Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20192020
or
 ¨☐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.Inc.
(Exact name of registrant as specified in its charter)
Canada 98-0364441
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer Identification No.)
   
745 Fifth Avenue
New York, New York330 Hudson Street, 10th Floor
 10151
New York,New York
10013
(Address of principal executive offices) (Zip Code)
(646) (646) 429-1800
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Subordinate Voting Shares, no par valueMDCANASDAQ
Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   ý☒   No   ¨☐
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   ¨☐
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.
Large accelerated Filer ¨
☐
Accelerated filer  xFiler☒
Non-accelerated Filer ¨
☐
Smaller reporting company x☒
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. ¨☐
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 number of common shares outstanding as of July 19, 201924, 2020 was 71,943,99472,740,767 Class A subordinate voting shares and 3,7493,743 Class B multiple voting shares.

MDC PARTNERS INC.
 
QUARTERLY REPORT ON FORM 10-Q
 
TABLE OF CONTENTS
 
  Page
 PART I. FINANCIAL INFORMATION 
Item 1.
Financial Statements
34
 
Unaudited Condensed Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 20192020 and 20182019
34
 
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Six Months Ended June 30, 20192020 and 2018
4
Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018
5
 
Unaudited Condensed Consolidated StatementsBalance Sheets as of Cash Flows (unaudited) for the Six Months Ended June 30, 20192020 and 2018December 31, 2019
6
 
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019
7
Unaudited Condensed Consolidated Statements of Shareholders’ Deficit (unaudited) for the Three and Six Months Ended June 30, 20192020 and 20182019
8
 
Notes to Unaudited Condensed Consolidated Financial Statements
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2728
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
5249
Item 4.
Controls and Procedures
5250
   
 PART II. OTHER INFORMATION 
Item 1.
Legal Proceedings
5451
Item 1A.
Risk Factors
5451
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
52
Item 3.
Defaults Upon Senior Securities
52
Item 4.
Mine Safety Disclosures
52
Item 5.
Other Information
53
Item 6.
Exhibits
54
Item 3.
Defaults Upon Senior SecuritiesSignatures
54
Item 4.
Mine Safety Disclosures
54
Item 5.
Other Information
55
Item 6.
Exhibits
56
Signatures
56

References in this Quarterly Report on Form 10-Q to “MDC Partners,” “MDC,” the “Company,” “we,” “us” and “our” refer to MDC Partners Inc. and, unless the context otherwise requires or otherwise is expressly stated, its subsidiaries. References in this Quarterly Report on Form 10-Q to “Partner Firms” generally refer to the Company’s subsidiary agencies.
All dollar amounts are stated in U.S. dollars unless otherwise stated.
Note About Forward-Looking Statements
This document contains forward-looking statements. 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, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. These 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”);
the effects of the outbreak of COVID-19, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;
developments involving the proposal by Stagwell Media LP to enter into a business combination with the Company;
the Company’s ability to attract new clients and retain existing clients;
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 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.
Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in the Company’s 2019 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2020 and accessible on the SEC’s website at www.sec.gov., under the caption “Risk Factors,” and in the Company’s other SEC filings.


PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of United States dollars, except per share amounts)
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Revenue: 
  
    
Services$259,678
 $362,130
 $587,420
 $690,921
Operating Expenses:       
Cost of services sold165,632
 240,749
 388,325
 477,903
Office and general expenses66,210
 87,276
 132,563
 154,394
Depreciation and amortization8,899
 10,663
 18,105
 19,501
Impairment and other losses18,839
 —
 19,000
 —
 259,580
 338,688
 557,993
 651,798
Operating income98
 23,442
 29,427
 39,123
Other Income (Expenses):       
Interest expense and finance charges, net(15,941) (16,413) (31,553) (33,174)
Foreign exchange gain (loss)5,342
 2,932
 (9,415) 8,374
Other, net5,884
 (746) 22,218
 (4,128)
 (4,715) (14,227) (18,750) (28,928)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(4,617) 9,215
 10,677
 10,195
Income tax expense (benefit)(7,923) 2,088
 5,577
 2,835
Income before equity in earnings of non-consolidated affiliates3,306
 7,127
 5,100
 7,360
Equity in earnings (losses) of non-consolidated affiliates(798) 206
 (798) 289
Net income2,508
 7,333
 4,302
 7,649
Net income attributable to the noncontrolling interest(3,101) (3,043) (3,892) (3,472)
Net income (loss) attributable to MDC Partners Inc.(593) 4,290
 410
 4,177
Accretion on and net income allocated to convertible preference shares(3,509) (3,515) (6,949) (5,625)
Net income (loss) attributable to MDC Partners Inc. common shareholders$(4,102) $775
 $(6,539) $(1,448)
Income (loss) Per Common Share: 
  
    
Basic 
  
    
Net income (loss) attributable to MDC Partners Inc. common shareholders$(0.06) $0.01
 $(0.09) $(0.02)
Diluted       
Net income (loss) attributable to MDC Partners Inc. common shareholders$(0.06) $0.01
 $(0.09) $(0.02)
Weighted Average Number of Common Shares Outstanding: 
  
    
Basic72,528,455
 71,915,832
 72,463,058
 66,118,749
Diluted72,528,455
 72,024,689
 72,463,058
 66,118,749
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Revenue: 
  
    
Services$362,130
 $379,743
 $690,921
 $706,711
Operating Expenses:       
Cost of services sold240,749
 253,390
 477,903
 496,420
Office and general expenses87,276
 83,878
 154,394
 167,757
Depreciation and amortization10,663
 11,703
 19,501
 24,078
Other asset impairment—
 —
 —
 2,317
 338,688
 348,971
 651,798
 690,572
Operating income23,442
 30,772
 39,123
 16,139
Other Income (Expenses):       
Interest expense and finance charges, net(16,413) (16,859) (33,174) (32,942)
Foreign exchange gain (loss)2,932
 (6,549) 8,374
 (13,209)
Other, net(746) 592
 (4,128) 1,033
 (14,227) (22,816) (28,928) (45,118)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates9,215
 7,956
 10,195
 (28,979)
Income tax expense (benefit)2,088
 1,977
 2,835
 (6,353)
Income (loss) before equity in earnings of non-consolidated affiliates7,127
 5,979
 7,360
 (22,626)
Equity in earnings (losses) of non-consolidated affiliates206
 (28) 289
 58
Net income (loss)7,333
 5,951
 7,649
 (22,568)
Net income attributable to the noncontrolling interest(3,043) (2,545) (3,472) (3,442)
Net income (loss) attributable to MDC Partners Inc.4,290
 3,406
 4,177
 (26,010)
Accretion on and net income allocated to convertible preference shares(3,515) (2,273) (5,625) (4,095)
Net income (loss) attributable to MDC Partners Inc. common shareholders$775
 $1,133
 $(1,448) $(30,105)
Income (loss) Per Common Share: 
  
    
Basic 
  
    
Net income (loss) attributable to MDC Partners Inc. common shareholders$0.01
 $0.02
 $(0.02) $(0.53)
Diluted       
Net income (loss) attributable to MDC Partners Inc. common shareholders$0.01
 $0.02
 $(0.02) $(0.53)
Weighted Average Number of Common Shares Outstanding: 
  
    
  Basic71,915,832
 57,439,823
 66,118,749
 56,924,208
  Diluted72,024,689
 57,802,872
 66,118,749
 56,924,208
Stock-based compensation expense is included in the following line items above: 
  
    
Cost of services sold$2,442
 $4,047
 $6,987
 $7,394
Office and general expenses1,192
 1,556
 (381) 3,246
Total$3,634
 $5,603
 $6,606
 $10,640

See notes to the Unaudited Condensed Consolidated Financial Statements.

MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(thousands of United States dollars)
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 20182020 2019 2020 2019
Comprehensive Income (Loss)   
       
    
Net income (loss)$7,333
 $5,951
 $7,649
 $(22,568)
       
Net income$2,508
 $7,333
 $4,302
 $7,649
Other comprehensive income (loss), net of applicable tax: 
  
     
  
    
Foreign currency translation adjustment(1,385) (1,848) (6,044) 429
1,367
 (1,385) 8,796
 (6,044)
Other comprehensive income (loss)(1,385) (1,848) (6,044) 429
1,367
 (1,385) 8,796
 (6,044)
Comprehensive income (loss) for the period5,948
 4,103
 1,605
 (22,139)3,875
 5,948
 13,098
 1,605
Comprehensive income attributable to the noncontrolling interests(3,081) (1,641) (3,861) (1,436)(3,511) (3,081) (3,793) (3,861)
Comprehensive income (loss) attributable to MDC Partners Inc.$2,867
 $2,462
 $(2,256) $(23,575)$364
 $2,867
 $9,305
 $(2,256)
See notes to the Unaudited Condensed Consolidated Financial Statements.

MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars)
June 30,
2019		 December 31,
2018		June 30,
2020		 December 31,
2019
(Unaudited)    (as adjusted) 
ASSETS 
  
 
  
Current Assets: 
  
 
  
Cash and cash equivalents$27,304
 $30,873
$85,483
 $106,933
Accounts receivable, less allowance for doubtful accounts of $2,792 and $1,879434,512
 395,200
Accounts receivable, less allowance for doubtful accounts of $1,875 and $3,304359,306
 449,288
Expenditures billable to clients40,605
 42,369
19,426
 30,133
Assets held for sale—
 78,913
Other current assets44,815
 42,499
66,318
 35,613
Total Current Assets547,236
 589,854
530,533
 621,967
Fixed assets, at cost, less accumulated depreciation of $141,167 and $128,54683,950
 88,189
Fixed assets, at cost, less accumulated depreciation of $134,529 and $129,57970,787
 81,054
Right of use assets - operating leases237,418
 —
238,230
 223,622
Investments in non-consolidated affiliates6,761
 6,556
Goodwill743,582
 740,955
706,946
 731,691
Other intangible assets, net, less accumulated amortization of $168,748 and $161,86860,848
 67,765
Other intangible assets, net48,904
 54,893
Deferred tax assets92,439
 92,741
82,696
 84,900
Other assets26,415
 25,513
27,356
 30,179
Total Assets$1,798,649
 $1,611,573
$1,705,452
 $1,828,306
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT 
  
   
Current Liabilities: 
  
 
  
Accounts payable$228,069
 $221,995
$148,349
 $200,148
Accruals and other liabilities253,868
 313,141
264,572
 353,575
Liabilities held for sale—
 35,967
Advance billings168,142
 138,505
136,196
 171,742
Current portion of lease liabilities - operating leases46,338
 —
38,377
 48,659
Current portion of deferred acquisition consideration35,439
 32,928
36,655
 45,521
Total Current Liabilities731,856
 742,536
624,149
 819,645
Long-term debt914,092
 954,107
922,537
 887,630
Long-term portion of deferred acquisition consideration22,804
 50,767
2,597
 29,699
Long-term lease liabilities - operating leases233,165
 —
267,559
 219,163
Other liabilities19,503
 54,255
36,503
 25,771
Deferred tax liabilities6,571
 5,329
Total Liabilities1,927,991
 1,806,994
1,853,345
 1,981,908
Redeemable Noncontrolling Interests42,635
 51,546
36,710
 36,973
Commitments, Contingencies, and Guarantees (Note 13)   
Commitments, Contingencies, and Guarantees (Note 9)


 


Shareholders’ Deficit:      
Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2019 and 95,000 at December 31, 2018152,746
 90,123
Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2020 and December 31, 2019152,746
 152,746
Common stock and other paid-in capital97,455
 58,579
98,234
 101,469
Accumulated deficit(460,726) (464,903)(480,368) (480,779)
Accumulated other comprehensive loss (income)(1,713) 4,720
4,627
 (4,269)
MDC Partners Inc. Shareholders' Deficit(212,238) (311,481)(224,761) (230,833)
Noncontrolling interests40,261
 64,514
40,158
 40,258
Total Shareholders' Deficit(171,977) (246,967)(184,603) (190,575)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit$1,798,649
 $1,611,573
$1,705,452
 $1,828,306
See notes to the Unaudited Condensed Consolidated Financial Statements.

MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of United States dollars)



 Six Months Ended June 30,

2019 2018
Cash flows from operating activities: 
  
Net income (loss)$7,649
 $(22,568)
Adjustments to reconcile net income (loss) to cash used in operating activities:   
Stock-based compensation6,606
 10,640
Depreciation12,621
 14,642
Amortization of intangibles6,880
 9,436
Amortization of deferred finance charges and debt discount1,663
 1,605
Other asset impairment—
 2,317
Adjustment to deferred acquisition consideration(5,570) (2,479)
Deferred income taxes2,835
 (9,494)
Loss on sale of assets3,407
 (955)
Earnings of non-consolidated affiliates(289) (58)
Other and non-current assets and liabilities(4,139) (1,114)
Foreign exchange(7,363) 12,128
Changes in working capital:   
Accounts receivable(21,570) 19,181
Expenditures billable to clients1,763
 (27,935)
Prepaid expenses and other current assets(3,345) (12,732)
Accounts payable, accruals and other current liabilities(66,343) (60,015)
Acquisition related payments(4,376) (23,894)
Advance billings29,334
 29,582
Net cash used in operating activities(40,237)
(61,713)
Cash flows from investing activities:   
Capital expenditures(7,923) (9,689)
Proceeds from sale of assets23,050
 —
Acquisitions, net of cash acquired(5,130) (27,299)
Other investments(179) 867
Net cash provided by (used in) investing activities9,818

(36,121)
Cash flows from financing activities: 
  
Repayment of revolving credit facility(834,538) (782,600)
Proceeds from revolving credit facility793,940
 897,844
Proceeds from issuance of common and convertible preference shares, net of issuance costs98,620
 —
Acquisition related payments(24,219) (29,172)
Distributions to noncontrolling interests(7,957) (8,927)
Payment of dividends(56) (168)
Purchase of shares(78) (493)
Other—
 (141)
Net cash provided by financing activities25,712

76,343
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts4
 311
Net decrease in cash, cash equivalents, and cash held in trusts including cash classified within assets held for sale(4,703) (21,180)
Change in cash and cash equivalents held in trusts classified within held for sale(3,307) —
Change in cash and cash equivalents classified within assets held for sale4,441
 —
Net decrease in cash and cash equivalents(3,569) (21,180)
Cash and cash equivalents at beginning of period30,873
 46,179

Six Months Ended June 30,Six Months Ended June 30,

2019 20182020 2019
Cash flows from operating activities: 
  
Net income$4,302
 $7,649
Adjustments to reconcile net income to cash used in operating activities:   
Stock-based compensation4,109
 6,606
Depreciation and amortization18,105
 19,501
Impairment and other losses19,000
 —
Adjustment to deferred acquisition consideration(2,288) (5,570)
Deferred income taxes2,114
 2,835
Foreign exchange and other(4,578) (6,721)
Changes in working capital:   
Accounts receivable88,039
 (21,570)
Expenditures billable to clients10,707
 1,763
Prepaid expenses and other current assets(4,363) (3,345)
Accounts payable, accruals and other current liabilities(127,188) (66,343)
Acquisition related payments(6,215) (4,376)
Advance billings(35,422) 29,334
Net cash used in operating activities(33,678)
(40,237)
Cash flows from investing activities:   
Capital expenditures(3,690) (7,923)
Proceeds from sale of assets19,616
 23,050
Acquisitions, net of cash acquired(729) (5,130)
Other investments(554) (179)
Net cash provided by investing activities14,643

9,818
Cash flows from financing activities: 
  
Repayments of borrowings under revolving credit facility(251,328) (834,538)
Proceeds from borrowings under revolving credit facility313,828
 793,940
Proceeds from issuance of common and convertible preference shares, net of issuance costs—
 98,620
Acquisition related payments(30,885) (24,219)
Other(11,050) (8,091)
Repurchase of Senior Notes(21,999) —
Net cash provided by (used in) financing activities(1,434)
25,712
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts(981) 4
Net decrease in cash and cash equivalents, including cash classified within current assets held for sale(21,450) (4,703)
Change in cash and cash equivalents held in trusts classified within held for sale—
 (3,307)
Change in cash and cash equivalents classified within assets held for sale—
 4,441
Net decrease in cash and cash equivalents(21,450) (3,569)
Cash and cash equivalents at beginning of period106,933

30,873
Cash and cash equivalents at end of period$27,304
 $24,999
$85,483

$27,304
Supplemental disclosures: 
  
 
  
Cash income taxes paid$3,494
 $2,626
$2,566

$3,494
Cash interest paid$31,643
 $31,414
$28,736

$31,643
See notes to the Unaudited Condensed Consolidated Financial Statements.

