the occurrenceCommon Stock
There are 5 shares of certain events related to an offer to purchase all Class B shares. ThereCommon Stock authorized, of which 4 shares were 73,529,105 and 72,150,854 Class A Shares issued and outstanding as of December 31, 2020 and 2019, respectively.
2022. Each share of Class B Common Shares (“Class B Shares”)
These are an unlimited number of voting shares, carrying 20Stock carries twenty votes each, with a par value of $0,and is convertible at any time at the option of the holder into one share of Class A share for each Common Stock.
Class B share. C Common Stock
There were 3,743 and 3,749are 250,000 shares of Class B SharesC Common Stock authorized, of which 160,909 shares were issued and outstanding as of December 31, 20202022. Each share of Class C Common Stock carries one vote and 2019, respectively.does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of OpCo (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”). Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).

In 2021, an aggregate of 179,970 Paired Units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities. In the year ended December 31, 2022, holders of Paired Units exchanged 19,061 Paired Units for the same number of shares of Class A Common Stock. Of these 19,061 Paired Units, approximately 5,000 triggered an employee tax withholding obligation of $14,900. The Company repurchased approximately 2,000 of the 5,000 shares of Class A Common Stock issued to the employees to satisfy its employee tax withholding obligation.
Shares-based Awards
As of December 31, 2020, a2022 and 2021, of the total number of 18,150,000 shares have been authorized, under our employee stock incentive plans, of which 5,108,58312,858 and 2,839, respectively, remain available to be issued for future awards.
The following tables summarize share-based activity of awards authorized under our employee stock incentive plans and awards (such as inducement awards) and other share-based commitments that have met the requirements to be issued separate from shareholder-approved stock incentive plans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
15. Share Capital - (continued)

The following table summarizes information about financial performance basedperformance-based and time basedtime-based restricted stock and restricted stock unit awards:
Performance-Based AwardsTime-Based AwardsPerformance-Based AwardsTime-Based Awards
SharesWeighted Average Grant Date Fair
Value
SharesWeighted Average
Grant Date
Fair Value
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Balance at December 31, 20192,443,801 $3.11 568,960 $5.53 
Balance at December 31, 2020Balance at December 31, 2020— $— — $— 
Shares acquired concurrent with acquisitionShares acquired concurrent with acquisition— — 3,326 5.42 
GrantedGranted685,369 2.19 1,741,280 1.97 Granted1,048 8.68 12,659 5.51 
VestedVested(555,226)2.96 (1,031,159)3.39 Vested— — (282)5.42 
ForfeitedForfeited(336,950)3.07 (141,821)3.32 Forfeited— — (4)5.42 
Balance at December 31, 20202,236,994 $3.37 1,137,260 $2.29 
Balance at December 31, 2021Balance at December 31, 20211,048 $8.68 15,699 $5.49 
GrantedGranted1,372 7.03 5,075 7.38 
VestedVested— — (14,182)5.45 
ForfeitedForfeited(34)7.79 (323)6.20 
Balance at December 31, 2022Balance at December 31, 20222,386 $7.74 6,269 $7.07 
Performance based and time-based awards granted in the twelve months ended December 31, 2019 had a weighted average grant date fair value of $3.08 and $2.54, respectively. Performance based and time-based awards granted in December 31, 2018 had a weighted average grant date fair value of $9.17 and $7.38, respectively. The vesting of the performance-based awards is contingent primarily upon the Company meeting certain cumulative revenue and earnings targets, primarily ranging over onetwo to three years, and continued employment through the vesting date. The term of the time-based awards is generally three years with vesting upgenerally one to generally three years. The vesting period of the time-based and performanceperformance-based awards is generally commensurate with the requisite service period.
The total fair value of restricted stock and restricted stock unit awards, which vested during the years ended December 31, 2020, 20192022 and 20182021, was $5,138, $4,517$77,332 and $3,583,$1,527, respectively. At December 31, 2020,2022, the weighted average remaining contractual life for time basedtime-based and performance-based awards was 1.070.65 and 1.821.86 years, respectively. At December 2021, the weighted average remaining contractual life for time-based and performance-based awards was 0.37 and 2.37 years, respectively.
At December 31, 2022 and 2021, the unrecognized compensation expense for time-based awards was $16,449 and $15,376, respectively, and will be recognized over a weighted average period of 0.65 years and 0.37 years, respectively.
At December 31, 2020,2022 and 2021, the unrecognized compensation expense for performance-based awards was $3,976 to$12,781 and $8,221, respectively, and will be recognized over a weighted average period of 1.82 years. At December 31, 2020, the unrecognized compensation expense for time-based awards was $570 to be recognized over a weighted average period of 1.07 years.1.86 and 2.37 years, respectively.
The following table summarizes information about share optionstock appreciation rights (“SAR”) awards:
Share Option AwardsSAR Awards
SharesWeighted Average
Grant Date Fair Value
Weighted Average Exercise PriceSharesWeighted Average Grant Date Fair ValueWeighted Average Exercise Price
Balance at December 31, 2019111,866 $2.23 $4.85 
Balance at December 31, 2020Balance at December 31, 2020— $— $— 
Shares acquired concurrent with acquisitionShares acquired concurrent with acquisition3,379 2.94 2.95 
GrantedGrantedGranted1,598 2.39 8.13 
ForfeitedForfeited(84)1.35 6.60 
Balance at December 31, 2021Balance at December 31, 20214,893 $2.79 $4.58 
GrantedGranted— — — 
ForfeitedForfeited(111,866)2.23 4.85 Forfeited— — — 
ExercisedExercisedExercised(48)3.66 6.00 
Balance at December 31, 2020$$
Balance at December 31, 2022Balance at December 31, 20224,845 $2.78 $4.57 
We use the Black-Scholes option-pricing model to estimate the fair value of options granted. No options were granted in 2020 and 2019.SAR awards.
The grant date fair value of the optionsSARs granted in 2018 was determined2021 ranged from $2.20 to be $2.23. The assumptions for the model were as follows: expected life of 4.9 years, risk free interest rate of 2.9%, expected volatility of 52.9% and dividend yield of 0%. Options$3.66. SARs granted in 20182021 vest in 1 to 3 years. The term of these awards is 5 years. The vesting period of these awards is generally commensurate with the requisite service period. These awards were all forfeited in 2020.
NaN options were exercised during 2020, 2019 and 2018. There are no options outstanding as of December 31, 2020. No options vested in 2020, 2019 and 2018.
The following table summarizes information about stock appreciation rights (“SAR”) awards:


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
15. Share Capital - (continued)

SAR Awards
  SharesWeighted Average
Grant Date Fair Value
Weighted Average Exercise Price
Balance at December 31, 20192,325,800 $1.14 $3.07 
Granted
Forfeited(250,000)0.73 5.00 
Exercised
Balance at December 31, 20202,075,800 $1.19 $2.84 
We use the Black-Scholes option-pricing model to estimate the fair value of the SAR awards. NaN SAR awards were granted in 2020. SAR awards granted in 2019 vest in equal installments on each of the first 3 anniversaries of the grant date and have grant date fair values ranging from $0.68 to $1.41. The assumptions for the modelused to value these awards were as follows: expected life of 3ranging from 2.8 to 4 years, risk free interest rate of 1.8% to 2.3%approximately 1.0%, expected volatility ranging from of 62.5%35.5% to 67.1%38.1%, and dividend yield of 0%0.0%. The term of these awards is 5 years. The vesting period
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Certain of awards granted is generally commensurate with the requisite service period.
NaNCompany’s SAR awards were grantedare settled in 2018.
cash. These awards are liability classified and remeasured at each reporting period. As of December 31, 2020, 775,8002022, the assumptions for the Black-Scholes model for these awards were as follows: expected life ranging from 2 to 3 years, risk free interest rate of approximately 4%, expected volatility ranging from of 37.0% to 41.4%, and dividend yield of 0.0%. The remaining term of these awards as of December 31, 2022, is approximately 4 years.
For the years ended December 31, 2022 and 2021, the number of SAR awards that vested were 1,943 and 1,950, respectively. As of December 31, 2022 and 2021, 3,845 and 1,950 SAR awards had vested and were exercisable. exercisable, respectively.
The aggregate intrinsic value of the SAR awards outstanding as of December 31, 2020 is $480. NaN SAR awards were exercised during 2020, 20192022 and 2018. NaN SAR awards vested in 20192021 was $11,063 and 2018.$19,677 respectively. At December 31, 2020,2022 and 2021, the weighted average remaining contractual life for the SAR awards was 0.8 years.1.45 years and 1.15 years, respectively.
At December 31, 2020,2022 and 2021, the unrecognized compensation expense for these awards was $402$1,175 and $4,639, respectively, to be recognized over a weighted average period of 0.8 years.1.45 and 1.15 years, respectively.
For the years ended December 31, 2020, 20192022 and 2018, $5,774, $2,460, and $5,892 was2021, the total recognized in stockstock-based compensation related to all stock compensation awards was $36,663 and $75,032, respectively. The related income tax expensebenefit for the years ended December 31, 2020, 20192022 and 20182021 was $0, $643,$4,106 and $472,$5,289, respectively.
Subsidiary Awards
Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The profits interests awards generally provide the employee the right, but not the obligation, to sell its profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are settled in cash and the corresponding liability was $20,961 and $36,418 at December 31, 2022 and 2021, respectively and is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. The change in the profits interest liabilities for the years ended December 31, 2022 and 2021 was a decrease of $4,179 and an increase of $536, respectively and was recorded as stock-based compensation in Office and general expenses within the Statements of Operations.
16. Changes in Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) for the twelve monthsyears ended December 31 were:
Defined
Benefit
Pension
Foreign Currency TranslationTotal
Balance December 31, 2018$(13,101)$17,821 $4,720 
Other comprehensive income before reclassifications(7,078)(7,078)
Amounts reclassified from accumulated other comprehensive loss (net of tax benefit of $740)(1,911)(1,911)
Other comprehensive income(1,911)(7,078)(8,989)
Balance December 31, 2019$(15,012)$10,743 $(4,269)
Other comprehensive loss before reclassifications8,362 8,362 
Amounts reclassified from accumulated other comprehensive loss (net of tax benefit of $519)(1,354)(1,354)
Other comprehensive loss(1,354)8,362 7,008 
Balance December 31, 2020$(16,366)$19,105 $2,739 

Defined Benefit PensionForeign Currency TranslationTotal
Balance December 31, 2020$— $— $— 
Other comprehensive loss before reclassifications— (6,000)(6,000)
Amounts reclassified from accumulated other comprehensive income722 — 722 
Other comprehensive loss722 (6,000)(5,278)
Balance December 31, 2021722 (6,000)(5,278)
Other comprehensive loss before reclassifications4,088 (37,751)(33,663)
Other comprehensive loss4,088 (37,751)(33,663)
Balance December 31, 2022$4,810 $(43,751)$(38,941)


17. Income Taxes

The components of the Company’s income before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were:
202220212020
Income (Loss):
U.S.$29,597 $38,717 $95,939 
Non-U.S.43,904 20,841 (18,599)
$73,501 $59,558 $77,340 
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The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were:
202220212020
Current tax provision
U.S. federal$3,913 $7,259 $5,812 
U.S. state and local5,588 7,459 3,242 
Non-U.S.16,398 12,498 2,346 
25,899 27,216 11,400 
Deferred tax provision (benefit):
U.S. federal(8,049)(143)(1,951)
U.S. state and local(6,439)(2,521)389 
Non-U.S.(3,831)(1,154)(3,901)
(18,319)(3,818)(5,463)
Income tax expense$7,580 $23,398 $5,937 

TableA reconciliation of Contentsincome tax expense (benefit) using the U.S. federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows:

202220212020
Income before income taxes, equity in non-consolidated affiliates and noncontrolling interest$73,501 $59,558 $77,340 
Statutory income tax rate21.0 %21.0 %21.0 %
Tax expense using U.S. statutory income tax rate$15,435 $12,507 $16,241 
Impact of disregarded entity structure(3,355)(6,954)(16,049)
Foreign, net2,111 5,995 752 
State taxes, net(850)4,327 1,980 
Stock compensation(1,342)4,009 — 
Valuation allowance2,760 (15)1,286 
Revaluation of TRA step up(6,952)— — 
Return to provision adjustments(16,159)— — 
Goodwill impairments14,645 — — 
Other, net1,287 3,529 1,727 
Income tax expense$7,580 $23,398 $5,937 
Effective income tax rate10.3 %39.3 %7.7 %

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousandsPrior to merger, the Company was a limited liability company classified as a disregarded entity for U.S. federal income tax purposes, and as such was not subject to taxes from a U.S. federal income tax perspective. After the merger, the Company is a corporation with an investment in a limited liability company classified as a partnership for U.S. federal income tax purposes, and as such a portion of United States dollars, except per share amounts, unless otherwise stated)
17. Income Taxesthe consolidated income is not subject to taxes from a U.S. federal income tax perspective. The tax rate of 21.0% has been used to capture the U.S. federal taxes of the Company and the corporations owned by the Company and recorded in the Consolidated Statements of Operations and Comprehensive Income.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act includes provisions relating to delaying certain payroll tax payments, refundable payroll tax credits, net operating loss carryback periods, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.
The components ofIn August 2022, the Company’s income (loss) before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were:
202020192018
Income (Loss):      
U.S.$(73,227)$(17,491)$(76,960)
Non-U.S.(15,175)38,358 (11,709)
  $(88,402)$20,867 $(88,669)
The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were:
202020192018
Current tax provision      
U.S. federal$3,016 $2,638 $444 
U.S. state and local742 12 
Non-U.S.4,241 2,875 7,584 
  7,999 5,525 8,030 
Deferred tax provision (benefit):      
U.S. federal75,686 4,635 (10,817)
U.S. state and local34,404 1,130 (3,476)
Non-U.S.(1,534)(974)35,878 
  108,556 4,791 21,585 
Income tax expense (benefit)$116,555 $10,316 $29,615 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
17. Income Taxes - (continued)
A reconciliationenacted to the Inflation Reduction Act of income2022 (“IRA”), which creates a new book minimum tax expense (benefit) using the U.S. federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows:
202020192018
Income (loss) before income taxes, equity in non-consolidated affiliates and noncontrolling interest$(88,402)$20,867 $(88,669)
Statutory income tax rate21.0 %21.0 %21.0 %
Tax expense (benefit) using U.S. statutory income tax rate(18,564)4,382 (18,621)
State and foreign taxes(3,486)1,496 (3,944)
Non-deductible stock-based compensation1,162 3,823 1,512 
Global intangible low-taxed income1,363 1,147 710 
Base erosion and anti-abuse tax4,697 2,504 389 
Other non-deductible expense1,043 273 1,388 
Change to valuation allowance128,938 (2,830)49,482 
Effect of the difference in U.S. federal and local statutory rates67 1,422 (152)
Noncontrolling interests(4,649)(3,566)(2,674)
Other impacts of foreign operations1,160 2,724 612 
Impact of goodwill impairments10,158 436 8,703 
Adjustments to accrued taxes in previous periods4,641 (3,544)1,192 
Adjustment to deferred tax balances*(9,999)1,920 (8,845)
Other, net24 129 (137)
Income tax expense (benefit)$116,555$10,316$29,615
Effective income tax rate(131.8)%49.4%(33.4)%
*Adjustments to deferred tax balances in 2020 are primarily offset by changes to valuation allowance.
Income tax expense for the twelve months ended December 31, 2020 was $116,555 (associated with a pre-tax loss of $88,402) compared to an income tax expenseat least 15% of $10,316 (associated withconsolidated GAAP pre-tax income for corporations with average book income in excess of $20,867) for the twelve months ended December 31, 2019. Income$1 billion. We do not expect an increase in our tax expenseliability from this new book minimum tax in 2020 included the impact of increasing valuation allowance primarily associated with U.S. deferred tax assets and the impact of non-deductible goodwill impairments of foreign operations. Income tax expense in 2019 included the impact of base erosion and anti-abuse tax and non-deductible stock compensation offset by a reduction in valuation allowance primarily associated with Canadian deferred tax assets.2023.
Income taxes receivable were $1,480$15,191 and $5,025$790 at December 31, 20202022 and 2019,2021, respectively, and were included in other current assets on the balance sheet. Income taxes payable were $9,238$6,850 and $11,722$24,643 at December 31, 20202022 and 2019,2021, respectively, and were included in accrued and other liabilities on the balance sheet. It is the Company’s policy to classify interest and penalties arising in connection with unrecognized tax benefits as a component of income tax expense.

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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
17. Income Taxes - (continued)
The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, were as follows:
20202019
Deferred tax assets:    
Accounting reserves and other$20,831 $10,987 
Net operating loss carryforwards47,139 60,705 
Interest deductions20,819 16,797 
Refinancing charge669 
Goodwill and intangibles122,045 117,421 
Stock compensation1,693 1,736 
Pension plan4,856 4,414 
Unrealized foreign exchange11,995 11,373 
Capital loss carryforwards13,657 13,081 
Lease liabilities77,870 76,397 
Gross deferred tax asset320,905 313,580 
Less: valuation allowance(198,452)(65,649)
Net deferred tax assets122,453 247,931 
Deferred tax liabilities:    
Right-of-use assets$(57,890)$(67,613)
Refinancing charge(1,675)
Withholding taxes(475)(546)
Capital assets(1,893)(382)
Goodwill amortization(88,326)(98,677)
Total deferred tax liabilities(150,259)(167,218)
Net deferred tax asset (liability)$(27,806)$80,713 
    