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






 Three Months Ended
 June 30, 2020
 Convertible Preference Shares
Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss)
MDC Partners Inc. Shareholders' Deficit
Noncontrolling Interests
Total Shareholder's Deficit
 
   


 Shares Amount
Shares   


Balance at March 31, 2020 (as adjusted)145,000
 $152,746
 72,483,166
 $99,587
 $(479,694) $3,669
 $(223,692) $39,749
 $(183,943)
Net loss attributable to MDC Partners Inc.—
 —
 —
 —
 (593) —
 (593) —
 (593)
Other comprehensive income—
 —
 —
 —
 —
 957
 957
 410
 1,367
Vesting of restricted awards—
 —
 173,334
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (69,110) (95) —
 —
 (95) —
 (95)
Stock-based compensation—
 —
 —
 557
 —
 —
 557
 —
 557
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 (1,412) —
 —
 (1,412) —
 (1,412)
Other—
 —
 —
 (403) (81) 1
 (483) (1) (484)
Balance at June 30, 2020145,000
 $152,746
 72,587,390
 $98,234
 $(480,368) $4,627
 $(224,761) $40,158
 $(184,603)

 Six Months Ended
 June 30, 2020
 Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
        
 Shares Amount Shares      
Balance at December 31, 2019 (as adjusted)145,000
 $152,746
 72,154,603
 $101,469
 $(480,779) $(4,269) $(230,833) $40,258
 $(190,575)
Net income attributable to MDC Partners Inc.—
 —
 —
 —
 410
 —
 410
 —
 410
Other comprehensive income—
 —
 —
 —
 —
 8,895
 8,895
 (99) 8,796
Vesting of restricted awards—
 —
 760,561
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (327,774) (732) —
 —
 (732) —
 (732)
Stock-based compensation—
 —
 —
 1,033
 —
 —
 1,033
 —
 1,033
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 (2,630) —
 —
 (2,630) —
 (2,630)
Business acquisitions and step-up transactions, net of tax—
 —
 —
 (503) —
 —
 (503) —
 (503)
Other—
 —
 —
 (403) 1
 1
 (401) (1) (402)
Balance at June 30, 2020145,000
 $152,746
 72,587,390
 $98,234
 $(480,368) $4,627
 $(224,761) $40,158
 $(184,603)














See notes to the Unaudited Condensed Consolidated Financial Statements.


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

 Three Months Ended
 June 30, 2019
 Convertible Preference Shares
Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income
MDC Partners Inc. Shareholders' Deficit
Noncontrolling Interests
Total Shareholder's Deficit
 
   


(in thousands, except share amounts)Shares Amount
Shares   


Balance at March 31, 2019145,000
 $152,117
 71,890,021
 $98,693
 $(465,016) $(290) $(214,496) $40,223
 $(174,273)
Net income attributable to MDC Partners Inc.—
 —
 —
 —
 4,290
 —
 4,290
 —
 4,290
Other comprehensive loss—
 —
 —
 —
 —
 (1,423) (1,423) 38
 (1,385)
Issuance of common and convertible preference shares—
 629
 —
 362
 —
 —
 991
 —
 991
Issuance of restricted stock—
 —
 76,979
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (19,257) (22) —
 —
 (22) —
 (22)
Stock-based compensation—
 —
 —
 1,800
 —
 —
 1,800
 —
 1,800
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 (3,190) —
 —
 (3,190)   (3,190)
Business acquisitions and step-up transactions, net of tax—
 —
 —
 (97) —
 —
 (97) —
 (97)
Changes in ownership interest—
 —
 —
 (91) —
 —
 (91) —
 (91)
Balance at June 30, 2019145,000
 $152,746
 71,947,743
 $97,455
 $(460,726) $(1,713) $(212,238) $40,261
 $(171,977)


Six Months EndedThree Months Ended
June 30, 2019June 30, 2019
Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's DeficitConvertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
  
(in thousands, except share amounts)Shares Amount Shares 
Balance at December 31, 201895,000
 $90,123
 57,521,323
 $58,579
 $(464,903) $4,720
 $(311,481) $64,514
 $(246,967)
Shares Amount Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
Balance at March 31, 2019 (as adjusted)145,000
 $152,117
 71,890,021
 
Net income attributable to MDC Partners Inc.—
 —
 —
 —
 4,177
 —
 4,177
 —
 4,177
—
 —
 —
 
Other comprehensive loss—
 —
 —
 —
 —
 (6,433) (6,433) 389
 (6,044)—
 —
 —
 —
 —
 (1,423) (1,423) 38
 (1,385)
Issuance of common and convertible preference shares50,000
 62,623
 14,285,714
 35,997
 —
 —
 98,620
 —
 98,620
—
 629
 —
 362
 —
 —
 991
 —
 991
Issuance of restricted stock—
 —
 193,979
 —
 —
 —
 —
 —
 —
Vesting of restricted awards—
 —
 76,979
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (53,273) (78) —
 —
 (78) —
 (78)—
 —
 (19,257) (22) —
 —
 (22) —
 (22)
Stock-based compensation—
 —
 —
 509
 —
 —
 509
 —
 509
—
 —
 —
 1,800
 —
 —
 1,800
 —
 1,800
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 2,729
 —
 —
 2,729
 —
 2,729
—
 —
 —
 (3,190) —
 —
 (3,190) —
 (3,190)
Business acquisitions and step-up transactions, net of tax—
 —
 —
 (97) —
 —
 (97) —
 (97)—
 —
 —
 (97) —
 —
 (97) —
 (97)
Changes in ownership interest—
 —
 —
 (184) —
 —
 (184) (24,642) (24,826)—
 —
 —
 (91) —
 —
 (91) —
 (91)
Balance at June 30, 2019145,000
 $152,746
 71,947,743
 $97,455
 $(460,726) $(1,713) $(212,238) $40,261
 $(171,977)
Balance at June 30, 2019 (as adjusted)145,000
 $152,746
 71,947,743
 $97,455
 $(471,349) $(1,713) $(222,861) $40,261
 $(182,600)





Three Months EndedSix Months Ended
June 30, 2018June 30, 2019
Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's DeficitConvertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
  
(in thousands, except share amounts)Shares Amount Shares 
Balance at March 31, 201895,000
 $90,123
 56,436,067
 $38,412
 $(370,586) $1,425
 $(240,626) $50,964
 $(189,662)
Shares Amount Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
Balance at December 31, 2018 (as adjusted)95,000
 $90,123
 57,521,323
 
Net income attributable to MDC Partners Inc.—
 —
 —
 —
 3,406
 —
 3,406
 —
 3,406
—
 —
 —
 
Other comprehensive loss—
 —
 —
 1
 —
 (944) (943) (905) (1,848)—
 —
 —
 —
 —
 (6,433) (6,433) 389
 (6,044)
Issuance of restricted stock—
 —
 12,585
 —
 —
 —
 —
 —
 —
Issuance of common and convertible preference shares50,000
 62,623
 14,285,714
 35,997
 —
 —
 98,620
 —
 98,620
Vesting of restricted awards—
 —
 193,979
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (6,185) (39) —
 —
 (39) —
 (39)—
 —
 (53,273) (78) —
 —
 (78) —
 (78)
Shares issued, acquisitions—
 —
 1,011,561
 7,030
 —
 —
 7,030
 —
 7,030
Stock-based compensation—
 —
 —
 2,107
 —
 —
 2,107
 —
 2,107
—
 —
 —
 509
 —
 —
 509
 —
 509
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 (1,687) —
 —
 (1,687) —
 (1,687)—
 —
 —
 2,729
 —
 —
 2,729
 —
 2,729
Business acquisitions and step-up transactions, net of tax—
 —
 —
 —
 —
 —
 —
 27,357
 27,357
—
 —
 —
 (97) —
 —
 (97) —
 (97)
Balance at June 30, 201895,000
 $90,123
 57,454,028
 $45,824
 $(367,180) $481
 $(230,752) $77,416
 $(153,336)
Changes in ownership interest—
 —
 —
 (184) —
 —
 (184) (24,642) (24,826)
Balance at June 30, 2019 (as adjusted)145,000
 $152,746
 71,947,743
 $97,455
 $(471,349) $(1,713) $(222,861) $40,261
 $(182,600)



 Six Months Ended
 June 30, 2018
 Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc. Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit
       
(in thousands, except share amounts)Shares Amount Shares      
Balance at December 31, 201795,000
 $90,220
 56,375,131
 $38,191
 $(340,000) $(1,954) $(213,543) $58,030
 $(155,513)
Net loss attributable to MDC Partners Inc.—
 —
 —
 —
 (26,010) —
 (26,010) —
 (26,010)
Other comprehensive income (loss)—
 —
 —
 —
 —
 2,435
 2,435
 (2,006) 429
Expenses for convertible preference shares—
 (97) —
 —
 —
 —
 (97) —
 (97)
Issuance of restricted stock—
 —
 122,029
 —
 —
 —
 —
 —
 —
Shares acquired and cancelled—
 —
 (54,693) (493) —
 —
 (493) —
 (493)
Shares issued, acquisitions—
 —
 1,011,561
 7,030
 —
 —
 7,030
 —
 7,030
Stock-based compensation—
 —
 —
 4,324
 —
 —
 4,324
 —
 4,324
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 (2,062) —
 —
 (2,062) —
 (2,062)
Business acquisitions and step-up transactions, net of tax—
 —
 —
 (1,166) —
 —
 (1,166) 27,357
 26,191
Changes in ownership interest—
 —
 —
 —
 —
 —
 —
 (5,965) (5,965)
Cumulative effect of adoption of ASC 606—
 —
 —
 —
 (1,170) —
 (1,170) —
 (1,170)
Balance at June 30, 201895,000
 $90,123
 57,454,028
 $45,824
 $(367,180) $481
 $(230,752) $77,416
 $(153,336)











See notes to the Unaudited Condensed Consolidated Financial Statements.

MDC PARTNERS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
1. Basis of Presentation and Recent Developments
MDC Partners Inc. (the “Company” or “MDC”), incorporated under 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 accompanying consolidated financial statements include the accounts of MDC, Partners Inc. (the “Company” or “MDC”), its subsidiaries and variable interest entities for which the Company is the primary beneficiary. References herein to “Partner Firms” generally refer to the Company’s subsidiary agencies.
MDC Partners Inc. has prepared the unaudited condensed consolidated interim 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 interim financial information on Form 10-Q. Accordingly, the financial statements have been condensed and do not include certain information and disclosures pursuant to these rules. 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. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 (“20182019 Form 10-K”).
The COVID-19 pandemic has negatively impacted the Company’s results of operations, financial position, and cash flows. While it is difficult to predict the full scale of the impact, the Company has taken actions to address the impact of the pandemic, such as working closely with our clients, reducing our expenses and monitoring liquidity. The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation of the financial statements. However, if the duration 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.
The accompanying financial statements reflect all adjustments, consisting of normally 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.
DueThe Company reorganized its management structure in 2020 which resulted in a change to changes in the composition of certain business and the Company’s internal management and reporting structure during 2019,our reportable segment results for the 2018segments. Prior periods presented have been recast to reflect the reclassificationchange in reportable segments. The Company began to present the Integrated Agencies Network reportable segment, which aggregated four operating segments (Constellation, Anomaly Alliance, Doner Partner Network and Colle McVoy), in the first quarter of certain businesses between segments.2020. In connection with our discussions with the SEC, the Company has changed the prior presentation for the Integrated Agencies Network. Beginning in the second quarter of 2020, the Company separated the Integrated Agencies Network into two reportable segments: Integrated Networks - Group A (Anomaly and Colle McVoy) and Integrated Networks - Group B (Constellation and Doner Partner Network). The change was made to aggregate the operating segments that have the most similar historical average long-term profitability. See Note 1214 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
Recent Developments
On June 26, 2020, MDC announced that its Board of Directors formed a Special Committee of independent directors to review the preliminary, non-binding proposal made by Stagwell Media LP with respect to a potential business combination between the Company and Stagwell Media LP (the “Potential Transaction”). Mark Penn, Chairman and Chief Executive Officer of the Company, is also the manager of the general partner of Stagwell Media LP. The Special Committee has retained legal counsel and an independent financial advisor to assist in its evaluation of the Potential Transaction. The Special Committee has not reached any conclusion regarding the Potential Transaction.
2. Acquisitions and Dispositions
2020 Acquisition
On March 19, 2020, the Company acquired the remaining 22.5% ownership interest of KWT Global it did not already own for an aggregate purchase price of $2,118, comprised of a closing cash payment of $729 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $1,389. The contingent deferred payments are based on the financial results of the underlying business from 2019 to 2020 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 Unaudited Condensed Consolidated Balance Sheets.

2020 Disposition
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 Unaudited Condensed Consolidated Statements of Operations. Sloane was included within Allison & Partners which is included within the All Other category.
2019 Acquisitions
On November 15, 2019, the Company acquired the remaining 35% ownership interest of Laird + Partners it did not already own for an aggregate purchase price of $2,389, comprised of a closing cash payment of $1,588 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $801. 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 $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 Unaudited Condensed Consolidated Balance Sheets.
Effective April 1, 2019, the Company acquired the remaining 35% ownership interest of HPR Partners LLC (Hunter) it did not already own 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 redeemable noncontrolling interest of $745 was recorded in Common stock and other paid-in capital in the Unaudited Condensed 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 in a loss of $3,000, which was included in Other, net within the Unaudited Condensed Consolidated Statements of Operations.
3. Revenue
The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topics of 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 MDC 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 management, media training, influencer engagement and events management. We also provide media 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 agency 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 are not significantly integrated noror interdependent, norand that do not significantly modify or customize each other, are considered separate performance obligations. Typically, we consider media planning, media buying, creative (or strategy), production and experiential marketing services to be separate performance obligations if included in the same contract as each of these services can be provided on a stand-alone basis, and do not significantly modify or customize each other. Public relations services and application/website design and development are typically each considered one performance obligation as there is a significant integration of these services into a combined output.