Deferred tax assets$179 $84,900 
Deferred tax liabilities(27,985)(4,187)
  $(27,806)$80,713 
202220212020
Deferred tax assets:
Net operating losses$38,871 $33,112 $10,229 
Tax credits7,104 6,644 583 
Operating lease liability52,442 48,173 4,141 
Interest deductions29,530 30,760 — 
Accruals and other liabilities2,794 3,720 — 
TRA and related step-up, net of amortization32,890 — — 
Other14,557 15,160 3,344 
Gross deferred tax asset178,188 137,569 18,297 
Less: valuation allowance(12,223)(5,825)(5,551)
Net deferred tax assets$165,965 $131,744 $12,746 
Deferred tax liabilities:
Right-of-use lease asset - operating leases40,012 37,001 3,577 
Property and equipment, net6,839 4,212 463 
Goodwill and intangibles90,599 83,607 21,959 
Residual basis differences— 102,297 — 
Other940 6,854 2,639 
Total deferred tax liabilities138,390 233,971 28,638 
Net deferred tax asset (liability)$27,575 $(102,227)$(15,892)
Deferred tax assets$67,684 $866 $158 
Deferred tax liabilities(40,109)(103,093)(16,050)
$27,575 $(102,227)$(15,892)
The preliminary deferred tax liability for the Company’s residual basis difference in OpCo of $102,297 reflected in the table above as of December 31, 2021 was adjusted to zero as of December 31, 2022 to reflect the finalization of the Company’s book and tax basis in OpCo. This deferred tax liability had a balance of $119,470 as of September 30, 2022 that should have been zero. In addition, a deferred tax liability of $16,700, and the associated reduction to additional paid-in-capital was not recorded when the exchanges of Paired Units for Class A Common Stock occurred in February 2022. The correction has been reflected as of December 31, 2022.
Tax Receivables Agreement
In connection with the closing of the Transaction, we entered into the Tax Receivables Agreement (“TRA”) with OpCo and Stagwell Media, pursuant to which we are 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 Company accounts for amounts payable under the TRA in accordance with ASC 450-Contingencies. We will evaluate the likelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance and a corresponding reduction to the TRA liability. The amounts to be recorded for both the deferred tax assets and the liability under the TRA will be estimated at the time of any purchase or exchange as a reduction to shareholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income or loss. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income or loss.
In the first quarter of 2022, the Company had its first exchange of Paired Units for shares of Class A Common Stock and recorded its initial TRA liability. Further exchanges have been made in the subsequent quarters. As of December 31, 2022 the
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Company has recorded a TRA liability of $28,694 and a deferred tax asset, net of amortization of $32,890 in connection with the exchanges of the Paired Units and the projected obligations under the TRA.
Stagwell Inc. itself has net operating loss carryforwards of $229,224$57,553 relating to U.S. states which expire years 2024 through 2042. Stagwell Inc. also had indefinite net operating loss carryforwards which consist of $44,048 relating to U.S. federal, and $140,608 relating to states. Stagwell Inc. also has foreign tax credit and general business carryovers of $7,104 which expire between 2024 and 2031.
Stagwell Inc.’s consolidated corporate subsidiaries also have net operating loss carryforwards which expire in years 20212022 through 2040.2044. These definite lived net operating loss carryforwards consist of $1,533$18,730 relating to U.S. federal, $132,655$21,403 relating to U.S. states and $95,036$20,099 relating to non-U.S. The Companycorporate subsidiaries also hashave indefinite net operating loss carryforwards of $122,299. These indefinite loss carryforwardswhich consist of $42,003 relating to the U.S. federal, $69,967$10,555 relating to U.S. states,federal, and $10,329$15,363 relating to non-U.S. In addition,The majority of the Company has indefinite capital loss carryforwardsconsolidated corporate subsidiaries’ U.S. tax attributes are subject to an annual limitation as a result of $103,074 in Canada and foreign tax credit carryforwards in the U.S.historic acquisitions which constituted a change of $5,460 which expire in years 2024 through 2027.
The Company maintained a valuation allowance of $198,452ownership as of December 31, 2020 relating to both U.S. and foreign deferred tax assets, and $65,649 as of December 31, 2019 relating to foreign deferred tax assets.defined under Internal Revenue Code 382.
The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates all positive and negative evidence and considers factors such as the reversal of taxable temporary differences, taxable income in eligible carryback years, future taxable income, and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax expense.
In 2020, the Company’s evaluation resulted in the recognition ofThe Company maintained a valuation allowance against its U.S. deferred tax assets. Given a three-year U.S. cumulative pre-tax lossof $12,223 as of December 31, 20202022 relating to both U.S. and other factors, the Company concluded it is more likely than not that such U.S.foreign deferred tax assets, will not be realized. Income tax expense for the year ended December 31, 2020


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
17. Income Taxes - (continued)
included a charge of approximately $129 million in connection with the change in the valuation allowance, which primarily relates to the U.S.
The Company has historically asserted that its unremitted foreign earnings are permanently reinvested except for certain international entities. The Company has provided $475 and $546 as an estimate of the tax costs of repatriation with respect to $4,745 and $5,462 of undistributed foreign earnings from certain international entities that are not subject to the permanent reinvestment assertion$5,825 as of December 31, 20202021 relating to U.S. and 2019. We have not changed our permanent reinvestment assertionforeign deferred tax assets.
The Company is permanently reinvested with respect to any other international entitiesits foreign earnings in certain jurisdictions, and no deferred taxes have been recorded related to such earnings as wethe determination of the amount is not practicable. The Company currently does not intend to usedistribute previously taxed income. Upon distribution in the related historical earningsfuture, the Company may incur state and profits to fund international operations and investments, and therefore have not recorded incomeforeign withholding taxes on such amounts.income, the amount of which is not practicable to compute.
As of December 31, 20202022 and 2019,2021, the Company recorded a liability for unrecognized tax benefits as well as applicable penalties and interest in the amount of $1,066$2,159 and $1,107,$1,120, respectively. It is the Company’s policy to classify interest and penalties arising in connection with unrecognized tax benefits as a component of income tax expense. As of December 31, 20202022 and 2019,2021, accrued penalties and interest included in unrecognized tax benefits were approximately $135$23 and $111,$82, respectively. If these unrecognized tax benefits were to be recognized, it would affect the Company’s effective tax rate.
202020192018
A reconciliation of the change in unrecognized tax benefits is as follows:
Unrecognized tax benefit - Beginning Balance$996 $887 $1,433 
Current year positions581 275 
Prior period positions
Settlements(314)
Lapse of statute of limitations(170)(166)(239)
Unrecognized tax benefits - Ending Balance$1,407 $996 $887 
The Company has presented $477 of the unrecognized tax benefits as of December 31, 2020 as a reduction to the deferred tax asset.
20222021
A reconciliation of the change in unrecognized tax benefits is as follows:
Unrecognized tax benefit - Beginning Balance$1,038 $— 
Current year positions— — 
Prior period positions1,850 1,038 
Settlements(477)— 
Lapse of statute of limitations(275)— 
Unrecognized tax benefits - Ending Balance$2,136 $1,038 
It is reasonably possible that the amount of unrecognized tax benefits could decrease by a range of $400$104 to $500$286 in the next twelve months as a result of expiration of certain statute of limitations.
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The statute of limitations for tax years prior to 20172019 are closed for U.S. federal purposes. The statute of limitations for tax years prior to 20102016 have also expired in non-U.S. jurisdictions.
18. Fair Value Measurements
A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below: 
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Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
Financial LiabilitiesInstruments that are not Measured at Fair Value on a Recurring Basis
The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at December 31, 2020 and 2019:31:


Table of Contents
 December 31, 2022December 31, 2021
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
5.625% Notes$1,100,000 $902,000 $1,100,000 $1,120,900 

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
18. Fair Value Measurements - (continued)
 December 31, 2020December 31, 2019
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Liabilities:    
Senior Notes$870,256 $883,580 $900,000 $812,250 
Our long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.
Non-financial Assets and Liabilities that are not Measured at Fair Value on a Recurring Basis
Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value assessment) and right-of-use lease assets (Level 2 fair value assessment). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment. The Company recognized an impairment of goodwill of $61,661 for the twelve months ended December 31, 2020 as compared to an impairment of goodwill of $4,879 for the twelve months ended December 31, 2019. The Company also recognized an impairment of intangible assets of $12,071 for the twelve months ended December 31, 2020. See Notes 2 and 8 of the Notes to the Consolidated Financial Statements for information related to the measurement of the fair value of goodwill.
In the twelve months ended December 31, 2020, the Company recorded a charge of $22,667, of which $9,969 was to reduce the carrying value of right-of-use lease assets and related leasehold improvements. The remaining $12,698 was related to the acceleration of the variable lease expenses associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio.
Financial LiabilitiesInstruments Measured at Fair Value on a Recurring Basis
Contingent deferred acquisition consideration (Level 3 fair value measurement) is initially recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with various contractual valuation formulasmodels of each business’ future performance, including revenue growth and isfree cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of December 31, 2020,2022, the discount rate used to measure these liabilities was 5.1%ranged from 5.2% to 5.4%.
As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Consolidated Balance Sheets are subject to material uncertainty.
See Note 9 of the Notes to the Consolidated Financial Statements included herein for additional information regarding contingent deferred acquisition consideration.
At December 31, 20202022 and 2019,December 31, 2021, the carrying amount of the Company’s financial instruments, including cash, and cash equivalents, accounts receivable and accounts payable, approximated their fair value because of their short-term maturity.
Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurements) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.
See Note 10 of the Notes included herein for additional information regarding the impairment of right-of-use lease assets and Note 8 of the Notes included herein for additional information regarding the impairment of goodwill and intangible assets.
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19. Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties, including Stagwell and its affiliates. The transactions may range in the nature and value of services underlying the arrangements. Below are theThe following table presents significant related party transactions thatwhere a third party receives services from the Company:
Total Transaction ValueRevenuesDue From
Related Party
Year Ended December 31,December 31,
2022
December 31, 2021
Services202220212020
Technological and production services(1)
$227$91 $60 $50 $42 $10 
Marketing services (2)
Ongoing arrangement (7)
3,387 243 522 493 88 
Polling services (3)
1,481718 436 — 380 70 
Marketing and website development services (4)
6,2047,185 9,647 — 488 979 
Marketing and advertising services (5)
3,5761,930 950 — 1,506 506 
Marketing and advertising services (8)
Ongoing arrangement (7)
1,418 299 — 1,072 153 
Marketing services (8)
603418 — — 30 — 
Marketing services (8)
Ongoing arrangement (7)
5,564 4,814 — 3,476 4,033 
Polling services (6)
3,4502,365 — — — — 
Total$23,076 $16,449 $572 $7,487 $5,839 
(1) Client was founded by the Company’s Chief Executive Officer.
(2) Family member of one of the Brands’ partners holds an executive leadership position in the client.
(3) Family members of certain of the Company’s executives hold key leadership positions in the client
(4) Client has significant interest in the Company.
(5) Brands’ partners and executives either hold a key leadership position in or are on the board of directors of the client.
(6) Founder of the client has significant interest in nature:the Company.
(7) This arrangement was entered into for an indefinite term and is invoiced as services are provided.
(8) A member of the Company’s board of directors holds an executive leadership position or are in the board of directors of the client.