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. 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 obligation 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 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 agencies 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 agencies 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. 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. The primary source of revenue is from agency 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. Representation of a client rarely means that MDC handles marketing communications for all brands or product lines of the client in every geographical location. The Company’s Partner firms often cooperate with one another through referrals and the sharing of both services and expertise, which enables MDC 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 MDC network.
The following table presents revenue disaggregated by client industry vertical for the three and six months ended June 30, 20192020 and 2018:2019:
   Three Months Ended June 30, Six Months Ended June 30,
IndustryReportable Segment 2020 2019 2020 2019
Food & BeverageAll $46,811
 $73,305
 $104,396
 $139,969
RetailAll 32,728
 39,894
 69,537
 72,350
Consumer ProductsAll 34,855
 45,296
 74,189
 78,232
CommunicationsAll 16,172
 47,793
 38,014
 87,490
AutomotiveAll 13,020
 18,541
 38,212
 36,732
TechnologyAll 38,846
 28,876
 88,341
 54,279
HealthcareAll 23,112
 25,954
 46,843
 49,161
FinancialsAll 19,748
 27,868
 43,753
 52,795
Transportation and Travel/LodgingAll 9,053
 27,050
 25,552
 44,085
OtherAll 25,333
 27,553
 58,583
 75,828
   $259,678
 $362,130
 $587,420
 $690,921

   Three Months Ended June 30, Six Months Ended June 30,
IndustryReportable Segment 2019 2018 2019 2018
Food & BeverageAll $73,305
 $84,464
 $139,969
 $147,932
RetailAll 39,894
 38,396
 72,350
 76,411
Consumer ProductsAll 45,296
 41,367
 78,232
 77,973
CommunicationsAll 47,793
 43,097
 87,490
 81,454
AutomotiveAll 18,541
 25,294
 36,732
 45,788
TechnologyAll 28,876
 23,540
 54,279
 45,080
HealthcareAll 25,954
 35,426
 49,161
 68,002
FinancialsAll 27,868
 30,207
 52,795
 52,702
Transportation and Travel/LodgingAll 27,050
 18,776
 44,085
 33,664
OtherAll 27,553
 39,176
 75,828
 77,705
   $362,130
 $379,743
 $690,921
 $706,711



MDC has historically largely focused its operations primarily where the Company was founded in North America, the largest market for its services in the world. In recent years the Company has expanded its global footprint to support clients looking for help to grow their businesses in new markets. Today, MDC’s Partner Firms are located in the United States, Canada, and an additional twelveeleven 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 three and six months ended June 30, 20192020 and 2018:2019:

Three Months Ended June 30, Six Months Ended June 30,
Geographic LocationReportable Segment 2020 2019 2020 2019
United StatesAll $210,342
 $284,659
 $474,903
 $547,676
CanadaAll 16,609
 24,564
 34,865
 46,942
OtherAll 32,727
 52,907
 77,652
 96,303
   $259,678
 $362,130
 $587,420
 $690,921


Three Months Ended June 30, Six Months Ended June 30,
Geographic LocationReportable Segment 2019 2018 2019 2018
United StatesAll $284,659
 $295,268
 $547,676
 $551,792
CanadaAll, excluding Media Services 24,564
 33,086
 46,942
 59,465
OtherAll, excluding Media Services and Domestic Creative Agencies 52,907
 51,389
 96,303
 95,454
   $362,130
 $379,743
 $690,921
 $706,711





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 $92,317$77,927 and $64,362$65,004 at June 30, 20192020 and December 31, 2018,2019, respectively, and are included as a component of accountsAccounts receivable on the Unaudited Condensed Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $40,605$19,426 and $42,369$30,133 at June 30, 20192020 and December 31, 2018,2019, respectively, and are included on the Unaudited Condensed Consolidated Balance Sheets as expendituresExpenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services.
Contract liabilities consist of fees billed to clients in excess of fees recognized as revenue and are classified as advanceAdvance billings on the Company’s Unaudited Condensed Consolidated Balance Sheets. Advance billings at June 30, 20192020 and December 31, 20182019 were $168,142$136,196 and $138,505,$171,742, respectively. The increasedecrease in the advance billings balance of $29,637$35,546 for the six months ended June 30, 2019 is2020 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $101,431$136,400 of revenues recognized that were included in the advance billings balances as of December 31, 20182019 and reductions due to the incurrence of third-party costs.
Changes in the contract asset and liability balances during the six months ended June 30, 2019 and December 31, 20182020 were not materially impacted by write-offs,write offs, impairment losses or any other factors.
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 $25,821 of unsatisfied performance obligations as of June 30, 2020, of which we expect to recognize approximately 84% in 2020, 14% in 2021 and 2% in 2022.

3.4. Income (Loss) Per Common Share
The following table sets forth the computation of basic and diluted income (loss) per common share:
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Numerator: 

 
    
Net income (loss) attributable to MDC Partners Inc.$(593) $4,290
 $410
 $4,177
Accretion on convertible preference shares(3,509)
(3,242) (6,949) (5,625)
Net income allocated to convertible preference shares—
 (273) —
 —
Net income (loss) attributable to MDC Partners Inc. common shareholders$(4,102)
$775
 $(6,539) $(1,448)
Denominator:       
Basic weighted average number of common shares outstanding72,528,455

71,915,832
 72,463,058
 66,118,749
Impact of stock options and non-vested stock under employee stock incentive plans—
 108,857
 —
 —
Diluted weighted average number of common shares outstanding72,528,455

72,024,689
 72,463,058
 66,118,749
Basic$(0.06)
$0.01
 $(0.09) $(0.02)
Diluted$(0.06) $0.01
 $(0.09) $(0.02)

 Three Months Ended June 30, Six Months Ended June 30,
 2019
2018 2019 2018
Numerator: 

 
    
Net income (loss) attributable to MDC Partners Inc.$4,290
 $3,406
 $4,177
 $(26,010)
Accretion on convertible preference shares(3,242)
(2,068) (5,625) (4,095)
Net income allocated to convertible preference shares(273) (205) —
 —
Net income (loss) attributable to MDC Partners Inc. common shareholders$775

$1,133
 $(1,448) $(30,105)
        
Adjustment to net income allocated to convertible preference shares—
 1
 —
 —
Numerator for dilutive income (loss) per common share:       
Net income (loss) attributable to MDC Partners Inc. common shareholders$775

$1,134
 $(1,448) $(30,105)
Denominator:       
Basic weighted average number of common shares outstanding71,915,832

57,439,823
 66,118,749
 56,924,208
Effect of dilutive securities:       
Impact of stock options and non-vested stock under employee stock incentive plans108,857
 363,049
 —
 —
Diluted weighted average number of common shares outstanding72,024,689

57,802,872
 66,118,749
 56,924,208
Basic$0.01

$0.02
 $(0.02) $(0.53)
Diluted$0.01
 $0.02
 $(0.02) $(0.53)
Anti-dilutive stock awards 2,912,436 2,662,666 327,5002,912,436 4,406,206 1,594,761


Restricted stock and restricted stock unit awards of 2,203,717 and 242,338 and 1,308,781 for the three and six months endedas of June 30, 2020 and 2019 and 2018, respectively, which are contingent upon the Company meeting a cumulative three year earnings target and contingent upon continued employment, are excluded from the computation of diluted income (loss) per common share because the performance contingency necessary for vesting has not been met as of the contingenciesreporting date or all the terms and conditions to establish a grant date were not satisfied at June 30, 2019 and 2018, respectively.yet known. In addition, there were 145,000 and 95,000 Preference Shares outstanding which were convertible into 25,621,18927,733,199 and 10,544,70825,621,189 Class A common shares at June 30, 20192020 and 2018,2019, respectively. These Preference Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted income (loss) per common share calculation.

4. Acquisitions and Dispositions
2019 Acquisition
Effective April 1, 2019, the Company acquired the 35% ownership interest of HPR Partners LLC (Hunter) it did not own for an aggregate purchase price of $9,585, comprised of a closing cash payment of $3,890 and additional deferred acquisition payments with an estimated present value at the acquisition date of $5,695. The deferred payments are based on the financial results of the underlying business from 2018 to 2020 with final payment due in 2021. As of the acquisition date, the fair value of the additional interest acquired was $20,178. The fair value was measured using a discounted cash flow model.
As a result of the transaction, the Company reduced redeemable noncontrolling interests by $9,488. The difference between the purchase price and the noncontrolling interest of $97 was recorded in common stock and other paid-in capital in the Unaudited Condensed Consolidated Balance Sheet.
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 was paid cash plus the assumption of certain liabilities totaling approximately $50 million in the aggregate. The sale resulted in a loss of approximately $3 million, which is included in Other, net within the Unaudited Condensed Consolidated Statement of Operations.


Assets and Liabilities Held for Sale - Change in Plan to Sell
In the fourth quarter of 2018, the Company initiated a process to sell its ownership interest in a foreign office within the Global Integrated Agencies reportable segment. The assets and liabilities of the entity were classified as Assets and Liabilities held for sale, at their fair value less cost to sell, within the Consolidated Balance Sheet as of December 31, 2018. In the second quarter of 2019, following the appointment of Mark Penn as Chief Executive Officer, management changed its strategy and plan to sell the foreign office. In connection with management’s decision, the amounts classified within assets and liabilities held for sale were reclassified into the respective line items within the Unaudited Condensed Consolidated Balance Sheet as of June 30, 2019.
2018 Acquisitions
On September 7, 2018, a subsidiary of the Company purchased 100% interests of OneChocolate Communications Limited and OneChocolate Communications LLC, PR (“OneChocolate”) a digital marketing consultancy headquartered in London, UK, for an aggregate purchase price of $3,231, working capital of $966 and additional deferred acquisition payments with an estimated present value of $2,146. OneChocolate’s results are reflected in the Allison & Partners operating segment which is included in the Specialist Communications reportable segment which had an immaterial impact on our results.
On July 1, 2018, the Company acquired the remaining 14.87% and 3% of membership interests of Doner Partners, LLC and Source Marketing LLC, respectively, for an aggregate purchase price of $7,618, comprised of a closing cash payment of $3,279 and additional deferred acquisition payments with an estimated present value of $4,305 as of December 31, 2018. As of the acquisition date, the fair value of the additional interests acquired was $16,361 for Doner Partners LLC. The fair values were measured using a discounted cash flow model. As a result of the transaction, the Company reduced noncontrolling interest by $11,946 and redeemable noncontrolling interest by $933.
On April 2, 2018, the Company purchased 51% of the membership interests of Instrument LLC (“Instrument”), a digital creative agency based in Portland, Oregon, for an aggregate purchase price of $35,591. The acquisition is expected to facilitate the Company’s growth and help to build its portfolio of modern, innovative and digital-first agencies. The purchase price consisted of a cash payment of $28,561 and the issuance of 1,011,561 shares of the Company’s Class A subordinate voting stock with an acquisition date fair value of $7,030. The Company issued these shares in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) of the Securities Act.
The purchase price allocation for Instrument resulted in tangible assets of $10,304, identifiable intangibles of $23,130, consisting primarily of customer lists and a trade name, and goodwill of $32,776. In addition, the Company has recorded $27,357 as the fair value of noncontrolling interests, which was derived from the Company’s purchase price less a discount related to the noncontrolling parties’ lack of control. The identified assets have a weighted average useful life of approximately six years and will be amortized in a manner represented by the pattern in which the economic benefits of such assets are expected to be realized. The goodwill is tax deductible. Instruments’ results are included in the All Other category from a segment reporting perspective. The Company has a controlling financial interest in Instrument through its majority voting interest, and as such, has aggregated the acquired Partner Firm’s financial data into the Company’s Unaudited Condensed Consolidated Financial Statements. The operating results of Instrument in the current year is not material.
Effective January 1, 2018, the Company acquired the remaining 24.5% ownership interest of Allison & Partners LLC for an aggregate purchase price of $10,023, comprised of a closing cash payment of $300 and additional deferred acquisition payments with an estimated present value at the acquisition date of $9,723. The deferred payments are based on the future financial results of the underlying business from 2017 to 2020 with final payments due in 2021. As of the acquisition date, the fair value of the additional interest acquired was $20,096. The fair value was measured using a discounted cash flow model. As a result of the transaction, the Company reduced redeemable noncontrolling interests by $8,857. The difference between the purchase price and the noncontrolling interest of $1,166 was recorded in additional paid-in capital.


5. Deferred Acquisition Consideration
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. 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 through operating income as stock-based compensation over the required retention period.

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 sheets as of June 30, 20192020 and December 31, 2018.2019.
June 30, December 31,June 30, December 31,
2019 20182020 2019
Beginning Balance of contingent payments$82,598
 $119,086
$74,671
 $82,598
Payments(24,492) (54,947)(35,987) (30,719)
Redemption value adjustments (1)
(6,100) 3,512
(759) 15,451
Additions - acquisitions and step up transactions5,695
 14,943
Additions - acquisitions and step-up transactions1,389
 7,145
Other(2)—
 4
(325) 196
Ending Balance of contingent payments$57,701
 $82,598
$38,989
 $74,671
Fixed payments542
 1,097
263
 549
$58,243
 $83,695
$39,252
 $75,220
(1)Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments

and stock-based compensation charges relating to acquisition payments that are tied to continued employment. Redemption value adjustments are recorded within cost of services sold and officeOffice and general expenses on the Unaudited Condensed Consolidated Statements of Operations.
(2) Other primarily consists of translation adjustments.
The following table presents the impact to the Company’s statementstatements of operations due to the redemption value adjustments for the contingent deferred acquisition consideration:
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Loss (Income) attributable to fair value adjustments$2,312
 $2,073
 $(2,288) $(5,570)
Stock-based compensation(496) (1,339) 1,529
 (530)
Redemption value adjustments$1,816
 $734
 $(759) $(6,100)

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Income (loss) attributable to fair value adjustments$2,073
 $(5,065) $(5,570) $(2,479)
Stock-based compensation(1,339) 2,321
 (530) 4,682
Redemption value adjustments$734
 $(2,744) $(6,100) $2,203

6. Leases

Effective January 1, 2019, the Company adopted FASB ASC Topic 842, Leases (“ASC 842”). As a result, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 840, Leases. See Note 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding the Company’s adoption of ASC 842. The policies described herein refer to those in effect as of January 1, 2019.
The Company leases office space in North America, 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. These leases are classified as operating leases and expire between years 20192020 through 2032. FinanceThe Company’s finance leases are considered to be immaterial to the Company.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 noncancelable 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 Unaudited Condensed 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, and 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.
TheSome of the Company’s leases include options to extend or renew the leaseleases through 2040. 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.
From time to time, the Company enters into sublease arrangements both with unrelated third-parties and with our partner agencies. These leases are classified as operating leases and expire between years 20192020 through 2023.2024. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America, Europe and Asia.Australia.
As of June 30, 2019,2020, the Company has entered into antwo operating leaseleases for which the commencement date has not yet occurred as this leased space isthe premises are in the process of being prepared for occupancy by the landlord for occupancy.landlord. Accordingly, this lease representsthese two leases represent an obligation of the Company that is not onreflected within the Unaudited Condensed Consolidated Balance SheetSheets as of June 30, 2019.2020. The aggregate future liability related to the leasethese leases is approximately $6 million.$11,817.
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 three and six months ended June 30, 2020 and 2019:


 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Lease Cost:       
Operating lease cost$18,511
 $17,473
 $34,902
 $33,914
Variable lease cost3,573
 4,361
 8,228
 9,325
Sublease rental income(2,892) (2,590) (5,697) (4,189)
Total lease cost$19,192
 $19,244
 $37,433
 $39,050
Additional information:       
Cash paid for amounts included in the measurement of lease liabilities for operating leases
 
 
 
Operating cash flows$17,592
 $19,523
 $35,227
 $35,175
        
Right-of-use assets obtained in exchange for operating lease liabilities$30,815
 $2,195
 $37,934
 $259,013
Weighted average remaining lease term (in years) - Operating leases7.4
 7.0
 7.4
 7.0
Weighted average discount rate - Operating leases10.5
 8.6
 10.5
 8.6

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2019
Lease Cost:   
Operating lease cost$17,473
 $33,914
Variable lease cost4,361
 9,325
Sublease rental income(2,590) (4,189)
Total lease cost$19,244
 $39,050
Additional information:   
Cash paid for amounts included in the measurement of lease liabilities for operating leases
 
Operating cash flows$19,523
 $35,175
    
Right-of-use assets obtained in exchange for operating lease liabilities$2,195
 $259,013
Weighted average remaining lease term (in years) - Operating leases7.0
 7.0
Weighted average discount rate - Operating leases8.6
 8.6


In the six months ended June 30, 2020, the Company recorded a charge of $5,619 primarily to reduce the carrying value of its right-of-use lease assets and related leasehold improvements of two of its agencies within its Integrated Networks - Group B reportable segment and leased space of Corporate. The Company evaluated the facts and circumstances related to the use of the asset which indicated that it may not be recoverable. Using adjusted quoted market prices to develop expected future cash flows, it was determined that the fair value of the asset was less than its carrying value. This impairment charge is included in Impairment and other losses within the Unaudited Condensed Consolidated Statements of Operations.
In the three and six months ended June 30, 2019, the Company did not record any impairment charge to reduce the carrying value of its right-of-use lease assets or related leasehold improvements.
Operating lease expense is included in office and general expenses in the Unaudited Condensed Consolidated StatementStatements of Operations. LeaseThe Company’s lease expense for leases with a term of 12 months or less is immaterial to the Company. Rental expense for the three and six months ended June 30, 2018 was $15,981 and $33,541, respectively, offset by $926 and $1,640, respectively in sublease rental income.
immaterial.
The following table presents minimum future rental payments under the Company’s leases at June 30, 20192020 and their reconciliation to the corresponding lease liabilities:

 Maturity Analysis
Remaining 2020$33,790
202167,713
202261,480
202357,344
202450,777
Thereafter190,274
Total461,378
Less: Present value discount(155,442)
Lease liability$305,936
 Maturity Analysis
Remaining 2019$33,776
202066,425
202156,428
202245,942
202342,113
Thereafter133,823
Total378,507
Less: Present value discount(99,004)
Lease liability$279,503


7. Debt
As of June 30, 20192020 and December 31, 2018,2019, the Company’s indebtedness was comprised as follows:

June 30, 2020
December 31, 2019
Revolving credit agreement$62,500
 $—
6.50% Notes due 2024870,256
 900,000
Debt issuance costs(10,219) (12,370)
 $922,537
 $887,630

June 30, 2019
December 31, 2018
Revolving credit agreement$27,545
 $68,143
6.50% Notes due 2024900,000
 900,000
Debt issuance costs(13,453) (14,036)
 $914,092
 $954,107

6.50% 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, the Credit Agreement (as defined below), as guarantors (the “Guarantors”) and The Bank of New York Mellon, as trustee, relating to the issuance by MDC of $900,000 aggregate principal amount of the senior unsecured notes due 2024 (the “6.50% Notes”). The 6.50% Notes were sold in a private placement in reliance on exceptionsexemptions from registration under the Securities Act of 1933. The 6.50% Notes bear interest, payable semiannually in arrears on May 1 and November 1, at a rate of 6.50% per annum. The 6.50% Notes mature on May 1, 2024, unless earlier redeemed or repurchased.
In April 2020, the Company repurchased $29,744 of the 6.50% Notes, at a weighted average price equal to 73.90% of the principal amount totaling $21,999, and accrued interest of $946. As a result of the repurchase, we recognized an extinguishment gain of $7,388.
MDC may, at its option, redeem the 6.50% Notes in whole at any time or in part from time to time, on and after May 1, 2019, at varying prices based on the timing of the redemption.
If MDC experiences certain kinds of changes of control (as defined in the Indenture), holders of the 6.50% Notes may require MDC to repurchase any 6.50% Notes held by them at a price equal to 101% of the principal amount of the 6.50% Notes plus accrued and unpaid interest. In addition, if MDC sells assets under certain circumstances, it must apply the proceeds from such sale and offer to repurchase the 6.50% Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest.
The Indenture includes covenants that, among other things, restrict MDC’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; create restrictions on the payment of dividends or other amounts from MDC’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’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 6.50% Notes are also subject to customary events of default, including a cross-payment default and cross-acceleration provision. The Company was in compliance with all covenants at June 30, 2019.2020.
Revolving Credit Agreement
The Company is party to a $250,000$211,500 secured revolving credit facility due MayFebruary 3, 2021. The amounts outstanding under the revolving credit facility as of June 30, 2019 and December 31, 2018 are presented in the table above and additional details are provided below.2022.
On March 12, 2019 (the “Amendment Effective Date”),May 29, 2020, the Company, Maxxcom Inc. (a, a subsidiary of the Company)Company (“Maxxcom”), and each of their subsidiaries party thereto entered into an Amendmentamendment (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 provides financial covenant relief by increasing the total leverage ratio applicable on each testing date after the Amendment Effective Date through the period ending December 31, 2020 from 5.5:1.0 to 6.25:1.0. The total leverage ratio applicable on each testing date after December 31, 2020 will revert to 5.5:1.0.
In connection with the Amendment, the Company reduced the aggregate maximum amount of revolving commitments provided by the lenders underto $211,500 from $250,000, extended the maturity date of the Credit Agreement from May 3, 2021 to $250 million from $325 million.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: (a)(i) LIBORNon-Prime Rate Loans bear interest at the LIBORNon-Prime Rate plus the Non-Prime Rate Margin and (ii) Base Rate Loansall other Obligations bear interest at the BasePrime Rate, plus (b) an applicable margin.the Prime Rate Margin. The initial applicable marginNon-Prime Rate Margin and Prime Rate Margin will range from 2.50% to 3.00% for borrowing is 0.75% in the case of BaseNon-Prime Rate Loans and 1.50% in the case of LIBORfrom 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 million to $120 million measured on a trailing 12-month basis. 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 is currently in compliance with all of the terms and conditions of its Credit Agreement.Agreement as of June 30, 2020.
At June 30, 20192020 and December 31, 2018,2019, the Company had issued undrawn outstanding letters of credit of $4,744$18,576 and $4,701,$4,836, respectively.
8. 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 Unaudited Condensed Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through additional 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 Unaudited Condensed Consolidated Balance Sheets.
Noncontrolling Interests
Changes in amounts due to noncontrolling interest holders included in Accruals and other liabilities on the Unaudited Condensed Consolidated Balance Sheets for the year ended December 31, 2019 and six months ended June 30, 2020 were as follows:
 Noncontrolling
Interests
Balance, December 31, 2018$9,278
Income attributable to noncontrolling interests16,156
Distributions made(11,392)
Other (1)
(14)
Balance, December 31, 2019$14,028
Income attributable to noncontrolling interests3,892
Distributions made(10,318)
Other (1)
(415)
Balance, June 30, 2020$7,187

(1) Other primarily consists of translation adjustments.

Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three and six months ended June 30, 2020 and 2019 were as follows:
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net income (loss) attributable to MDC Partners Inc.$(593) $4,290
 $410
 $4,177
Transfers from the noncontrolling interest:       
Decrease in MDC Partners Inc. paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests—
 (97) (503) (97)
Net transfers from noncontrolling interests$—
 $(97) $(503) $(97)
Change from net income (loss) attributable to MDC Partners Inc. and transfers to noncontrolling interests$(593) $4,193
 $(93) $4,080

Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
 Six Months Ended June 30, 2020 Year Ended December 31, 2019
Beginning Balance$36,973
 $51,546
Redemptions(1,615) (14,530)
Changes in redemption value2,630
 (3,163)
Currency translation adjustments(724) 3
Other (1)
(554) 3,117
Ending Balance$36,710
 $36,973
(1) Other primarily consists of the redeemable noncontrolling interest balance related to a foreign entity that was classified as held for sale as of December 31, 2018 and reclassified in 2019.
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 2020 to 2024. 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 $36,710 as of June 30, 2020, consists of $21,227 assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings level and such rights are exercised, $14,496upon termination of such owner’s employment with the applicable subsidiary or death and $987 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.
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 six months ended June 30, 2020 and 2019, there was no related impact on the Company’s loss per share calculation.  
9. Commitments, Contingencies, and Guarantees
Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While 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 5 and 8 of the Notes to the Unaudited Condensed 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 three and six months ended June 30, 2020 and 2019, these operations did not incur any material costs related to damages resulting from hurricanes.
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

8.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 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 June 30, 2020, the Company had $18,576 of undrawn letters of credit.
The Company entered into operating leases for which the commencement date has not yet occurred as of June 30, 2020. See Note 6 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information.
10. Share Capital
The authorized and outstanding share capital of the Company is as follows:
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, Group LLC (“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 million.$50,000. The Company received proceeds of approximately $98,620,$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 one nomineetwo nominees designated by the Purchaser.Stagwell Holdings. Except as required by law, the Series 6 Preference Shares do not have voting rights and are not redeemable at the option of the Purchaser.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 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 preference 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 splits 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 six months ended June 30, 2019,2020, the Series 6 Preference Shares accreted at a monthly rate of $6.69,$7.24, for total accretion of $1,193,$2,152, bringing the aggregate liquidation preference to $51,193$55,413 as of June 30, 2019.2020. The accretion is considered in the calculation of net income (loss)loss attributable to MDC Partners Inc. common shareholders. See Note 34 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information regarding the Series 6 Preference Shares.
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.

Effective March 18, 2019, the Company’s Board of Directors (the “Board”) appointed Mark Penn as the Chief Executive Officer and as a director of the Board. Mr. Penn is manager of Stagwell. Effective April 18, 2019, Mr. Penn was also appointed as Chairman of the Board.

Series 4 Convertible Preference Shares
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.

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 preference 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 splits 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 six months ended June 30, 2019,2020, the Series 4 Preference Shares accreted at a monthly rate of approximately $7.85$8.50 per Series 4 Preference Share, for total accretion of $4,432,$4,797, bringing the aggregate liquidation preference to $114,139$123,548 as of June 30, 2019.2020. The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc. common shareholders. See Note 34 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information regarding the Series 4 Preference Shares.
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”)
AnThese are an unlimited number of subordinate voting shares, carrying one1 vote each, with a par value of $0, entitled to dividends equal to or greater than Class B Shares, convertible at the option of the holder into one Class B Share for each Class A Share after the occurrence of certain events related to an offer to purchase all Class B shares. There were 71,943,994 (including the Class A Shares issued to Stagwell)72,583,647 and 57,517,56872,150,854 Class A Shares issued and outstanding as of June 30, 20192020 and December 31, 2018,2019, respectively.
Class B Common Shares (“Class B Shares”)
AnThese are an unlimited number of voting shares, carrying twenty20 votes each, with a par value of $0, convertible at any time at the option of the holder into one Class A share for each Class B share. There were 3,7493,743 and 3,7553,749 Class B Shares issued and outstanding as of June 30, 20192020 and December 31, 2018,2019, respectively.

9. 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 Unaudited Condensed Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through additional 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 Unaudited Condensed Consolidated Balance Sheets.

Noncontrolling Interests
Changes in amounts due to noncontrolling interest holders included in accruals and other liabilities on the Unaudited Condensed Consolidated Balance Sheets for the year ended December 31, 2018 and six months ended June 30, 2019 were as follows:
 Noncontrolling
Interests
Balance, December 31, 2017$11,030
Income attributable to noncontrolling interests11,785
Distributions made(13,419)
Other (1)
(118)
Balance, December 31, 2018$9,278
Income attributable to noncontrolling interests3,472
Distributions made(7,957)
Other (1)
25
Balance, June 30, 2019$4,818
(1)Other consists of cumulative translation adjustments.
Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three and six months ended June 30, 2019 and 2018 were as follows:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Net income (loss) attributable to MDC Partners Inc.$4,290
 $3,406
 $4,177
 $(26,010)
Transfers from the noncontrolling interest:       
Decrease in MDC Partners Inc. paid-in capital for purchase of equity interests in excess of redeemable noncontrolling interests and noncontrolling interests(97) —
 (97) (1,166)
Net transfers from noncontrolling interests$(97) $—
 $(97) $(1,166)
Change from net loss attributable to MDC Partners Inc. and transfers to noncontrolling interests$4,193
 $3,406
 $4,080
 $(27,176)
Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
 Six Months Ended June 30, 2019 Year Ended December 31, 2018
Beginning Balance$51,546
 $62,886
Redemptions(9,486) (11,943)
Granted—
 —
Changes in redemption value421
 1,067
Currency translation adjustments154
 (464)
Ending Balance$42,635
 $51,546
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 2019 to 2024. 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 $42,635 as of June 30, 2019, consists of $19,158 assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings level and such rights are exercised, $19,926 upon termination of such owner’s employment with the applicable subsidiary or death and $3,551 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.
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 three months ended June 30, 2019 and 2018, there was no related impact on the Company’s loss per share calculation.  

10.11. 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: 

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 Liabilities 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 June 30, 20192020 and December 31, 2018:2019:
  June 30, 2020
December 31, 2019
  Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Liabilities:  

 

 

 
6.50% Senior Notes due 2024 $870,256
 $807,162
 $900,000
 $812,250
 June 30, 2019
December 31, 2018
 Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Liabilities: 

 

 

 
6.50% Senior Notes due 2024$900,000
 $823,500
 $900,000
 $834,750

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.
Financial Liabilities Measured at Fair Value on a Recurring Basis
Contingent deferred acquisition consideration are(Level 3 fair value measurement) is recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with various contractual valuation formulas that may beand is dependent upon future events,significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and in some cases, the currency exchangediscount rate. These growth rates are consistent with the Company’s long-term forecasts. As of June 30, 2020, the discount rate asused to measure these liabilities was 11.41%.
As these estimates require the use of assumptions about future performance, which are uncertain at the datetime of payment (Level 3). estimation, the fair value measurements presented on the Unaudited Condensed Consolidated Balance Sheets are subject to material uncertainty.
See Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding contingent deferred acquisition consideration.
At June 30, 20192020 and December 31, 2018,2019, the carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximated 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, and intangible assets (a Level(Level 3 fair value assessment)measurement) 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. The Company recognized an impairment of goodwill of $13,382 in the three months ended June 30, 2020. The company did not recognize an impairment of goodwill or intangible assets in the three and six months ended June 30, 2019 or2019.
The Company recognized a charge of $5,619 primarily to reduce the carrying value of its right-of-use lease assets and leasehold improvements in the six months ended June 30, 2018

2020. The company did not recognize an impairment of right-of-use assets and leasehold improvements in the three and six months ended June 30, 2019. See Note 6 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
11.12. Supplemental Information
Accounts Payable, Accruals and Other Liabilities
At June 30, 20192020 and December 31, 2018, accruals2019, Accruals and other liabilities included accrued media of $151,143$172,691 and $180,586,$216,931, respectively; and also included amounts due to noncontrolling interest holders for their share of profits. See Note 98 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding noncontrolling interest holdersholders’ share of profits.
Impairment and Other Losses
The Company recognized a charge of $19,000 for the six months ended June 30, 2020 consisting of a goodwill impairment of $13,382 and an impairment of right-of-use lease assets and losses of $5,619.

GoodwillGiven the impact of the COVID-19 pandemic, the Company performed interim goodwill impairment tests in 2020. The company recognized a goodwill impairment of $13,382 for the six months ended June 30, 2020. Additionally, the interim test resulted in the fair value of one reporting unit, with goodwill of approximately $130,000, exceeding its carrying value by a minimal percentage. If the duration of the COVID-19 pandemic is longer and Indefinite Lived Intangiblesthe operational impact is greater than estimated, the Company could recognize an impairment of goodwill in the future. The Company used an income approach to measure its goodwill for impairment. This methodology incorporates the use of the discounted cash flow method. The income approach requires the exercise of significant judgment and inputs, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
GoodwillSee Note 6 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding the impairment of right-of-use lease assets and indefinitelosses.
During the first quarter of 2020, the Company reassessed its estimate of the useful life intangible assets (trademarks)of a trademark in the amount of $14,600, acquired as a result of a business combination which are not subjectcombination. The Company revised the useful life to amortization are tested for impairment annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For goodwill, impairment is assessed at the reporting unit level. Goodwill balances as of June 30, 2019 and December 31, 2018, were $743,582 and $740,955, respectively.5 years from indefinite lived.

Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in interim periods.
IncomeOn March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law and the new legislation contains several key tax expenseprovisions, including the five-year net operating loss carryback, an adjusted business interest limitation, and payroll tax deferral. The Company is required to recognize the effect of tax law changes in the period of enactment, which required the Company to reassess the net realizability of its deferred tax assets and liabilities. The Company has assessed the applicability of the CARES Act and determined there is no impact.
The Company had an income tax benefit for the three months ended June 30, 2019 was2020 of $7,923 (on a pre-tax loss of $4,617 resulting in an effective tax rate of 171.6%) compared to income tax expense of $2,088 (on pre-tax income of $9,215 resulting in an effective tax rate of 22.7%) compared to an expense of $1,977 (on income of $7,956 resulting in an effective tax rate of 24.8%) for the three months ended June 30, 2018. 2019.
The change in the effective tax rate of 171.6% in the three months ended June 30, 2020 as compared to 22.7% in the same period in 2019 was primarily driven byattributable to the jurisdictional miximpact of earnings.  applying the estimated annual effective tax rate to the pre-tax loss in the current period.
IncomeThe Company had income tax expense for the six months ended June 30, 2019 was2020 of $5,577 (on pre-tax income of $10,677 resulting in an effective tax rate of 52.2%) compared to an expense of $2,835 (on pre-tax income of $10,195 resulting in an effective tax rate of 27.8%) compared to a benefit of $6,353 (on a loss of $28,979 resulting in an effective tax rate of 21.9%) for the six months ended June 30, 2018. 2019.
The change in the effective tax rate of 52.2% in the six months ended June 30, 2020 as compared to 27.8% in same period in 2019 was primarily drivenattributable to an increase in base erosion and anti-abuse tax (“BEAT”) in 2020.
Payroll Taxes
In accordance with the payroll tax deferral provision under the CARES Act, the Company is deferring the employer portion of the social security payroll tax of 6.2%. The Company anticipates the deferral through December 31, 2020 to be approximately $16,000 which is payable in equal installments on December 31, 2021 and 2022.

Revision of Previously Issued Financial Statements for Immaterial Misstatements
During the quarter ended June 30, 2020, the Company identified certain errors related to prior periods that were not material to any of the Company’s prior period financial statements; however, the cumulative effect of these errors could be considered material to our current year financial statements. As such, the Company revised the prior period financial statements, as presented below, and will similarly revise previously presented historical financial statements for these immaterial errors in future filings.
The adjustments by year and financial statement area are as follows:
Calendar Years 2019 through 2017 - The Company identified an understatement of its deferred tax assets and the jurisdictional mixrelated impact on goodwill impairment charges recognized in previous years. This resulted in correcting adjustments to increase deferred tax assets and reduce deferred tax expense by $217 in 2019, $1,988 in 2018 and $294 in 2017 and to recognize an incremental goodwill impairment charge and reduction of earnings.goodwill by $780 in 2019, $7,147 in 2018 and $1,056 in 2017. These amounts were recorded to reflect required adjustments in connection with the impairment of tax deductible goodwill.
Calendar Year 2018 - The Company recorded a correcting adjustment of $1,115 to reduce revenue and accounts receivable that was incorrectly recognized in 2018 in connection with the adoption of ASC 606.

Calendar Year 2016 - The Company recorded a correcting adjustment to increase tax expense and reduce deferred tax assets by $3,587 for previously unidentified deemed dividends treated as U.S. taxable income in connection with certain U.S. controlled foreign corporation assets which were pledged as security for a U.S. loan.
The following table presents the impact of the revisions on the Consolidated Statements of Operations for the periods presented:
 For the Twelve Months Ended December 31,
 2019 2018 2017
 As Reported Adjustment As Revised As Reported Adjustment As Revised As Reported Adjustment As Revised
Revenue$1,415,803
 $—
 $1,415,803
 $1,476,203
 $(1,115) $1,475,088
 $1,513,779
 $—
 $1,513,779
Impairment and other losses7,819
 780
 8,599
 80,057
 7,147
 87,204
 4,415
 1,056
 5,471
Total operating expenses1,335,563
 780
 1,336,343
 1,466,507
 7,147
 1,473,654
 1,381,820
 1,056
 1,382,876
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates21,647
 (780) 20,867
 (80,407) (8,262) (88,669) 87,078
 (1,056) 86,022
Income tax expense (benefit)10,533
 (217) 10,316
 31,603
 (1,988) 29,615
 (168,064) (294) (168,358)



 

 

 

 

 

 

 

 

Net income (loss) attributable to MDC Partners Inc. common shareholders$(16,994) $(563) $(17,557) $(132,088) $(6,274) $(138,362) $205,594
 $(762) $204,832



 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic69,132,100
 —
 69,132,100
 57,218,994
 —
 57,218,994
 55,255,797
 —
 55,255,797
Diluted69,132,100
 —
 69,132,100
 57,218,994
 —
 57,218,994
 55,481,786
 —
 55,481,786



 

 

 

 

 

 

 

 

Income (loss) Per Common Share:

 

 

 

 

 

 

 

 

Basic$(0.25) $—
 $(0.25) $(2.31) $(0.11) $(2.42) $3.72
 $(0.01) $3.71
Diluted$(0.25) $—
 $(0.25) $(2.31) $(0.11) $(2.42) $3.71
 $(0.01) $3.70

The following table presents the impact of the revisions on the Consolidated Balance Sheets for the periods presented:

 December 31, 2019 December 31, 2018
 As Reported
Adjustment
As Revised
As Reported
Adjustment
As Revised
Accounts receivable$450,403
 $(1,115) $449,288
 $395,200
 $(1,115) $394,085
Goodwill740,674
 (8,983) 731,691
 740,955
 (8,203) 732,752
Deferred tax assets85,988
 (1,088) 84,900
 92,741
 (1,305) 91,436
Total Assets$1,839,492
 $(11,186) $1,828,306
 $1,611,573
 $(10,623) $1,600,950
Accumulated deficit(469,593) (11,186) (480,779) (464,903) (10,623) (475,526)
Total Shareholders' Deficit(179,389) (11,186) (190,575) (246,967) (10,623) (257,590)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit$1,839,492
 $(11,186) $1,828,306
 $1,611,573
 $(10,623) $1,600,950


12.13. 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 the related party transactions that are significant in nature:
In October 2019, a Partner Firm of the Company entered into an arrangement with a Stagwell affiliate, in which the Stagwell affiliate and the Partner Firm will collaborate to provide various services to a client of the Partner Firm. The Partner Firm and the Stagwell affiliate pitched and won 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 $723 which is expected to be recognized through the end of 2020. As of June 30, 2020, $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, buying and reporting services. Under the arrangement, the Partner Firm is expected to receive from the Stagwell affiliate approximately $1,167, which is expected to be recognized through the end of 2020. As of June 30, 2020, $82 was due from the affiliate. 

In January 2020, a Partner Firm of the Company entered into an arrangement with a Stagwell affiliate to develop advertising technology for the Partner Firm. Under the arrangement the Partner Firm is expected to pay the Stagwell affiliate approximately $460, which is expected to be recognized through May 2020. As of June 30, 2020, $170 was owed to the affiliate.
On February 14, 2020, Sloane sold substantially all its assets and certain liabilities to an affiliate of Stagwell. See Note 2 of the Notes to the Unaudited Condensed 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 June 30, 2020, the total future rental income related to the sublease is approximately $185.
14. 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.
DueThe CODM uses Adjusted EBITDA (defined below) as a key metric, to changesevaluate 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) 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, net includes items such as 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.

Effective in the compositionfirst quarter of 2020, the Company reorganized its management structure resulting in the aggregation of certain business andPartner Firms into integrated groups (“Networks”). Mr. Penn, appointed key agency executives, that report directly into him, to lead each Network. In connection with the Company’s internal management andreorganization, we reassessed our reportable segments to align our external reporting structure during 2019, reportable segment results forwith how we operate the 2018Networks under our new organizational structure. Prior periods presented have been recast to reflect the reclassificationchange in reportable segments. See Note 1 of certain businessesthe Notes to the Unaudited Condensed Consolidated Financial Statements included herein for information regarding a change in reportable segments between segments. The changes were as follows:
Doner, previously within the Global Integrated Agencies reportable segment is now included within the Domestic Creative Agencies reportable segment.
HL Group Partners, previously within the Specialist Communications reportable segment,first and Redscout, previously within the All Other category, are now included in the Yes & Company operating segment. The Yes & Company operating segment previously within the Media Services reportable segment is now included within the Domestic Creative Agencies reportable segment.
Attention, previously within the Forsman & Bodenfors operating segment has operationally merged into MDC Media Partners, which is included within the Media Services reportable segment.second quarter of 2020.
The four3 reportable segments that result from applying the aggregation criteria are as follows: “Global Integrated Agencies”; “Domestic Creative Agencies”; “Specialist Communications”;“Integrated Networks - Group A,” “Integrated Networks - Group B” and the “Media Services.& Data Network.” In addition, the Company combines and discloses those 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 throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein and Note 2 of the Company’s 2019 Form 10-K for the year ended December 31, 2018.10-K.
•
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.
TheGlobal Integrated Agencies reportable segment is comprised of the Company’s four global, integrated operating segments (72andSunny, Anomaly, Crispin Porter + Bogusky,aggregated within the Integrated Networks - Group A and Forsman & Bodenfors) serving multinationalB reportable segments provide a range of services for its clients, around the world.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 global 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. The Company believesWhile the historicoperating 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 and expected average long-term profitability is similar among the operating segments aggregated in the Global Integrated Agencies reportable segment.profitability.
The operating segments within the Global Integrated Agenciesreportable segment provides a range of different services for its clients, including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast).

The Domestic Creative Agencies reportable segment is comprised of seven operating segments that are primarily national advertising agencies (Colle + McVoy, Doner, Laird + Partners, Mono Advertising, Union, Yamamoto, and Yes & Company) leveraging creative capabilities at their core. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of domestic client accounts and the methods used to provide services; and (iii) the extent to which they may be impacted by domestic economic and policy factors within North America. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long- term profitability is similar among the operating segments aggregated in the Domestic Creative Agencies reportable segment.
The operating segments within the Domestic Creative Agencies reportable segment provide similar services as the Global Integrated Agencies.

The Specialist Communications reportable segment is comprised of four operating segments that are each communications agencies (Allison & Partners, Hunter, KWT Global, and Veritas) with core service offerings in public relations and related communications services. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of client accounts and the methods used to provide services; (iii) the extent to which they may be impacted by domestic economic and policy factors within North America; and (iv) the regulatory environment regarding public relations and social media. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Specialist Communications reportable segment.
The operating segments within the Specialist Communications reportable segment provide public relations and communications services including strategy, editorial, crisis support or issues management, media training, influencer engagement, and events management.

The Media Services reportable segment is comprised of a single operating segment known as MDC Media Partners. MDC Media Partners, which operates primarily in North America, performs media buying and planning as their core competency across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast).
All Other consists of the Company’s remaining operating segments that provide a range of diverse 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 6Degrees Communications, Concentric Partners, Gale Partners, Kenna, Kingsdale (through the date of sale on March 8, 2019), Instrument, Relevent, Team, Vitro, and Y Media Labs. The nature of the specialist services provided by these operating segments vary among each other and from those operating segments aggregated into the reportable segments. This results in these operating segments having current and long-term performance expectations inconsistent with those operating segments aggregated in the reportable segments. The operating segments within All Other provide a range of diverse marketing communication services, including application and website design and development, data and analytics, experiential marketing, customer research management, creative services, and branding.
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.
•
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. The Media & Data Network includes Gale Partners, Kenna, MDC Media and Northstar.
•
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.

Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 20182020 2019 2020 2019
Revenue:        
Global Integrated Agencies$154,368
 $158,163
 $284,087
 $287,686
Domestic Creative Agencies65,193
 72,971
 132,201
 139,625
Specialist Communication47,170
 40,304
 86,123
 79,128
Media Services21,331
 21,398
 41,510
 46,082
Integrated Networks - Group A$82,735
 $103,248

$173,356

$176,987
Integrated Networks - Group B93,398
 133,394
 211,105
 266,565
Media & Data Network28,551
 39,456
 69,609
 82,688
All Other74,068
 86,907
 147,000
 154,190
54,994
 86,032
 133,350
 164,681
Total$362,130
 $379,743
 $690,921
 $706,711
$259,678
 $362,130
 $587,420
 $690,921
              
Segment operating income (loss):       
Global Integrated Agencies$20,720
 $18,352
 $24,491
 $4,760
Domestic Creative Agencies8,730
 5,077
 14,207
 7,955
Specialist Communication6,683
 6,216
 13,760
 9,944
Media Services991
 (1,719) (843) (1,738)
Adjusted EBITDA:       
Integrated Networks - Group A$17,205
 $18,241
 $33,507
 $19,156
Integrated Networks - Group B16,387

24,848

33,523

43,128
Media & Data Network892

1,004

2,679

1,036
All Other2,949
 15,986
 8,962
 22,430
6,885

10,937

16,790

17,737
Corporate(16,631) (13,140) (21,454) (27,212)(5,208)
(8,593)
(10,770)
(13,146)
Total$23,442
 $30,772
 $39,123
 $16,139
Total Adjusted EBITDA$36,161
 $46,437
 $75,729
 $67,911
       
Depreciation and amortization$(8,899) $(10,663) $(18,105) $(19,501)
Impairment and other losses(18,839) —
 (19,000) —
Stock-based compensation(1,039) (3,634) (4,109) (6,606)
Deferred acquisition consideration adjustments(2,312) (2,073) 2,288
 5,570
Distributions from non-consolidated affiliates(1,079) (31) (1,065) (31)
Other items, net(3,895) (6,594) (6,311) (8,220)
Total Operating Income$98
 $23,442
 $29,427
 $39,123
              
Other Income (Expenses):              
Interest expense and finance charges, net$(16,413) $(16,859) $(33,174) $(32,942)$(15,941) $(16,413) $(31,553) $(33,174)
Foreign exchange gain (loss)2,932
 (6,549) 8,374
 (13,209)5,342
 2,932
 (9,415) 8,374
Other, net(746) 592
 (4,128) 1,033
5,884
 (746) 22,218
 (4,128)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates9,215
 7,956
 10,195
 (28,979)(4,617) 9,215
 10,677
 10,195
Income tax expense (benefit)2,088
 1,977
 2,835
 (6,353)(7,923) 2,088
 5,577
 2,835
Income (loss) before equity in earnings of non-consolidated affiliates7,127
 5,979
 7,360
 (22,626)
Income before equity in earnings of non-consolidated affiliates3,306
 7,127
 5,100
 7,360
Equity in earnings (losses) of non-consolidated affiliates206
 (28) 289
 58
(798) 206
 (798) 289
Net income (loss)7,333
 5,951
 7,649
 (22,568)
Net income2,508
 7,333
 4,302
 7,649
Net income attributable to the noncontrolling interest(3,043) (2,545) (3,472) (3,442)(3,101) (3,043) (3,892) (3,472)
Net income (loss) attributable to MDC Partners Inc.$4,290
 $3,406
 $4,177
 $(26,010)(593) 4,290
 410
 4,177
Accretion on and net income allocated to convertible preference shares(3,509) (3,515) (6,949) (5,625)
Net income (loss) attributable to MDC Partners Inc. common shareholders$(4,102) $775
 $(6,539) $(1,448)