The following table presents significant related party transactions in which the Company receives services from a third party:
Total Transaction ValueExpensesDue to Related Party
Year Ended December 31,December 31,
2022
December 31, 2021
Services202220212020
Data management services (1)
Ongoing arrangement (4)
$2,138 $1,473 $8,009 $1,295 $623 
Sales and management services (2)
Ongoing arrangement (4)
2,006 788 — 1,416 442 
Marketing services (3)
$4040 — — 40 — 
Marketing services (5)
365181 — — — — 
Total$4,365 $2,261 $8,009 $2,751 $1,065 
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(1) Family member of one of the Brand’s partners holds an executive leadership position in the third party.
(2) Chief Executive Officer of the Brand is a shareholder of the affiliate providing the services.
(3) A family member of the Company’s President holds a key leadership position in the client.
(4) This arrangement was entered into for an indefinite term and is invoiced as services are provided.
(5) A member of the Company’s board of directors holds an executive leadership position or are on the board of directors of the client.
In October 2019, a Partner FirmBrand of the Company, entered into a loan agreement with a third party who holds a minority interest in the Brand. The loan receivable of $3,611 and $3,784 due from the third party is included within Other current assets in the Company’s Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021, respectively. The Company recognized $464, $307, and $249 for the years ended December 31, 2022, 2021, and 2020, respectively, of interest income within Interest expense, net on its Consolidated Statements of Operations.
The Company made loans to three employees of a subsidiary each in the amount of approximately $889, together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5% per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling interest of 13.3% in TMA Direct.
Prior Period Transactions
In October 2020, a Brand entered into an arrangement with a Stagwell affiliate, in which the Stagwell affiliate and the Partner Firm will collaborate to provide variousmarketing services to a client in which one of the Partner Firm. The Partner FirmBrand’s partners holds a key leadership position. During the years ended December 31, 2021 and 2020, the Stagwell affiliate pitchedCompany recognized $5,146 and won$4,866, respectively, in revenue related to this business together, with the client ultimately determining the general scope of work for each agency. Under the arrangement, which was structured as a sub-contract due to client preference, the Partner Firm is expected to pay the Stagwell affiliate, for services provided by the Stagwell affiliate in connection with serving the client, approximately $2,000 which has been fully recognized as of December 2020.transaction. As of December 31, 2020, $1,200 was owed to the affiliate.
During 2020, a Partner Firm of the Company entered into an arrangement with certain Stagwell affiliates to perform media planning, buying2022 and reporting services. Under the arrangement, the Partner Firm is expected to receive from the Stagwell affiliates approximately $56,700, which has been fully recognized as of December 2020. As of December 31, 2020, $110 was2021, there were no balances due from the affiliates. client related to this arrangement. This transaction was fully recognized in 2021.


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
19. Related Party Transactions - (continued)
In JanuaryDuring the years ended December 31, 2021 and 2020, a Partner Firm ofStagwell Media made additional non-cash investments in the Company entered into an arrangement with a Stagwell affiliate to develop advertising technology forof $12,400, and $93,900 respectively. Additionally, during the Partner Firm. Under the arrangement the Partner Firm recorded approximately $483, of which $2 was owed to the affiliate as ofyears ended December 31, 2020. This transaction has been completed.
In August2021 and 2020, the Company entered into an arrangement with a Stagwell affiliate to provide audiencemade cash investments of $1,600 and brand research, concept testing and landscape related to the ongoing new business pitches for clients of the Company. Under the arrangement$1,500, respectively. In March 2021, the Company is expectedmade a non-cash distribution to payStagwell Media of $13,000. Additionally, the Company made cash distributions to Stagwell affiliate approximately $145, which has been fully recognized asMedia of October 2020. As of$191,900 and $108,500 for the years ended December 31, 2021 and 2020, $63 was owed to the affiliate.
In November 2020, a Partner Firm of the Company entered into an arrangement with a certain Stagwell affiliate to perform event management services. Under the arrangement, the Partner Firm is expected to receive from the Stagwell affiliate approximately $457, which is expected to be recognized through March of 2021. As of December 31, 2020, $67 was due from the affiliate.
On February 14, 2020, Sloane sold substantially all its assets and certain liabilities to an affiliate of Stagwell. See Note 4 of the Notes to the Consolidated Financial Statements for information related to this transaction. 
The Company entered into an agreement commencing on January 1, 2020 to sublease office space through July 2021 to a company whose chairman is a member of the Company’s Board of Directors. As of December 31, 2020, the total future rental income related to the sublease is approximately $122.respectively.
20. Segment Information
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.
The CODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income (loss) attributableexcluding non-operating income or expense to MDC Partners Inc. common shareholders plus or minus adjustments to Operatingachieve operating income, (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates and other items. Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates, less contributions to date, plus undistributed earnings (losses). Other items net includes items such as severance expenseinclude restructuring costs, acquisition-related expenses, and other restructuring expenses, including costs for leases that will either be terminated or sublet in connection with the centralization of our New York real estate portfolio.non-recurring items.
EffectiveDue to changes in the firstCompany’s internal management and reporting structure in the second quarter of 2020,2022, reportable segment results for periods presented prior to the Company reorganized its management structure resulting in the aggregationsecond quarter of certain Partner Firms into integrated groups (“Networks”). Mr. Penn appointed key agency executives, that report directly into him to lead each Network. In connection with the reorganization, we reassessed our reportable segments to align our external reporting with how we operate the Networks under our new organizational structure. Prior periods presented2022 have been recast to reflect the changereclassification of certain reporting units (Brands) between operating segments. The changes in reportable segments.segments were that the Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro Brands, previously within the Integrated Agencies Network, are now within the Brand Performance Network.
The Company has three reportable segments that resulted from our reassessment are as follows: “Integrated Networks - Group A,Agencies Network,“Integrated Networks - Group B”“Brand Performance Network” and the “Media & Data“Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described in Note 2 ofthroughout the Notes to the Consolidated Financial Statements included herein.
The Integrated Networks - Group AAgencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment is comprised of theare as follows: Anomaly Alliance (Anomaly, Concentric, Partners, Hunter, Mono, Y Media Labs)YML and Scout (Brands), Constellation (72andSunny, Colle McVoy, operating segments.Instrument,
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The Integrated Networks - Group B reportable segment is comprised of the Constellation (72andSunny, CPB, Instrument
Redscout, Hello Design, Team Enterprises, and Redscout) andHarris Insights), the Doner Partner Network (6degrees,(Doner, KWT Global, Harris X, Veritas, Doner KWT, Union, VeritasNorth, Northstar, which is currently sunsetting, and Yamamoto) operating segments.Yamamoto (Brands)), Code and Theory and National Research Group.


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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
20. Segment Information - (continued)

The operating segments aggregated within the Integrated Networks - Group A and B reportable segments provide a range of services for their clients, primarily including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast) as well as public relations and communications services, experiential, social media and influencer marketing. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business and from time to timeor have business move between them. While
The Brand Performance Network (“BPN”), previously referred to as the “Media Network” reportable segment, is comprised of a single operating segments are similarsegment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in nature, the distinction between the Integrated Networks - Group Athis segment aim to provide scaled creative performance through developing and B is the aggregationexecuting sophisticated omnichannel campaign strategies leveraging significant amounts of operating segments that have the most similar historicalconsumer data. BPN’s Brands provide media solutions such as audience analysis, media planning, and expected average long-term profitability.buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and travel media experts Ink.
The Media & DataCommunications Network reportable segment is comprised of a single operating segment, our specialist network that combines media buyingprovides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and planning across a rangeother services to both corporations and political and advocacy organizations and consists of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast) with technologyour Allison & Partners SKDK (including Sloane & Company), and data capabilities.Targeted Victory brands.
All Other consists of the Company’s remaining operating segments that provide a range of servicesdigital innovation group and Stagwell Marketing Cloud, including advertising, public relationsMaru and marketing communication services, but generally do not have similar services offerings or financial characteristicsEpicenter, and products such as those aggregatedPRophet, ARound and Reputation Defender (which was sold in the reportable segments. The All Other category includes Allison & Partners, Bruce Mau, Forsman & Bodenfors, Hello, Team and Vitro.September 2021).
Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.