 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Depreciation and amortization:(Dollars in Thousands)
Integrated Networks - Group A$1,566
 $2,348
 $3,307
 $4,289
Integrated Networks - Group B4,387
 4,318
 8,913
 8,092
Media & Data Network807
 1,335
 1,615
 2,328
All Other1,903
 2,441
 3,802
 4,354
Corporate236
 221
 468
 438
Total$8,899
 $10,663
 $18,105
 $19,501
        
Stock-based compensation:       
Integrated Networks - Group A$(105) $639
 $1,856
 $4,234
Integrated Networks - Group B746
 1,627
 1,646
 2,491
Media & Data Network4
 6
 (9) 6
All Other118
 170
 198
 256
Corporate276
 1,192
 418
 (381)
Total$1,039
 $3,634
 $4,109
 $6,606
        
Capital expenditures:       
Integrated Networks - Group A$208

$2,157
 $566
 $4,038
Integrated Networks - Group B(272) 1,013
 205
 2,181
Media & Data Network111
 206
 197
 344
All Other134
 923
 457
 1,341
Corporate1,963
 18
 2,265
 19
Total$2,144
 $4,317
 $3,690
 $7,923
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Depreciation and amortization:       
Global Integrated Agencies$4,437
 $4,743
 $8,502
 $12,152
Domestic Creative Agencies1,547
 1,281
 2,786
 2,574
Specialist Communication698
 992
 1,265
 1,959
Media Services794
 635
 1,485
 1,273
All Other2,966
 3,892
 5,025
 5,736
Corporate221
 160
 438
 384
Total$10,663
 $11,703
 $19,501
 $24,078
        
Stock-based compensation:       
Global Integrated Agencies$1,232
 $2,475
 $4,999
 $4,935
Domestic Creative Agencies522
 1,097
 986
 1,507
Specialist Communication52
 52
 78
 239
Media Services(16) 74
 (16) 149
All Other652
 684
 940
 1,341
Corporate1,192
 1,221
 (381) 2,469
Total$3,634
 $5,603
 $6,606
 $10,640
        
Capital expenditures:       
Global Integrated Agencies$1,816
 $2,411
 $3,234
 $4,654
Domestic Creative Agencies369
 569
 1,063
 1,473
Specialist Communication231
 2,208
 482
 2,443
Media Services126
 131
 167
 315
All Other1,757
 547
 2,958
 772
Corporate18
 24
 19
 32
Total$4,317
 $5,890
 $7,923
 $9,689


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.
See Note 23 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for a summary of the Company’s revenue by geographic region for three months ended June 30, 2019 and 2018.

13. Commitments, Contingencies, and Guarantees
Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While 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 5 and 9 of the Notes to the Unaudited Condensed 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 three and six months ended June 30, 20192020 and 2018 these operations did not incur any material costs related to damages resulting from hurricanes.
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 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 June 30, 2019, the Company had $4,744 of undrawn letters of credit.

2019.
14. New Accounting Pronouncements
Adopted In The Current Reporting Period
Effective January 1, 2019, the Company adopted ASC 842. As a result, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 840, Leases. With the adoption of ASC 842, the Company has elected to apply the package of practical expedients: (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. Additionally, the Company elected the practical expedient to not separate non-lease components from lease components for all operating leases.
The adoption of ASC 842 had a material impact on the Company’s Unaudited Condensed Consolidated Balance Sheets, resulting in the recognition, on January 1, 2019, of a lease liability of $299,243 which represents the present value of the remaining lease payments, and a right-of-use asset of $254,245 which represents the lease liability, offset by adjustments as appropriate under ASC 842. The adoption of ASC 842 did not have a material impact on the Company’s other Unaudited Condensed Consolidated Financial Statements.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, references to the “Company” or “MDC” mean MDC Partners Inc. and its subsidiaries, and 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 20192020 means the period beginning January 1, 2019,2020, and ending December 31, 2019)2020).
The Company reports its financial results in accordance with accounting principles generally accepted accounting principles ofin the United States of America (“U.S. GAAP”). In addition, the Company has included certain non-U.S. GAAPnon-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 U.S. GAAP and should not be construed as an alternative to other titled measures determined in accordance with U.S. GAAP.
Two such non-U.S. GAAP Certain non-GAAP measures are “organic revenue growth” or “organic revenue decline” thatand “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 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 2 “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 includes items such as 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.
The following discussion focuses on the operating performance of the Company for the three and six months ended June 30, 2020 or June 30, 2019 and 2018 and the financial condition of the Company as of June 30, 2019.2020. This analysis should be read in conjunction with the interim Unaudited Condensed Consolidated Financial Statements presented in this interim report and the annual audited consolidated financial statementsAudited Consolidated Financial Statements and Management’s Discussion and Analysis presented in the Annual Report for2019 Form 10-K.
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 year ended December 31, 2018 as reported on the Form 10-K (the “Annual Report on Form 10-K”). 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 2 that are not considered meaningful are presented as “NM.”
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. 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.
The effects of the COVID-19 pandemic have negatively impacted our results of operations, financial position and cash flows; however, the extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19. While it is difficult to predict the full scale of the impact, the Company has taken actions to address the pandemic. Our Partner Firms have 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. We have also moved quickly to align our operating expenses with changes in revenue. We have 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 our capital expenditures where possible to preserve our cash flow. Given these measures, the Company believes it is well positioned to successfully work through the effects of COVID-19.

MDC conducts its business through its network of Partner Firms, the “Advertising and Communications Group,” whowhich provide a comprehensive array of marketing and communications services for clients both domesticallybusiness solutions that realize the potential of combining data and globally. The Company’s objectivecreativity. MDC’s strategy is to create shareholder value by building, growingbuild, grow and acquiringacquire market-leading Partner Firmsbusinesses that deliver innovative, value-addedthe 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 their clients. Management believesMDC leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that shareholder valueare technologically forward and media-agnostic. The Company’s work is maximized with an operating philosophy of “Perpetual Partnership” with proven committeddesigned to challenge the industry leaders in marketing communications.status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
MDC manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenues, operating expenses and capital expenditures. 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) growth by primary discipline, (v) growth from currency changes, and (vi) 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. These indicators may include a Partner Firm’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Partner Firm’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
As discussedEffective in Note 122020, the Company reorganized its management structure resulting in the aggregation of certain Partner Firms into integrated groups (“Networks”). Mark Penn, Chief Executive Officer and Chairman of the NotesCompany, appointed key agency executives, that report directly into him, to lead each Network. In connection with the Unaudited Condensed Consolidated Financial Statements included herein for the Company aggregates operating segments that meet the aggregation criteria detailed in ASC 280 into one of the fourreorganization, we reassessed our reportable segments and combines and discloses those operating segments that do not meetto align our external reporting with how we operate the aggregation criteria in the All Other category. Due to changes in the composition of certain business and the Company’s internal management and reporting structure during 2019, reportable segment results for the 2018Networks under our new organizational structure. Prior periods presented have been recast to reflect the reclassification of certain businesses betweenchange in reportable segments. See Note 12Notes 1 and 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for a description of each of our reportable segments, andthe All Other category, and furtheras well as information regarding a change in reportable segments between the reclassificationfirst and second quarter of certain businesses between segments.2020.
The three reportable segments that result from applying the aggregation criteria 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 throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein and Note 2 of the Company’s 2019 Form 10-K.
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.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. Additional expenses managed by the corporate office that are directly related to the Partner Firms are allocated to the appropriate reportable segment and the All Other category.
Certain Factors Affecting Our Business
See the Executive Summary section of Item 7 of the Company’s Annual Report on2019 Form 10-K for the year ended December 31, 2018 for information regarding certain factors affecting our business.





Results of Operations:

Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 20182020 2019 2020
2019
Revenue:(Dollars in Thousands)(Dollars in Thousands)
Global Integrated Agencies$154,368
 $158,163
 $284,087
 $287,686
Domestic Creative Agencies65,193
 72,971
 132,201
 139,625
Specialist Communication47,170
 40,304
 86,123
 79,128
Media Services21,331
 21,398
 41,510
 46,082
Integrated Networks - Group A$82,735
 $103,248
 $173,356
 $176,987
Integrated Networks - Group B93,398
 133,394
 211,105

266,565
Media & Data Network28,551
 39,456
 69,609

82,688
All Other74,068
 86,907
 147,000
 154,190
54,994
 86,032
 133,350

164,681
Total$362,130
 $379,743
 $690,921
 $706,711
$259,678
 $362,130
 $587,420

$690,921
              
Segment operating income (loss):       
Global Integrated Agencies$20,720
 $18,352
 $24,491
 $4,760
Domestic Creative Agencies8,730
 5,077
 14,207
 7,955
Specialist Communication6,683
 6,216
 13,760
 9,944
Media Services991
 (1,719) (843) (1,738)
Operating Income (Loss):       
Integrated Networks - Group A$14,605
 $14,963
 $26,637

$11,112
Integrated Networks - Group B(7,717) 17,338
 9,444

36,701
Media & Data Network46
 278
 663

(1,371)
All Other2,949
 15,986
 8,962
 22,430
4,987
 7,494
 12,844

14,135
Corporate(16,631) (13,140) (21,454) (27,212)(11,823) (16,631) (20,161)
(21,454)
Total$23,442
 $30,772
 $39,123
 $16,139
Total Operating Income$98
 $23,442
 $29,427

$39,123
              
Other Income (Expenses):              
Interest expense and finance charges, net$(16,413) $(16,859) $(33,174) $(32,942)$(15,941) $(16,413) $(31,553)
$(33,174)
Foreign exchange gain (loss)2,932
 (6,549) 8,374
 (13,209)5,342
 2,932
 (9,415)
8,374
Other, net(746) 592
 (4,128) 1,033
5,884
 (746) 22,218

(4,128)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates9,215
 7,956
 10,195
 (28,979)(4,617) 9,215
 10,677

10,195
Income tax expense (benefit)2,088
 1,977
 2,835
 (6,353)(7,923) 2,088
 5,577

2,835
Income (loss) before equity in earnings of non-consolidated affiliates7,127
 5,979
 7,360
 (22,626)
Income before equity in earnings of non-consolidated affiliates3,306
 7,127
 5,100

7,360
Equity in earnings (losses) of non-consolidated affiliates206
 (28) 289
 58
(798) 206
 (798)
289
Net income (loss)7,333
 5,951
 7,649
 (22,568)
Net income2,508
 7,333
 4,302

7,649
Net income attributable to the noncontrolling interest(3,043) (2,545) (3,472) (3,442)(3,101) (3,043) (3,892)
(3,472)
Net income (loss) attributable to MDC Partners Inc.$4,290
 $3,406
 $4,177
 $(26,010)(593) 4,290
 410

4,177
Accretion on and net income allocated to convertible preference shares(3,509) (3,515) (6,949) (5,625)
Net income (loss) attributable to MDC Partners Inc. common shareholders$(4,102) $775
 $(6,539) $(1,448)
       
Adjusted EBITDA:       
Integrated Networks - Group A$17,205
 $18,241
 $33,507
 $19,156
Integrated Networks - Group B16,387
 24,848
 33,523
 43,128
Media & Data Network892
 1,004
 2,679
 1,036
All Other6,885
 10,937
 16,790
 17,737
Corporate(5,208) (8,593) (10,770) (13,146)
Total Adjusted EBITDA$36,161
 $46,437
 $75,729
 $67,911





 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Depreciation and amortization:(Dollars in Thousands)
Global Integrated Agencies$4,437
 $4,743
 $8,502
 $12,152
Domestic Creative Agencies1,547
 1,281
 2,786
 2,574
Specialist Communication698
 992
 1,265
 1,959
Media Services794
 635
 1,485
 1,273
All Other2,966
 3,892
 5,025
 5,736
Corporate221
 160
 438
 384
Total$10,663
 $11,703
 $19,501
 $24,078
        
Stock-based compensation:       
Global Integrated Agencies$1,232
 $2,475
 $4,999
 $4,935
Domestic Creative Agencies522
 1,097
 986
 1,507
Specialist Communication52
 52
 78
 239
Media Services(16) 74
 (16) 149
All Other652
 684
 940
 1,341
Corporate1,192
 1,221
 (381) 2,469
Total$3,634
 $5,603
 $6,606
 $10,640
        
Capital expenditures:       
Global Integrated Agencies$1,816
 $2,411
 $3,234
 $4,654
Domestic Creative Agencies369
 569
 1,063
 1,473
Specialist Communication231
 2,208
 482
 2,443
Media Services126
 131
 167
 315
All Other1,757
 547
 2,958
 772
Corporate18
 24
 19
 32
Total$4,317
 $5,890
 $7,923
 $9,689
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Capital expenditures:       
Integrated Networks - Group A$208
 $2,157
 $566
 $4,038
Integrated Networks - Group B(272) 1,013
 205
 2,181
Media & Data Network111
 206
 197
 344
All Other134
 923
 457
 1,341
Corporate1,963
 18
 2,265
 19
Total$2,144
 $4,317
 $3,690
 $7,923


The following tables reconcile Net income (loss) attributable to MDC Partners Inc. common shareholders (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2020 and 2019. The adjustments from Net income (loss) attributable to MDC Partners Inc. common shareholders to Operating income (loss) are detailed in the table above.
 Three Months Ended June 30, 2020
 Integrated Networks - Group A Integrated Networks - Group B Media & Data Network All Other Corporate Total
Net loss attributable to MDC Partners Inc. common shareholders          $(4,102)
Adjustments          4,200
Operating income (loss)$14,605
 $(7,717) $46
 $4,987
 $(11,823) $98
 

          
Adjustments:
          
Depreciation and amortization1,566
 4,387
 807
 1,903
 236
6,097
8,899
Impairment and other losses—
 17,468
 35
 207
 1,129
11
18,839
Stock-based compensation(105) 746
 4
 118
 276
563
1,039
Deferred acquisition consideration adjustments1,139
 1,503
 —
 (330) —
—
2,312
Distributions from non-consolidated affiliates—
 —
 —
 —
 1,079
—
1,079
Other items, net—
 —
 —
 —
 3,895
 3,895
Adjusted EBITDA$17,205
 $16,387
 $892
 $6,885
 $(5,208) $36,161


 Three Months Ended June 30, 2019

Integrated Networks - Group A
Integrated Networks - Group B Media & Data Network All Other Corporate Total
Net income attributable to MDC Partners Inc. common shareholders          $775
Adjustments

          22,667
Operating income (loss)$14,963
 $17,338
 $278
 $7,494
 $(16,631) $23,442
            
Adjustments:           
Depreciation and amortization2,348
 4,318
 1,335
 2,441
 221
 10,663
Stock-based compensation639
 1,627
 6
 170
 1,192
 3,634
Deferred acquisition consideration adjustments291
 1,565
 (615) 832
 —
 2,073
Distributions from non-consolidated affiliates—
 —
—
—
—
—
 31
 31
Other items, net—
 —
—
—
 —
 6,594
 6,594
Adjusted EBITDA$18,241
 $24,848
 $1,004
 $10,937
 $(8,593) $46,437



 Six Months Ended June 30, 2020
 Integrated Networks - Group A
Integrated Networks - Group B Media & Data Network All Other Corporate Total
Net loss attributable to MDC Partners Inc. common shareholders          $(6,539)
Adjustments

          35,966
Operating income (loss)$26,637
 $9,444
 $663
 $12,844
 $(20,161) $29,427
            
Adjustments:           
Depreciation and amortization3,307
 8,913
 1,615
 3,802
 468
 18,105
Impairment and other losses—
 17,629
 35
 207
 1,129
 19,000
Stock-based compensation1,856
 1,646
 (9) 198
 418
 4,109
Deferred acquisition consideration adjustments1,707
 (4,109) 375
 (261) —
 (2,288)
Distributions from non-consolidated affiliates—
 —
 —
 —
 1,065
 1,065
Other items, net—
 —
 —
 —
 6,311
 6,311
Adjusted EBITDA$33,507
 $33,523
 $2,679
 $16,790
 $(10,770) $75,729



 Six Months Ended June 30, 2019

Integrated Networks - Group A Integrated Networks - Group B Media & Data Network All Other Corporate Total
Net loss attributable to MDC Partners Inc. common shareholders          $(1,448)
Adjustments

          40,571
Operating income (loss)$11,112
 $36,701
 $(1,371) $14,135
 $(21,454) $39,123

           
Adjustments:           
Depreciation and amortization4,289
 8,092
 2,328
 4,354
 438
 19,501
Impairment and other losses—
 —
 —
 —
 —
 —
Stock-based compensation4,234
 2,491
 6
 256
 (381) 6,606
Deferred acquisition consideration adjustments(479) (4,156) 73
 (1,008) —
 (5,570)
Distributions from non- consolidated affiliates—
 —
 —
 —
 31
 31
Other items, net—
 —
 —
 —
 8,220
 8,220
Adjusted EBITDA$19,156
 $43,128
 $1,036
 $17,737
 $(13,146) $67,911


THREE MONTHS ENDED JUNE 30, 20192020 COMPARED TO THREE MONTHS ENDED JUNE 30, 2018

2019
Consolidated Results of Operations

Revenues
Revenue was $259.7 million for the three months ended June 30, 2020 compared to revenue of $362.1 million for the three months ended June 30, 20192019.
The components of the fluctuations in revenues for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
June 30, 2019$362,130
   $284,659
   $24,564
   $52,907
  
Components of revenue change:               
   Foreign exchange impact(2,909) (0.8)% —
 — % (847) (3.4)% (2,062) (3.9)%
   Non-GAAP acquisitions (dispositions), net(4,106) (1.1)% (4,106) (1.4)% —
 — % —
 — %
   Organic revenue(95,437) (26.4)% (70,211) (24.7)% (7,108) (28.9)% (18,118) (34.2)%
Total Change$(102,452) (28.3)% $(74,317) (26.1)% $(7,955) (32.4)% $(20,180) (38.1)%
June 30, 2020$259,678
   $210,342
   $16,609
   $32,727
  
The negative foreign exchange impact of $2.9 million, or 0.8%, was attributable to the fluctuation of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro and British Pound.
For the three months ended June 30, 2020, organic revenue declined $95.4 million, or 26.4%, primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The table below provides a reconciliation between revenue from acquired/disposed businesses in the statement of $379.7operations to non-GAAP acquisitions (dispositions), net for the three months ended June 30, 2020:
 All Other Total
 (Dollars in Thousands)
GAAP revenue from 2019 and 2020 acquisitions$—
 $—
Foreign exchange impact—
 —
Contribution to non-GAAP organic revenue growth (decline)—
 —
Prior year revenue from dispositions(4,106) (4,106)
Non-GAAP acquisitions (dispositions), net$(4,106) $(4,106)
The geographic mix in revenues for the three months ended June 30, 2020 and 2019 is as follows:
 2020 2019
United States81.0% 78.6%
Canada6.4% 6.8%
Other12.6% 14.6%

Impairment and Other Losses
The Company recognized a charge of $18.8 million for the three months ended June 30, 2018. See2020 consisting of goodwill impairment of $13.4 million and an impairment of right-of-use lease assets and loss of $5.5 million.
Given the Advertisingimpact of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the second quarter of 2020. The interim test resulted in an impairment of goodwill of $13.4 million to write-down the excess carrying value above the fair value of goodwill of one reporting unit within the Integrated Networks - Group B reportable segment. Additionally, the interim test resulted in the fair value of one reporting unit, with goodwill of approximately $130.0 million, exceeding its

carrying value by a minimal percentage. If the duration of the COVID-19 pandemic is longer and Communications Group section below forthe operational impact is greater than estimated, the Company could recognize another impairment of goodwill in the future.
The Company recorded a discussion regarding consolidated revenues forloss of $5.5 million primarily to reduce the three months ended June 30, 2019 compared toexcess carrying value of certain right-of-use lease assets and related leasehold improvements above the three months ended June 30, 2018.fair value.
Operating Income (Loss)
Operating income for the three months ended June 30, 20192020 was $23.4$0.1 million, compared to $30.8operating income of $23.4 million for the three months ended June 30, 2018,2019, representing a change of $23.3 million, primarily driven by the impairment charge of $18.8 million. In addition, the decline in revenues were mostly offset by a reduction in operating expenses to align our costs with revenues impacted by the COVID-19 pandemic.
Adjusted EBITDA
Adjusted EBITDA for the three months ended June 30, 2020 was $36.2 million, compared to $46.4 million for the three months ended June 30, 2019, representing a decrease of $7.4 million. The decrease was primarily driven by a decline$10.3 million, principally resulting from the same reasons as the reduction in operatingOperating income, in the Advertising and Communications Groupaddition to an incremental reduction of $3.8 million. Additionally, Corporate operating expenses, were higher by $3.5 million, driven by severance expense inprimarily from the second quarterexclusion of 2019.the goodwill impairment for the three months ended June 30, 2020.
Other, Net
Other, net, for the three months ended June 30, 20192020 was income of $5.9 million, primarily driven by a gain of $7.4 million on the repurchase of $29.7 million of the Company’s senior notes due 2024 (the “6.50% Notes”), partially offset by a charge to write-down certain assets, compared to a loss of $0.7 million compared to income of $0.6 million for the three months ended June 30, 2018.2019.
Foreign Exchange Transaction Gain (Loss)
ForeignThe foreign exchange gain for the three months ended June 30, 20192020 was $2.9$5.3 million compared to loss of $6.5$2.9 million for the three months ended June 30, 2018.2019. The improvementchange in the foreign exchange impact iswas primarily attributable to the strengthening of the Canadian dollar against the U.S. dollar.dollar in 2020 compared to the prior year period. The change is primarily related to U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company.
Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the three months ended June 30, 20192020 was $16.4$15.9 million compared to $16.9$16.4 million for the three months ended June 30, 2018,2019, representing a decrease of $0.5 million.million, primarily driven by a decline in the average amounts outstanding under the Company’s revolving credit facility.
Income Tax Expense (Benefit)
Income tax expensebenefit for the three months ended June 30, 20192020 was $7.9 million (on a pre-tax loss of $4.6 million resulting in an effective tax rate of 171.6%) compared to an income tax expense of $2.1 million (on pre-tax income of $9.2 million resulting in an effective tax rate of 22.7%) compared to an expense of $2.0 million (on income of $8.0 million resulting in an effective tax rate of 24.8%) for the three months ended June 30, 2018.  2019.
The change in the effective tax rate was primarily driven by the jurisdictional mix of earnings.
Equity171.6% in Earnings of Non-Consolidated Affiliates
Equity in earnings of non-consolidated affiliates represents the income or losses attributable to equity method investments. Income recorded for the three months ended June 30, 2020 as compared to 22.7% in the same period in 2019 was $0.2 million comparedprimarily attributable to the impact of applying the estimated annual effective tax rate to the pre-tax loss of $0.03 million forin the three months ended June 30, 2018.current period.
Noncontrolling Interests
The effect of noncontrolling interests for the three months ended June 30, 20192020 was $3.0$3.1 million compared to $2.5$3.0 million for the three months ended June 30, 2018.

2019.
Net IncomeLoss 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 preference shares, net incomeloss attributable to MDC Partners Inc. common shareholders for the three months ended June 30, 20192020 was $0.8$4.1 million, or $0.01$0.06 diluted incomeloss per share, compared to net income attributable to MDC Partners Inc. common shareholders of $1.1$0.8 million, or $0.02$0.01 diluted income per share, for the three months ended June 30, 2018.
Advertising and Communications Group
The following discussion provides additional detailed disclosure for each of the Company’s four (4) reportable segments, and the “All Other” category, within the Advertising and Communications Group.2019.

Integrated Networks - Group A
The componentschange in expenses, operating income and Adjusted EBITDA as a percentage of revenue in the fluctuations in revenuesIntegrated Networks - Group A reportable segment for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
June 30, 2018$379,743
   $295,268
   $33,086
   $51,389
  
Components of revenue change:               
Foreign exchange impact(4,176) (1.1)% —
 — % (1,122) (3.4)% (3,054) (5.9)%
Non-GAAP acquisitions (dispositions), net(4,218) (1.1)% 496
 0.2 % (5,545) (16.8)% 831
 1.6 %
Organic revenue growth (decline)(9,219) (2.4)% (11,105) (3.8)% (1,855) (5.6)% 3,741
 7.3 %
Total Change$(17,613) (4.6)% $(10,609) (3.6)% $(8,522) (25.8)% $1,518
 3.0 %
June 30, 2019$362,130
   $284,659
   $24,564
   $52,907
  
Revenue was $362.1 million for the three months ended June 30, 2019 compared to revenue of $379.7 million for the three months ended June 30, 2018, representing a decline of $17.6 million.

The negative foreign exchange impact of $4.2 million, or 1.1%, was attributed to the fluctuation of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro2020 and British Pound.
The Company also utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined above. For the three months ended June 30, 2019 organic revenue decreased by $9.2 million, or 2.4%, of which $9.7 million, or 2.5% pertained to Partner Firms the Company has owned throughout each of the comparable periods presented. The remaining revenue growth of $0.4 million, or 0.1%, was generated from acquired Partner Firms. The decline 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. Additionally, the change in revenue was driven by a decline in categories including health care, food and beverage and automotive, partially offset by growth in transportation and technology.
The table below provides a reconciliation between the revenue in the Advertising and Communications Group from acquired/disposed businesses in the statement of operations to non-GAAP acquisitions (dispositions), net for the three months ended June 30, 2019:
 Specialist Communications All Other Total
 (Dollars in Thousands)
GAAP revenue from 2018 and 2019 acquisitions$1,519
 $698
 $2,217
Contribution to non-GAAP organic revenue (growth) decline(440)—
—
—
(440)
Prior year revenue from dispositions—
 (5,995) (5,995)
Non-GAAP acquisitions (dispositions), net$1,079
 $(5,297) $(4,218)

The geographic mix in revenues for the three months ended June 30, 2019 and 2018 is as follows:
 2019 2018
United States78.6% 77.8%
Canada6.8% 8.7%
Other14.6% 13.5%
Revenue growth was mixed through the geographic regions with a decline in the United States of 3.6%, a decline in Canada of 25.8%, partially offset by growth of 3.0% in the other regions outside of North America partially attributable to the strengthening of the U.S. dollar.

The United States and Canada had organic revenue decline of 3.8% and 5.6%, respectively. Organic revenue growth outside of North America was 7.3%. Organic revenue performance in the United States and Canada was attributable to client losses and a reduction in spending by some clients, partially offset by a contribution from new client wins.
The change in expenses and operating profit as a percentage of revenue in the Advertising and Communications Group for the three months ended June 30, 2019 and 2018 was as follows:
 2019 2018 Change 2020 2019 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
Integrated Networks - Group A $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue: $362,130
   $379,743
   $(17,613) (4.6)% $82,735
   $103,248
   $(20,513) (19.9)%
Operating expenses                        
Cost of services sold 240,482
 66.4% 253,390
 66.7% (12,908) (5.1)% 53,193
 64.3% 71,251
 69.0% (18,058) (25.3)%
Office and general expenses 71,132
 19.6% 70,898
 18.7% 234
 0.3 % 13,371
 16.2% 14,686
 14.2% (1,315) (9.0)%
Depreciation and amortization 10,442
 2.9% 11,543
 3.0% (1,101) (9.5)% 1,566
 1.9% 2,348
 2.3% (782) (33.3)%
 $322,056
 88.9% $335,831
 88.4% $(13,775) (4.1)% $68,130
 82.3% $88,285
 85.5% $(20,155) (22.8)%
Operating profit (loss) $40,074
 11.1% $43,912
 11.6% $(3,838) (8.7)%
Operating income $14,605
 17.7% $14,963
 14.5% $(358) (2.4)%
            
Adjusted EBITDA $17,205
 20.8% $18,241
 17.7% $(1,036) (5.7)%
The changedecrease in revenue was primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The decrease in operating profitincome was primarily attributable to the 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 Advertising and CommunicationsIntegrated Networks - Group for the three months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $60,040
 16.6% $52,590
 13.8 % $7,450
 14.2 %
Staff costs (2)
 204,442
 56.5% 224,582
 59.1 % (20,140) (9.0)%
Administrative 42,617
 11.8% 47,801
 12.6 % (5,184) (10.8)%
Deferred acquisition consideration 2,073
 0.6% (5,067) (1.3)% 7,140
 NM
Stock-based compensation 2,442
 0.7% 4,382
 1.2 % (1,940) (44.3)%
Depreciation and amortization 10,442
 2.9% 11,543
 3.0 % (1,101) (9.5)%
Total operating expenses $322,056
 88.9% $335,831
 88.4 % $(13,775) (4.1)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
Direct costs increased primarily attributed to higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was primarily attributed to staffing reductions at Partner Firms and lower costs to support the operations of Partner Firms.
Deferred acquisition consideration change for the three months ended June 30, 2019 was primarily attributed to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.

Global Integrated Agencies
The change in expenses and operating profit as a percentage of revenue in the Global Integrated AgenciesA reportable segment for the three months ended June 30, 20192020 and 20182019 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue: $154,368
   $158,163
   $(3,795) (2.4)%
Operating expenses            
Cost of services sold 97,230
 63.0% 104,959
 66.4% (7,729) (7.4)%
Office and general expenses 31,981
 20.7% 30,109
 19.0% 1,872
 6.2 %
Depreciation and amortization 4,437
 2.9% 4,743
 3.0% (306) (6.4)%
  $133,648
 86.6% $139,811
 88.4% $(6,163) (4.4)%
Operating profit $20,720
 13.4% $18,352
 11.6% $2,368
 12.9 %
  2020 2019 Change
Integrated Networks - Group A $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs $7,630
 9.2 % $14,996
 14.5% $(7,366) (49.1)%
Staff costs 49,045
 59.3 % 59,206
 57.3% (10,161) (17.2)%
Administrative 8,855
 10.7 % 10,805
 10.5% (1,950) (18.0)%
Deferred acquisition consideration 1,139
 1.4 % 291
 0.3% 848
 NM
Stock-based compensation (105) (0.1)% 639
 0.6% (744) NM
Depreciation and amortization 1,566
 1.9 % 2,348
 2.3% (782) (33.3)%
Total operating expenses $68,130
 82.3 % $88,285
 85.5% $(20,155) (22.8)%
Direct costs declined in line with the reduction in revenues as discussed above.
The decline in revenue is primarilystaff 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 negative impactdecline in spending resulting from foreign exchange of $2.9 million, or 1.8%.the orders to work-from-home given the COVID-19 pandemic and related cost containment initiatives.
The change in operating profitdeferred acquisition consideration for the three months ended June 30, 2020 was primarily attributedattributable to an increase in the projected performance of certain Partner Firms relative to previously projected expectations.
The decline in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income for the three months ended June 30, 2020.


Integrated Networks - Group B
The change in expenses, operating income (loss) and Adjusted EBITDA as a percentage of revenue in the Integrated Networks - Group B reportable segment for the three months ended June 30, 2020 and 2019 was as follows:
  2020 2019 Change
Integrated Networks - Group B $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue: $93,398
   $133,394
   $(39,996) (30.0)%
Operating expenses            
Cost of services sold 55,282
 59.2 % 79,356
 59.5% (24,074) (30.3)%
Office and general expenses 23,978
 25.7 % 32,382
 24.3% (8,404) (26.0)%
Depreciation and amortization 4,387

4.7 %
4,318

3.2%
69

1.6 %
Impairment and other losses 17,468

18.7 %
—

—%
17,468

— %
  $101,115
 108.3 % $116,056
 87.0% $(14,941) (12.9)%
Operating income (loss) $(7,717) (8.3)% $17,338
 13.0% $(25,055) NM
             
Adjusted EBITDA $16,387
 17.5 % $24,848
 18.6% $(8,461) (34.1)%
The decrease in revenue was primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.