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Year Ended December 31,
202220212020
Revenue:
Integrated Agencies Network$1,479,802 $770,056 $221,595 
Brand Performance Network757,208 424,632 262,362 
Communications Network430,820 248,832 382,815 
All Other19,962 25,843 21,260 
Total Revenue$2,687,792 $1,469,363 $888,032 
Adjusted EBITDA:
Integrated Agencies Network$293,643 $163,596 $42,332 
Brand Performance Network115,835 65,942 27,697 
Communications Network85,684 45,527 78,562 
All Other(933)(769)(1,893)
Corporate(43,111)(20,644)(3,530)
Total Adjusted EBITDA$451,118 $253,652 $143,168 
Depreciation and amortization$(131,273)$(77,503)$(41,025)
Impairment and other losses(122,179)(16,240)— 
Stock-based compensation(33,152)(75,032)— 
Deferred acquisition consideration13,405 (18,721)(4,497)
Other items, net(18,691)(21,430)(13,906)
Total Operating Income$159,228 $44,726 $83,740 

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
20. Segment Information - (continued)

Years Ended December 31,
202020192018
Revenue:
Integrated Networks - Group A$379,648 $392,101 $393,890 
Integrated Networks - Group B435,589 531,717 551,317 
Media & Data Network139,015 161,451 183,287 
All Other244,759 330,534 346,594 
Total$1,199,011 $1,415,803 $1,475,088 
Adjusted EBITDA:
Integrated Networks - Group A$79,793 $74,822 $75,609 
Integrated Networks - Group B84,297 84,568 74,091 
Media & Data Network9,707 7,746 12,205 
All Other30,755 37,618 38,307 
Corporate(27,220)(30,601)(38,761)
Total Adjusted EBITDA$177,332 $174,153 $161,451 
Depreciation and amortization$(36,905)$(38,329)$(46,196)
Impairment and other losses(96,399)(8,599)(87,204)
Stock compensation expense(14,179)(31,040)(18,416)
Deferred acquisition consideration expense/(income)(42,187)(5,403)457 
Loss on investments(2,175)(2,048)(779)
Other expense(31,244)(9,274)(7,879)
Total Operating Income (Loss)$(45,757)$79,460 $1,434 
Other Income (Expenses):
Interest expense and finance charges, net$(62,163)$(64,942)$(67,075)
Foreign exchange gain (loss)(982)8,750 (23,258)
Other, net20,500 (2,401)230 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(88,402)20,867 (88,669)
Income tax expense116,555 10,316 29,615 
Income (loss) before equity in earnings of non-consolidated affiliates(204,957)10,551 (118,284)
Equity in earnings of non-consolidated affiliates(2,240)352 62 
Net income (loss)(207,197)10,903 (118,222)
Net income attributable to the noncontrolling interest(21,774)(16,156)(11,785)
Net loss attributable to MDC Partners Inc.(228,971)(5,253)(130,007)
Accretion on and net income allocated to convertible preference shares(14,179)(12,304)(8,355)
Net loss attributable to MDC Partners Inc. common shareholders$(243,150)$(17,557)$(138,362)


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Year Ended December 31,
202220212020
Other Income (expenses):
Interest expense, net$(76,062)$(31,894)$(6,223)
Foreign exchange, net(2,606)(3,332)(721)
Other, net(7,059)50,058 544 
Income before income taxes and equity in earnings of non-consolidated affiliates73,501 59,558 77,340 
Income tax expense7,580 23,398 5,937 
Income before equity in earnings of non-consolidated affiliates65,921 36,160 71,403 
Equity in income (loss) of non-consolidated affiliates(79)(240)58 
Net income65,842 35,920 71,461 
Net income attributable to noncontrolling and redeemable noncontrolling interests(38,573)(14,884)(15,105)
Net income attributable to Stagwell Inc. common shareholders$27,269 $21,036 $56,356 
Depreciation and amortization:
Integrated Agencies Network$74,609 $37,646 $9,360 
Brand Performance Network33,674 26,031 20,117 
Communications Network10,831 7,553 5,903 
All Other5,234 2,498 3,681 
Corporate6,925 3,775 1,964 
Total depreciation and amortization$131,273 $77,503 $41,025 
Stock-based compensation:
Integrated Agencies Network$13,774 $47,190 $— 
Brand Performance Network5,830 5,251 — 
Communications Network1,797 15,928 — 
All Other41 39 — 
Corporate11,710 6,624 — 
Total stock-based compensation$33,152 $75,032 $— 

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousandsThe Company recognized a severance charge of United States dollars, except per share amounts, unless otherwise stated)
20. Segment Information - (continued)

Years Ended December 31,
202020192018
Depreciation and amortization:(Dollars in Thousands)
Integrated Networks - Group A$6,467 $8,559 $9,602 
Integrated Networks - Group B17,204 15,904 19,032 
Media & Data Network4,376 4,303 3,820 
All Other7,478 8,695 12,980 
Corporate1,380 868 762 
Total$36,905 $38,329 $46,196 
Stock-based compensation:
Integrated Networks - Group A$7,580 $24,420 $5,792 
Integrated Networks - Group B3,191 4,303 6,890 
Media & Data Network122 63 320 
All Other304 374 755 
Corporate2,982 1,880 4,659 
Total$14,179 $31,040 $18,416 
Capital expenditures:
Integrated Networks - Group A$1,087 $5,934 $8,228 
Integrated Networks - Group B987 9,270 6,352 
Media & Data Network569 627 1,632 
All Other966 2,729 3,985 
Corporate33,694 36 67 
Total$37,303 $18,596 $20,264 
A summaryapproximately $10,600 in 2022, the majority of which was at the Company’s long-lived assets, comprised of fixed assets, goodwill and intangibles, net, by geographic region at December 31, is set forth in the following table.
United StatesCanadaOtherTotal
Long-lived Assets
2020 $80,447 $3,461 $6,505 $90,413 
2019 $68,497 $4,475 $8,082 $81,054 
Goodwill and Intangible Assets
2020 $614,168 $51,267 $36,620 $702,055 
2019 $659,584 $64,842 $62,158 $786,584 
Brand Performance Network.
The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.
Corporate’s capital expenditures in 2020 are primarily for leasehold improvements at its new headquarters at One World Trade Center in connection with the centralizationSee Note 5 of the Company’s New York real estate portfolio. As of December 31, 2020, the Company had $12,993 of capital expenditures that were incurred in the current year, but not yet paid.





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MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
20. Segment Information - (continued)

ANotes included herein for a summary of the Company’s revenue by geographic region at December 31 is set forth in the following table.
United StatesCanadaOtherTotal
Revenue:        
2020$959,636 $81,930 $157,445 $1,199,011 
2019$1,116,045 $105,067 $194,691 $1,415,803 
2018$1,152,399 $124,001 $198,688 $1,475,088 

21. Quarterly Results of Operations (Unaudited)
The following table sets forth a summary of the Company’s consolidated unaudited quarterly results of operations for the years ended December 31, in thousands of dollars, except per share amounts.
Quarters
FirstSecondThirdFourth
Revenue:
2020$327,742 $259,678 $283,423 $328,168 
2019$328,791 $362,130 $342,907 $381,975 
Cost of services sold:
2020$222,693 $165,632 $172,531 $209,043 
2019$237,154 $240,749 $222,448 $260,725 
Net Income (loss):
2020$1,794 $2,508 $14,804 $(226,303)
2019$316 $7,333 $5,513 $(2,259)
Net income (loss) attributable to MDC Partners Inc.:
2020$1,003 $(593)$4,076 $(233,457)
2019$(113)$4,290 $(1,752)$(7,678)
Income (loss) per common share:
Basic
2020$(0.03)$(0.06)$(0.07)$(3.23)
2019$(0.04)$0.01 $(0.07)$(0.15)
Diluted
2020$(0.03)$(0.06)$(0.07)$(3.23)
2019$(0.04)$0.01 $(0.07)$(0.15)
The above revenue, cost of services sold,2022, 2021, and income (loss) have primarily been affected by acquisitions and divestitures.
Historically, with some exceptions, the Company’s fourth quarter generates the highest quarterly revenues in a year. The fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur.
Income (loss) has been affected as follows:
The fourth quarter of 2020 and 2019 included a foreign exchange gain of $6,274 and a gain of $4,349, respectively.
The fourth quarter of 2020 and 2019 included stock-based compensation charges of $3,611 and $18,408, respectively.
The fourth quarter of 2020 and 2019 included changes in deferred acquisition resulting in income of $41,672 and $9,030, respectively.


Table of Contents2020.

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
21. Quarterly Results of Operations (Unaudited) - (continued)

The fourth quarter of 2020 and 2019 included goodwill, intangible asset, right-of-use asset, related leasehold improvement impairment charges, and expenses to accelerate the variable costs associated with certain leases of $77,240 and goodwill, right-of-use assets and related leasehold improvement impairment charges of $6,655, respectively.
The fourth quarter of 2020 included income tax expense of approximately $129 million, related to the increase in the valuation allowance primarily for U.S. deferred tax assets.



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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Not Applicable.

Item 9A.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be included in our SEC reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC’s rules and
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forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. However, our disclosure controls and procedures are designed to provide reasonable assurances of achieving our control objectives.
We conducted an evaluation, under the supervision and with the participation of our management, including our CEO, CFO and management Disclosure Committee, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to RuleRules 13a-15(e) and 15(d)-15(e)15d-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in our internal control over financial reporting described below, our CEO and CFO concluded that, as of December 31, 2022, our disclosure controls and procedures arewere not effective as of December 31, 2020.at a reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
ManagementOur management is responsible for establishing and maintaining adequate internal control over financial reporting (asas defined in RulesRule 13a-15(f) and Rule 15d-15(f) underof the Exchange Act). The Company’sAct. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect theour transactions and the dispositions of the assets of the Company;
our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles,GAAP and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s managementappropriate authorizations; and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on theour financial statements.
BecauseOur management, under the supervision of its inherent limitations,and with the participation of the CEO and CFO, assessed the effectiveness of our internal control over financial reporting maybased on the criteria set forth in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, our management concluded that our internal control over financial reporting was not preventeffective as of December 31, 2022, as described below. A material weakness is a deficiency, or detect misstatements. Also, projectionscombination of any evaluationdeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of effectivenessthe company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As outlined in Item 8—Financial Statements and Supplementary Data, Note 4 — Acquisitions, throughout 2022, we acquired several companies in a series of purchase business combinations including Brand New Galaxy, Maru Group Limited, TMA Direct, Inc, Wolfgang, LLC, Epicenter Experience LLC and other less significant acquisitions. The Securities and Exchange Commission permits companies to future periods are subjectexclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition, and our management has elected to exclude these from our assessment as of December 31, 2022. Combined total assets and total revenues of the acquired businesses represent approximately 4% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.
Material Weaknesses in Internal Control over Financial Reporting
The following material weaknesses were disclosed in our Form 10-K for the fiscal year ended December 31, 2021 and the remediation has not been completed as of December 31, 2022.
We did not effectively select and develop certain information technology (“IT”) general controls related to access and change management controls that led to deficiencies in the design and operation of control activities, including segregation of duties deficiencies. We also had deficiencies in the design and operation of account reconciliations. These deficiencies and a lack of sufficient resources contributed to the risk that controls may become inadequate because ofpotential for there to have been material errors in our financial statements and therefore resulted in the following additional material weaknesses:
Risk Assessment—control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in conditions,the business that could impact the system of internal controls;
Control Activities—control deficiencies constituting material weaknesses, either individually or thatin the degreeaggregate, relating to: (i) addressing relevant risks, (ii) providing evidence of compliance withperformance, (iii) providing appropriate segregation of duties, or (iv) operation at a level of precision to identify all potentially material errors;
Information and Communication—control deficiencies constituting material weaknesses, either individually or in the policiesaggregate, relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control; and
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Monitoring—control deficiencies constituting material weaknesses, either individually or procedures may deteriorate.in the aggregate, relating to monitoring activities to ascertain whether the components of internal control are present and functioning.
Management (withNotwithstanding the participation ofconclusion by our CEO and CFO) conducted an evaluation of the effectiveness ofCFO that our internal control over financial reporting as of December 31, 2020 based2022 was not effective, management has concluded that the consolidated financial statements and related financial information included in this Annual Report on the criteria set forthForm 10-K fairly present in Internal Control - Integrated Framework (2013) issued by the Committeeall material respects our financial condition, results of Sponsoring Organizationsoperations and cash flows as of the Treadway Commission (COSO). Baseddates presented, and for the periods ended on this evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2020.

such dates, in conformity with GAAP.
The effectiveness of our internal control over financial reporting as of December 31, 20202022 has been audited by BDO USADeloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.in this Item 9A.
Remediation Plan and Status
Although the material weaknesses described above have not yet been fully remediated as of December 31, 2022, our management remains committed to remediating identified control deficiencies (including both those that rise to the level of a material weakness and those that do not), fostering continuous improvement in our internal controls and enhancing our overall internal control environment.
The Company made progress with the remediation of these material weaknesses and continued to execute on the following remediation activities through December 31, 2022:
Continued to emphasize at the executive management level, the importance of internal control over financial reporting, as well as the integrity of our financial statements throughout the Company.
Hired a Senior Vice President of Sarbanes-Oxley Act (“SOX”) reporting directly to the CFO with the appropriate level of knowledge and experience to lead the development and execution of the remediation plan.
Established a SOX Steering Committee, that monitors and advises with respect to the remediation plan and progress.
Enhanced communications with the Audit Committee of the Board of Directors for increased oversight. The Company also continues to formally report quarterly to the Audit Committee regarding progress against the remediation plan.
Assessed the current state of the system of internal control, including information technology systems and controls, at the consolidated and brand levels. The results of this assessment allowed management to enhance existing business processes and control activities and assess the adequacy of its resources.
Implemented new controls across our information technology environment to address the identified material weaknesses. To assess the effectiveness of the controls, management retained a consultant to test the design and implementation across select significant IT applications and remediation is in progress.
Redesigned and strengthened control activities over reconciliations including enhanced review and approval controls.
Conducted a detailed qualitative, quantitative, and fraud risk assessment and enhanced the linkage between risks and internal controls associated with the risk of material misstatement.
Formalized internal control policies and procedures and conducted multiple in-depth trainings with control owners throughout the Company.
The Company has also continued to roll out its finance transformation initiative, which involves a phased deployment of new enterprise resource planning and human resource information systems and a shared service platform.
Management’s actions are expected to continue into 2023, with the goal of having the system of internal controls substantially designed and implemented in the second quarter of 2023. We will consider the above material weaknesses to be fully remediated once the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively. In addition, as we continue to monitor the effectiveness of our internal control over financial reporting, we may perform additional internal control changes as necessary.
Changes in Internal Control Over Financial Reporting
InOther than the changes discussed above in connection with our Annual Report on Form 10-K for the year ended December 31, 2019, management identified a material weakness over the accounting for income taxes, principally related to the deferred tax accounts (liabilities, assets, and provision). In response to the material weakness, management has implemented the following remediation actions during the fiscal year ended December 31, 2020: i) hired a Senior Vice President of Global Tax with extensive experience in ASC 740, “Accounting for Income Taxes” and a Tax Manager to assist in the global tax compliance process, ii) designed and implemented a comprehensive process to collect information critical to calculationimplementation of the tax provision, iii) developed supplemental schedules to support, analyze and validate the tax provision, iv) implemented enhanced review procedures over the accounting for income taxes including the proper application of ASC 740, critical calculations, adequacy of valuation andremediation plan, there were no other income tax reserves and the appropriateness of financial statement disclosures. Management has determined as of December 31, 2020, that the remediation actions discussed above result in controls that are effective in design and operation and enables management to conclude that the material weakness has been remediated.




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We have given consideration to the impact of the COVID-19 pandemic and have concluded that there have been no changes in our internal controlscontrol over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) that haveoccurred during our most recent quarter, that has materially affected, or areis reasonably likely to materially affect, our internal controlscontrol over financial reporting.
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Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors and Shareholders
MDC Partnersof Stagwell Inc.
New York, New York

Opinion on Internal Control over Financial Reporting

We have audited MDC Partners Inc.’s (the “Company’s”)the internal control over financial reporting of Stagwell Inc. and subsidiaries (the “Company”) as of December 31, 2020,2022, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”)(COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained in all material respects, effective internal control over financial reporting as of December 31, 2020,2022, based on the COSO criteria established in .Internal Control — Integrated Framework (2013)

issued by COSO. We have also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the consolidated balance sheetsfinancial statements as of and for the year ended December 31, 2022, of the Company and subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedules presented in Item 15 and our report dated March 16, 20216, 2023, expressed an unqualified opinion thereon.on those financial statements.

As described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, the Company
acquired several companies in a series of business combinations during the year ended December 31, 2022, including Brand New Galaxy, Maru Group Limited, TMA Direct, Inc., Wolfgang, LLC, Epicenter Experience LLC and other less significant acquisitions. Management excluded these companies from its assessment of internal control over financial reporting. The combined total assets and total revenues of the acquired businesses represent approximately 4% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.Accordingly, our audit did not include the internal control over financial reporting for these acquired businesses.
Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:
The Company did not effectively select and develop certain information technology (“IT”) general controls related to access and change management controls that led to deficiencies in the design and operation of control activities, including segregation of duties deficiencies. The Company also had deficiencies in the design and operation of account reconciliations. These deficiencies and a lack of sufficient resources contributed to the potential for there to have been material errors in the Company’s financial statements. Therefore, such deficiencies resulted in the following material weaknesses:
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Risk Assessment - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in the business that could impact the system of internal controls.
Control Activities - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) addressing relevant risks, (ii) providing evidence of performance, (iii) providing appropriate segregation of duties, and (iv) operation at a level of precision to identify all potentially material errors.
Information and Communication - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.
Monitoring - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to monitoring activities to ascertain whether the components of internal control are present and functioning.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such financial statements.
/s/ BDO USA,Deloitte & Touche LLP
New York, New YorkNY
March 16, 20216, 2023

Item 9B. Other Information
None.On March 1, 2023, the Company granted Mark Penn 225,000 stock appreciation rights (“SARs) in respect of the Company’s Class A Common Stock under the Company’s Second Amended and Restated 2016 Stock Incentive Plan and entered into a Stock Appreciation Rights Agreement with Mr. Penn.The SARs have a base price of $6.79 per share, vest in three equal installments on each of the first three anniversaries of the date of grant, and expire on the fifth anniversary of the date of grant.

The description of the SARs Agreement in this Item 9B. is qualified in its entirety by reference to the terms of the SARs Agreement, which is filed as Exhibit 10.9.3 to this Form 10-K and is incorporated herein by reference.


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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item, and not set forth below, will be included in the sections captioned “Election of Directors,” “Information About the Board and Corporate Governance - Audit Committee,” and “Delinquent Section 16(a) Reports” in the Company’s Proxy Statement for the 20212023 Annual General Meeting of Stockholders (the “2023 Proxy Statement), to be filed with the SEC no later than 120 days after December 31, 2022, and is incorporated herein by reference.

Executive Officers of MDC PartnersStagwell Inc.
The executive officers of MDC PartnersStagwell Inc. as of February 28, 2021March 6, 2023 are:
NameAgeOffice
Mark Penn6769Chairman of the Board, Chief Executive Officer
Jay Leveton46President
Frank Lanuto5860Chief Financial Officer
David C. RossRyan Greene4045Executive Vice President, Strategy & Corporate Development, Chief Operating Officer
Peter McElligott38General Counsel and Secretary
Vincenzo DiMaggio4648Senior Vice President, Chief Accounting Officer
____________
There is no family relationship among any of the executive officers or directors.
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Mr. Penn joined MDC Partners in March 2019 and currently serves as Chairman of the Board and Chief Executive Officer. Mr. Penn has also been acting as the Managing Partner and President at theof The Stagwell Group, a private equity fund that invests in digital marketing services companies, since its formation in 2015. Prior thereto,Previously, Mr. Penn served as Microsoft’s Executive Vice President and Chief Strategy Officer and held Chief Executive Officer position in multiple strategic public relation firms.
Mr. Leveton joined the Company in August 2021 as President. Prior to joining Stagwell Inc., Mr. Leveton served as a Partner of The Stagwell Group, where he was responsible for sourcing, integrating and scaling Stagwell’s portfolio of companies, since July 2015. Previously, Mr. Leveton served as the Executive Vice President, Worldwide at Burson-Marsteller, a global public relations firm, from November 2010 to July 2015. Mr. Leveton has more than 20 years of leadership experience in marketing communications services and extensive experience in high-level political and corporate market research.
Mr. Lanuto joined MDC partners in June 2019 as Chief Financial Officer. Prior to joining MDC Partners,Stagwell Inc., Mr. Lanuto served as Vice President, Corporate Controller at Movado Group, Inc. since August 2015. Before Movado Group, he spent over 17 years overseeing global financial functions and operations activities in the advertising, marketing and media services industries.
Mr. Ross joined MDC PartnersGreene joined the Company in 2010August 2021 as Chief Operating Officer. Prior to joining Stagwell Inc., Mr. Greene served as Chief Financial Officer of The Stagwell Group since September 2015. Previously, Mr. Greene served as a Financial Management Consultant at MorganFranklin Consulting from October 2013 to September 2015, where he serviced clients across a variety of industries, including advertising technology, healthcare, financial services, and currently servesdefense contractors, in connection with initial public offerings, mergers and acquisitions and business process reengineering. Prior to MorganFranklin, Mr. Greene worked in various financial leadership roles for several agencies of Omnicom Group Inc.’s Diversified Agency Services network. Earlier in his career, Mr. Greene held corporate finance and operations roles with Ernst & Young LLP, B|Com3 (acquired by Publicis Groupe), and Arthur Andersen, where he was employed in the Technology, Media and Telecom group.
Mr. McElligott joined Stagwell Inc. in March 2021 and became our General Counsel in February 2022. Prior to joining Stagwell Inc., Mr. McElligott served as General Counsel Executive Vice President, Corporate Development.  Priorof RapidSOS, Inc. from October 2019 to joining MDC Partners,March 2021 and General Counsel of Spruce Holdings Inc. from January 2017 to October 2019. Previously, Mr. Ross was an attorneyMcElligott held positions as senior legal counsel at Skadden Arps LLP where he represented global clients inCitrix Systems Inc., a wide rangemember of capital markets offerings, M&A transactions,the corporate strategy team at Microsoft, and general corporate matters.with a Washington, D.C. based law firm. Mr. McElligott started his legal career as a clerk for Judge James Loken on the 8th Circuit Court of Appeals.
Mr. DiMaggio joined MDC Partners in 2018 as Chief Accounting Officer. Prior to joining MDC Partners,Stagwell Inc., he served as the Senior Vice President, Global Controller & Chief Accounting Officer at Endeavor, from 2017 to 2018. Prior thereto, he worked at Viacom Inc. from 2012 to 2017 as Senior Vice President, Deputy Controller and at the New York Times Company from 1999 to 2012 ultimately serving as its Vice President, Assistant Corporate Controller.
Code of Conduct
The Company has adopted a Code of Conduct, which applies to all directors, officers (including the Company’s Chief Executive Officer and Chief Financial Officer) and employees of the Company and its subsidiaries. The Company’s policy is to not permit any waiver of the Code of Conduct for any director or executive officer, except in extremely limited circumstances. Any waiver of this Code of Conduct for directors or officers of the Company must be approved by the Company’s Board of Directors.Board. Amendments to and waivers of the Code of Conduct will be publicly disclosed as required by applicable laws, rules and regulations. The Code of Conduct is available free of charge on the Company’s website at https://www.mdc-partners.comwww.stagwellglobal.com, or by writing to MDC PartnersStagwell Inc., One World Trade Center, Floor 65, New York, New York 10017,10007, Attention: Investor Relations. The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions of the Code of Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer by posting such information on its website, at the address and location specified above.




Item 11. Executive Compensation
The information required by this item will be included in the sections captioned “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” “Director Compensation for Fiscal Year 2020,” and “Report of the Human Resources and Compensation Committee” in the Company’s2023 Proxy Statement forto be filed with the 2021 Annual General Meeting of Stockholders,SEC no later than 120 days after December 31, 2022 and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in the sections captioned “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” in the Company’s2023 Proxy Statement forto be filed with the 2021 Annual General Meeting of StockholdersSEC no later than 120 days after December 31, 2022 and is incorporated herein by reference.

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Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item will be included in the sections captioned “Review and Approval of Related Party Transactions” and “Election of Directors” in the Company’s2023 Proxy Statement forto be filed with the 2021 Annual General Meeting of Stockholders,SEC no later than 120 days after December 31, 2022 and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services
The information required by this item will be included in the section captioned “Appointment of Auditors and Authorizing the Audit Committee to Determine its Remuneration” in the Company’s2023 Proxy Statement forto be filed with the 2021 Annual General Meeting of Stockholders,SEC no later than 120 days after December 31, 2022 and is incorporated herein by reference.


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PART IV

Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statement Schedules
The Financial Statements and Schedules listed in the accompanying Index to the Audited Consolidated Financial Statements in Item 8 are filed as part of this report. Schedules not included in the Index have been omitted because they are not applicable.

Schedule II — 1 of 2
MDC PARTNERSSTAGWELL INC. & SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31,
(dollars in thousands)
Column AColumn BColumn CColumn DColumn EColumn F
DescriptionBalance at Beginning of PeriodCharged to Costs and ExpensesRemoval of Uncollectible ReceivablesTranslation Adjustments Increase (Decrease)Balance at the End of Period
Valuation accounts deducted from assets to which they apply – allowance for doubtful accounts:
December 31, 2022$5,638 $7,755 $(2,908)$(116)$10,369 
December 31, 20215,109 2,037 (1,482)(26)5,638 
December 31, 20202,777 6,222 (3,907)17 5,109 
Schedule II — 2 of 2
STAGWELL INC. & SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31,
(Dollars in Thousands)
Column AColumn BColumn CColumn DColumn EColumn F
DescriptionBalance at
Beginning
of Period
Charged to
Costs and
Expenses
Removal of Uncollectible ReceivablesTranslation Adjustments
Increase
(Decrease)
Balance at
the End of
Period
Valuation accounts deducted from assets to which they apply –  allowance for doubtful accounts:
December 31, 2020$3,304 $3,487 $(1,305)$(13)$5,473 
December 31, 2019$1,879 $2,996 $(1,377)$(194)$3,304 
December 31, 2018$2,453 $1,538 $(1,795)$(317)$1,879 
Schedule II — 2 of 2
MDC PARTNERS INC. & SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31,
(Dollars in Thousands)
Column AColumn BColumn CColumn DColumn EColumn F
DescriptionBalance at
Beginning
of Period
Charged to
Costs and
Expenses
OtherTranslation Adjustments
Increase
(Decrease)
Balance at
the End of
Period
Valuation accounts deducted from assets to which they apply – valuation allowance for deferred income taxes:
December 31, 2020$65,649 $128,938 $2,436 $1,429 $198,452 
December 31, 2019$68,479 $(2,830)$$$65,649 
December 31, 2018$19,032 $49,447 $$$68,479 

Column AColumn BColumn CColumn DColumn EColumn F
Description Balance at Beginning of Period Charged to Costs and Expenses Other Translation Adjustments Increase (Decrease)Balance at the End of Period
Valuation accounts deducted from assets to which they apply – valuation allowance for deferred income taxes:
December 31, 2022$5,825 $2,760 $3,638 $— $12,223 
December 31, 20215,551 (15)289 — 5,825 
December 31, 20202,945 2,606 — — 5,551 
(b) Exhibits
The exhibits listed on the accompanying Exhibits Index are filed as a part of this report.


Item 16. Form 10-K Summary
None.





EXHIBIT INDEX
Exhibit No.Description
Transaction Agreement, dated as of December 21, 2020, by and among Stagwell Media LP and the CompanyMDC Partners Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on December 22, 2020).
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Amendment No. 1 to the Transaction Agreement, dated as of June 4, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on June 7, 2021).
Amendment No. 2 to the Transaction Agreement, dated as of July 8, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on July 9, 2021).
ArticlesSecond Amended and Restated Certificate of Amalgamation, dated January 1, 2004Incorporation of Stagwell Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 10, 2004)
Articles of Continuance, dated June 28, 2004 (incorporated by reference to Exhibit 3.3 to the Company’s Form 10-Q filed on August 4, 2004)
Articles of Amalgamation, dated July 1, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on July 30, 2010)
Articles of Amalgamation, dated May 1, 2011 (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 2, 2011)
Articles of Amalgamation, dated January 1, 2013 (incorporated by reference to Exhibit 3.1.4 to the Company’s Form 10-K filed on March 10, 2014)
Articles of Amalgamation, dated April 1, 2013 (incorporated by reference to Exhibit 3.1.5 to the Company’s Form 10-K filed on March 10, 2014)
Articles of Amalgamation, dated July 1, 2013 (incorporated by reference to Exhibit 3.1.6 to the Company’s Form 10-K filed on March 10, 2014)
Articles of Amendment, dated March 7, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on March 7, 2016)
Articles of Amendment, dated March 14, 2019 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed on March 15, 2019)17, 2022).
General By-law No. 1, as amended on April 29, 2005Amended and Restated Bylaws of Stagwell Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K8-K filed on March 16, 2007)August 2, 2021).
Indenture, dated as of March 23, 2016,August 20, 2021, among Stagwell Global LLC (f/k/a Midas OpCo Holdings LLC), the Company, theNote Guarantors party thereto, and The Bank of New York Mellon Trust Company, N.A., as trusteeTrustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 23, 2016)
Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on March 23, 2016)
First Supplemental Indenture, dated as of September 16, 2020, among the Additional Note Guarantors and the Bank of New York Mellon, as trustee, to Indenture, dated as of March 23, 2016, among the Company, the Guarantors, and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-Q filed on October 29, 2020)
Second Supplemental Indenture, dated as of January 13, 2021, among the Company, the Note Guarantors party thereto and the Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on January 13,August 20, 2021)
Third Supplemental Indenture, dated as of February 8, 2021, among the Company, the Note Guarantors party thereto and the Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 9, 2021).
Form of 5.625% Senior Note due 2029 (included in Exhibit 4.1).
Description of Securities*Securities (incorporated by reference to Exhibit 4.4 to the Company’s Form 10-K filed March 17, 2022).
Second Amended and Restated CreditLimited Liability Company Agreement of Stagwell Global LLC dated as of May 3, 2016, among the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent, and the lenders from time to time party theretoMarch 23, 2022. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 4, 2016)March 28, 2022).
Consent and First Amendment to the Second Amended and Restated Credit Agreement, dated as of May 3, 2016,August 2, 2021, as amended, among Stagwell Marketing Group LLC, Stagwell Global LLC, Maxxcom LLC, and the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiariesother Borrowers and other Loan Parties party thereto, Wells Fargothe Lenders and other parties party thereto, and JP Morgan Chase Bank, N.A., as agent, and the lenders from time to time party theretoAdministrative Agent (incorporated by reference to Exhibit 10.110.2 to the Company'sCompany’s Form 8-K10-Q filed on March 15, 2019)August 5, 2022).
Second Amendment dated as of May 29, 2020,No. 3 to the Second Amended and Restated Credit Agreement, dated as of May 3, 2016, among the Company, Maxxcom Inc., each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent and the lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 1, 2020)December 14, 2022.*
Securities Purchase Agreement, by and between MDC Partners Inc. and Broad Street Principal Investments, L.L.C., dated as of February 14, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 15, 2016)2017).
Goldman Letter Agreement, dated as of April 21, 2021, by and among MDC Partners Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Amendment No. 2 to Registration Statement on Form S-4 filed on April 21, 2021).
Goldman Letter Agreement, dated as of July 8, 2021, by and among MDC Partners Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on July 9, 2021).
Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Broad Street Principal Investments, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 4, 2021).
Securities Purchase Agreement, by and between MDC Partners Inc. and Stagwell Agency Holdings LLC, dated as of March 14, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on March 15, 2019).




Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 4, 2021).
Registration Rights Agreement, dated August 2, 2021, by and among the Company and the Stagwell Parties (as defined therein) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2021).
Tax Receivable Agreement, dated August 2, 2021, by and among the Company, Midas OpCo Holdings LLC and Stagwell Media LP (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 2, 2021).
Information Rights Letter Agreement, dated August 2, 2021, by and among the Company, Stagwell Media LP, Stagwell Group LLC and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 2, 2021).
Second Amended and Restated Employment Agreement effectiveAmendment, dated as of March 18, 2019,11, 2022, by and between the Company and Mark Penn (incorporated by reference to Exhibit 10.310.10 to the Company’s Form 8-K10-K filed on March 15, 2019)
17, 2022).
Stock Appreciation Rights Agreement by and between the Company and Mark Penn, dated as of April 5, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-K/A filed April 29, 2020).
Amended and Restated Stock Appreciation Rights Agreement by and between the Company and Mark Penn, dated as of March 11, 2022 (incorporated by reference to Exhibit 10.10.2 to the Company’s Form 10-K filed March 17, 2022).
Stock Appreciation Rights Agreement by and between the Company and Mark Penn, dated as of March 1, 2023.*
125


Employment Agreement dated as of May 6, 2019, by and between the Company and Frank Lanuto (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on May 8, 2019).
Employment Agreement Amendment, dated as of September 8, 2021, by and between the Company and Frank Lanuto (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 8, 2021).
Stock Appreciation Rights Agreement by and between the Company and Frank Lanuto, dated as of June 12, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K/A filed April 29, 2020).
Stock Appreciation Rights Agreement by and between the Company and Frank Lanuto, dated as of June 12, 2019 (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K/A filed April 29, 2020).
Second Amended and Restated Employment Agreement, dated as of September 12, 2021, by and between the Company and David Ross, dated as of February 27, 2017Jay Leveton (incorporated by reference to Exhibit 10.710.1 to the Company’s Form10-KForm 8-K filed on March 1, 2017)
September 16, 2021).
LetterEmployment Agreement, dated as of September 12, 2021, by and between the Company and David Ross, dated June 4, 2019Ryan Greene (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on June 6, 2019)September 16, 2021).
Employment Agreement between the Company and Vincenzo DiMaggio, dated as of May 8, 2018 (incorporated by reference to Exhibit 10.8 to the Company's 10-K filed on March 18, 2019)
.
Employment Agreement dated as of May 6, 2019, by and between the Company and Jonathan Mirsky (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed on May 8, 2019)
Stock Appreciation Rights Agreement by and between the Company and Jonathan Mirsky, dated as of June 26, 2019 (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-K/A filed April 29, 2020)
Inducement Restricted Stock Agreement, made as of June 17, 2019, between the Company and Jonathan Mirsky (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-K/A filed April 29, 2020)
Separation Agreement and General Release between MDC Partners Inc. and Jonathan Mirsky, dated as of September 22, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 23, 2020)
Amended and Restated Employment Agreement between the Company and David Doft, dated as of July 19, 2007 (effective August 10, 2007) (incorporated by reference to Exhibit 10.7 to the Company's Form 10-Q filed on August 7, 2007)
Amendment No. 1 dated March 7, 2011, to the Amended and Restated Employment Agreement made as of July 19, 2007, by and between the Company and David Doft (incorporated by reference to Exhibit 10.2 to the Company Form 10-Q filed on May 2, 2011
Separation and Release Agreement, dated as of May 8, 2019, by and between the Company and David Doft (incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q filed on May 9, 2019)
Amended and Restated Employment Agreement between the Company and Mitchell Gendel, dated as of July 6, 2007 (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on August 7, 2007)
Amendment No. 1 dated March 7, 2011, to the Amended and Restated Employment Agreement made as of July 6, 2007, by and between the Company and Mitchell Gendel (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on May 2, 2011)
Separation and Release Agreement, dated as of May 6, 2019, by and between the Company and Mitchell Gendel (incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q filed on May 9, 2019)
Amended and Restated Stock Appreciation Rights Plan, as adopted by the shareholders of the Company on June 2, 2009 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on June 5, 2009)
2011 Stock Incentive Plan, of the Company, as approved and adopted by the shareholders of the Company on June 1, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 1, 2011).
MDC PartnersStagwell Inc. 2014 Long Term Cash Incentive Compensation Plan, as adopted March 6, 2014, including forms of 2014 Award Agreement (incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K filed on March 10, 2014)
MDC Partners Inc.Second Amended and Restated 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.14.3 to the Company’s Form 8-KS-8 filed on June 30, 2020)14, 2022).
Form of Financial Performance-Based Restricted Stock Grant Agreement (2019)(2021) (incorporated by reference to Exhibit 10.110.14 to the Company's Form 10-Q filed on November 6, 2019)9, 2021).
Form of Long-Term Cash Incentive Compensation Plan 2019 Award Agreement (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q filed on November 6, 2019)
Form of Indemnification Agreement with Directors and Officers*
Letter Agreement, dated as of December 21, 2020, by and between the Company and Broad Street Principal Investments, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 22, 2020)




Form of Consent and Support Agreement entered into by and between MDC Partners Inc. and the holders of more than 50% of the aggregate principal amount of the Senior Notes due 2024 of the CompanyOfficers (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K10-Q filed on December 22, 2020)November 7, 2022).
Stagwell Inc. Non-Employee Director Compensation Policy. (incorporated by reference to Exhibit 10.20 to the Company’s Form 10-K filed March 17, 2022).
Subsidiaries of Registrant*
Consent of Independent Registered Public Accounting Firm BDO USADeloitte & Touche LLP*
Power of Attorney (included on the signature pages to this Form 10-K)*
Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002*2002.*
Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002*
2002.*
Certification by Chief Executive Officer pursuant to 18 USCUSC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*2002.*
Certification by Chief Financial Officer pursuant to 18 USCUSC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*2002.*
101Interactive Data File, for the period ended December 31, 2020.2022. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
*
104Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.
*
___________
* Filed electronically herewith.
† Indicates management contract or compensatory plan



plan.


Table of Contents

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MDC PARTNERSSTAGWELL INC.
 
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer and Authorized Signatory
March 16, 20216, 2023

126


POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frank Lanuto and Vincenzo DiMaggio, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.




Table of Contents

MDC PARTNERSSTAGWELL INC.
/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
March 16, 20216, 2023
 
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
March 16, 20216, 2023
/s/ Vincenzo DiMaggio
Vincenzo DiMaggio
Chief Accounting Officer (Principal Accounting Officer)
March 16, 20216, 2023
/s/ Charlene Barshefsky
Ambassador Charlene Barshefsky
Director
March 16, 20216, 2023
/s/ Asha Daniere
Asha Daniere
Director
March 16, 2021
/s/ Bradley Gross
Bradley Gross
Director
March 16, 20216, 2023
/s/ Wade Oosterman
Wade Oosterman
Director
March 16, 20216, 2023
/s/ Desirée Rogers
Desirée Rogers
Director
March 16, 20216, 2023



/s/ Eli Samaha
Eli Samaha
Director
March 6, 2023
/s/ Irwin D. Simon
Irwin D. Simon
Lead Independent Director
March 16, 20216, 2023
/s/ Rodney Slater
Secretary Rodney Slater
Director
March 6, 2023
/s/ Brandt Vaughan
Brandt Vaughan
Director
March 6, 2023