The decrease in operating income was attributable to the decline in revenue, more thanpartially offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Global Integrated AgenciesNetworks - Group B reportable segment for the three months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
Integrated Networks - Group B $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $15,785
 10.2% $11,237
 7.1 % $4,548
 40.5 % $7,661
 8.2% $16,519
 12.4% $(8,858) (53.6)%
Staff costs (2)
 91,357
 59.2% 102,066
 64.5 % (10,709) (10.5)% 58,614
 62.8% 75,369
 56.5% (16,755) (22.2)%
Administrative 19,026
 12.3% 21,899
 13.8 % (2,873) (13.1)% 10,736
 11.5% 16,658
 12.5% (5,922) (35.6)%
Deferred acquisition consideration 1,811
 1.2% (2,609) (1.6)% 4,420
 NM
 1,503
 1.6% 1,565
 1.2% (62) (4.0)%
Stock-based compensation 1,232
 0.8% 2,475
 1.6 % (1,243) (50.2)% 746
 0.8% 1,627
 1.2% (881) (54.1)%
Depreciation and amortization 4,437
 2.9% 4,743
 3.0 % (306) (6.4)% 4,387
 4.7% 4,318
 3.2% 69
 1.6 %
Impairment and other losses 17,468
 18.7% —
 —% 17,468
 — %
Total operating expenses $133,648
 86.6% $139,811
 88.4 % $(6,163) (4.4)% $101,115
 108.3% $116,056
 87.0% $(14,941) (12.9)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
Direct costs increased primarily attributed to higher billable costs for client arrangements accounted fordeclined in line with the reduction in revenues as principal.discussed above.
The decreasedecline in staff costs was attributedattributable to staffing reductions at certain Partner Firms.a reduction in staff to combat the impact of the COVID-19 pandemic on the business.
DeferredAdministrative 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.
The change in deferred acquisition consideration change for the three months ended June 30, 20192020 was primarily attributedattributable to an increase in the aggregateprojected performance of certain Partner Firms in 2019 relative to the previously projected expectations.
The decline in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income, and the exclusion of the goodwill and right-of-use lease asset impairments for the three months ended June 30, 2020.

Domestic Creative AgenciesMedia & Data Network
The change in expenses, operating income and operating profitAdjusted EBITDA as a percentage of revenue in the Domestic Creative AgenciesMedia & Data Network reportable segment for the three months ended June 30, 20192020 and 20182019 was as follows:
  2020 2019 Change
Media & Data Network $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $28,551
   $39,456
   $(10,905) (27.6)%
Operating expenses            
Cost of services sold 20,882
 73.1% 29,407
 74.5% (8,525) (29.0)%
Office and general expenses 6,781
 23.8% 8,436
 21.4% (1,655) (19.6)%
Depreciation and amortization
807

2.8%
1,335

3.4%
(528)
(39.6)%
Impairment and other losses
35

0.1%
—

—%
35

— %
  $28,505
 99.8% $39,178
 99.3% $(10,673) (27.2)%
Operating income $46
 0.2% $278
 0.7% $(232) (83.5)%
             
Adjusted EBITDA $892
 3.1% $1,004
 2.5% $(112) (11.2)%
  2019 2018 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $65,193
   $72,971
   $(7,778) (10.7)%
Operating expenses            
Cost of services sold 41,782
 64.1% 49,830
 68.3% (8,048) (16.2)%
Office and general expenses 13,134
 20.1% 16,783
 23.0% (3,649) (21.7)%
Depreciation and amortization 1,547
 2.4% 1,281
 1.8% 266
 20.8 %
  $56,463
 86.6% $67,894
 93.0% $(11,431) (16.8)%
Operating profit $8,730
 13.4% $5,077
 7.0% $3,653
 72.0 %
The declinedecrease in revenue from existing Partner Firmswas primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The decrease in operating income was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins.
The change in operating profit was attributed to the 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 Domestic Creative AgenciesMedia & Data Network reportable segment for the three months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
Media & Data Network $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $9,863
 15.1 % $12,267
 16.8% $(2,404) (19.6)% $6,556
 23.0% $10,166
 25.8 % $(3,610) (35.5)%
Staff costs (2)
 37,009
 56.8 % 42,809
 58.7% (5,800) (13.5)% 16,713
 58.5% 21,926
 55.6 % (5,213) (23.8)%
Administrative 7,688
 11.8 % 9,207
 12.6% (1,519) (16.5)% 4,390
 15.4% 6,360
 16.1 % (1,970) (31.0)%
Deferred acquisition consideration (166) (0.3)% 1,233
 1.7% (1,399) NM
 —
 —% (615) (1.6)% 615
 (100.0)%
Stock-based compensation 522
 0.8 % 1,097
 1.5% (575) (52.4)% 4
 —% 6
 — % (2) (33.3)%
Depreciation and amortization 1,547
 2.4 % 1,281
 1.8% 266
 20.8 % 807
 2.8% 1,335
 3.4 % (528) (39.6)%
Impairment and other losses 35
 0.1% —
 — % 35
 — %
Total operating expenses $56,463
 86.6 % $67,894
 93.0% $(11,431) (16.8)% $28,505
 99.8% $39,178
 99.3 % $(10,673) (27.2)%
NM - Not meaningfulDirect costs declined in line with the reduction in revenues as discussed above.
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The decline in direct costs are attributable to the decline in revenues.
The decrease in staff costs were attributed to staffing reductions at certain Partner Firms.
Deferred acquisition consideration change for the three months ended June 30, 2019 was primarily attributed to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.

Specialist Communications
The change in expenses and operating profit as a percentage of revenue in the Specialist Communications reportable segment for the three months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $47,170
   $40,304
   $6,866
 17.0 %
Operating expenses            
Cost of services sold 32,112
 68.1% 25,613
 63.5% 6,499
 25.4 %
Office and general expenses 7,677
 16.3% 7,483
 18.6% 194
 2.6 %
Depreciation and amortization 698
 1.5% 992
 2.5% (294) (29.6)%
  $40,487
 85.8% $34,088
 84.6% $6,399
 18.8 %
Operating profit $6,683
 14.2% $6,216
 15.4% $467
 7.5 %
The increase in revenue is primarily due to client wins at certain Partner firms as well as a contribution of $1.5 million from an acquired Partner Firm.
The change in operating profit was attributed to the increase in revenue, partially offset by higher operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Specialist Communications reportable segment for the three months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $13,017
 27.6% $8,970
 22.3% $4,047
 45.1 %
Staff costs (2)
 20,977
 44.5% 18,769
 46.6% 2,208
 11.8 %
Administrative 4,998
 10.6% 5,048
 12.5% (50) (1.0)%
Deferred acquisition consideration 745
 1.6% 257
 0.6% 488
 NM
Stock-based compensation 52
 0.1% 52
 0.1% —
 —
Depreciation and amortization 698
 1.5% 992
 2.5% (294) (29.6)%
Total operating expenses $40,487
 85.8% $34,088
 84.6% $6,399
 18.8 %
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The increase in direct costs are attributable to higher revenues.
The increase in staff costs was primarily attributedattributable to contributionsa reduction in staff to combat the impact on the business from an acquired Partner Firmthe 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 higher costs to support the growth of certain Partner Firms.

Media Servicesother cost containment initiatives.
The changedecline in expenses and operating profit as a percentage of revenue in the Media Services reportable segmentAdjusted EBITDA is principally for the three months ended June 30, 2019 and 2018 wassame reasons as follows:

  2019 2018 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $21,331
   $21,398
   $(67) (0.3)%
Operating expenses            
Cost of services sold 14,835
 69.5% 15,239
 71.2 % (404) (2.7)%
Office and general expenses 4,711
 22.1% 7,243
 33.8 % (2,532) (35.0)%
Depreciation and amortization 794
 3.7% 635
 3.0 % 159
 25.0 %
  $20,340
 95.4% $23,117
 108.0 % $(2,777) (12.0)%
Operating income (loss) $991
 4.6% $(1,719) (8.0)% $2,710
 NM
NM - Not meaningful
The changethe reduction in operating profit was primarily attributable lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Media Services reportable segment for the three months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $3,716
 17.4 % $1,652
 7.7% $2,064
 125.0 %
Staff costs (2)
 12,710
 59.6 % 16,629
 77.7% (3,919) (23.6)%
Administrative 3,751
 17.6 % 4,037
 18.9% (286) (7.1)%
Deferred acquisition consideration (615) (2.9)% 90
 0.4% (705) NM
Stock-based compensation (16) (0.1)% 74
 0.3% (90) NM
Depreciation and amortization 794
 3.7 % 635
 3.0% 159
 25.0 %
Total operating expenses $20,340
 95.4 % $23,117
 108.0% $(2,777) (12.0)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The increase in direct costs is driven by incremental costs to support certain client arrangements.
The decrease in staff costs was attributed to staffing reductions at certain Partner Firms.Operating income.

All Other
The change in expenses, operating income and operating profitAdjusted EBITDA as a percentage of revenue in the All Other category for the three months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ % $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue $74,068
   $86,907
   $(12,839) (14.8)% $54,994
   $86,032
   $(31,038) (36.1)%
Operating expenses                        
Cost of services sold 54,522
 73.6% 57,749
 66.4% (3,227) (5.6)% 36,275
 66.0% 60,469
 70.3% (24,194) (40.0)%
Office and general expenses 13,631
 18.4% 9,280
 10.7% 4,351
 46.9 % 11,622
 21.1% 15,628
 18.2% (4,006) (25.6)%
Depreciation and amortization 2,966
 4.0% 3,892
 4.5% (926) (23.8)% 1,903
 3.5% 2,441
 2.8% (538) (22.0)%
Impairment and other losses
207

0.4%
—

—%
207

— %
 $71,119
 96.0% $70,921
 81.6% $198
 0.3 % $50,007

90.9% $78,538
 91.3% $(28,531) (36.3)%
Operating profit $2,949
 4.0% $15,986
 18.4% $(13,037) (81.6)%
Operating income $4,987
 9.1% $7,494
 8.7% $(2,507) (33.5)%
            
Adjusted EBITDA $6,885
 12.5% $10,937
 12.7% $(4,052) (37.0)%

The declinedecrease in revenue was primarily attributable to a disposition of a Partner Firmlower spending by clients in connection with an impact of $6.0 million as well as a decline from existing Partner Firms of $7.0 million, primarilythe COVID-19 pandemic.
The decrease in operating income was attributable to reduced spending from existing clients.the 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 three months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ % $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $17,659
 23.8% $18,464
 21.2 % $(805) (4.4)% $7,695
 14.0 % $18,358
 21.3% $(10,663) (58.1)%
Staff costs (2)
 42,390
 57.2% 44,309
 51.0 % (1,919) (4.3)% 34,332
 62.4 % 47,945
 55.7% (13,613) (28.4)%
Administrative 7,154
 9.7% 7,610
 8.8 % (456) (6.0)% 6,082
 11.1 % 8,792
 10.2% (2,710) (30.8)%
Deferred acquisition consideration 298
 0.4% (4,038) (4.6)% 4,336
 NM
 (330) (0.6)% 832
 1.0% (1,162) NM
Stock-based compensation 652
 0.9% 684
 0.8 % (32) (4.7)% 118
 0.2 % 170
 0.2% (52) (30.6)%
Depreciation and amortization 2,966
 4.0% 3,892
 4.5 % (926) (23.8)% 1,903
 3.5 % 2,441
 2.8% (538) (22.0)%
Impairment and other losses 207
 0.4 % —
 —% 207
 — %
Total operating expenses $71,119
 96.0% $70,921
 81.6 % $198
 0.3 % $50,007
 90.9 % $78,538
 91.3% $(28,531) (36.3)%
NM - Not meaningfulDirect costs declined in line with the reduction in revenues as discussed above.
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The decreasedecline in staff costs was primarily attributedattributable to staffing reductions at certain Partner Firms and a positive benefitreduction in staff to combat the impact on the business from the disposition ofCOVID-19 pandemic.
Administrative costs were lower due to a Partner Firm.decline in spending resulting from the orders to work-from-home given the COVID-19 pandemic and other cost containment initiatives.

DeferredThe change in deferred acquisition consideration change for the three months ended June 30, 20192020 was primarily attributedattributable to a decrease in the aggregateprojected performance of certain Partner Firms in 2019 relative to the previously projected expectations.
The decline in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income, and the exclusion of the deferred acquisition consideration benefit from the three months ended June 30, 2020.

Corporate
The change in operating expenses and Adjusted EBITDA for Corporate for the three months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Variance 2020 2019 Change
Corporate $ $ $ % $ $ $ %
 (Dollars in Thousands) (Dollars in Thousands)
Staff costs (1)
 $11,325
 $6,377
 $4,948
 77.6 %
Staff costs $3,772
 $11,325
 $(7,553) (66.7)%
Administrative 3,893
 5,382
 (1,489) (27.7)% 6,410
 3,893
 2,517
 64.7 %
Stock-based compensation 1,192
 1,221
 (29) (2.4)% 276
 1,192
 (916) (76.8)%
Depreciation and amortization 221
 160
 61
 38.1 % 236
 221
 15
 6.8 %
Impairment and other losses 1,129
 —
 1,129
 — %
Total operating expenses $16,631
 $13,140
 $3,491
 26.6 % $11,823
 $16,631
 $(4,808) (28.9)%
        
Adjusted EBITDA $(5,208) $(8,593) $3,385
 (39.4)%
(1)Excludes stock-based compensation.
Staff costs increased due to a $6.7 million severance charge, partially offset by lower compensation expense associated with aThe reduction in staff relatedcosts is primarily driven by a severance charge in 2019 not repeated in 2020.
Administrative costs were higher due to certain actions takenan increase in the prior year.

The decrease in administrativeoccupancy costs was primarily related to lower professional fees as the prior year included fees related to the implementationCompany’s new space at One World Trade Center as part of the centralization of its New York real estate portfolio.
Stock-based compensation declined primarily as a result of a new accounting pronouncement.reduced level of awards outstanding and lesser stock-based compensation being recorded in 2020 due to the expectation that certain performance vesting conditions will not be met.

The impairment was recognized to write-down the carrying value of a right-of-use lease asset to its fair value.

The improvement in Adjusted EBITDA is a result of the change in operating expenses, and the exclusion of the impairment charge, severance expense and occupancy costs associated with the centralization of our New York real estate portfolio.
SIX MONTHS ENDED JUNE 30, 20192020 COMPARED TO SIX MONTHS ENDED JUNE 30, 2018

2019
Consolidated Results of Operations

Revenues
Revenue was $587.4 million for the six months ended June 30, 2020 compared to revenue of $690.9 million for the six months ended June 30, 20192019. The components of the fluctuations in revenues for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
June 30, 2019$690,921
   $547,676
   $46,942
   $96,303
  
Components of revenue change:               
   Foreign exchange impact(4,709) (0.7)% —
 — % (876) (1.9)% (3,833) (4.0)%
   Non-GAAP acquisitions (dispositions), net(9,789) (1.4)% (6,084) (1.1)% (3,705) (7.9)% —
 — %
   Organic revenue(89,003) (12.9)% (66,689) (12.2)% (7,496) (16.0)% (14,818) (15.4)%
Total Change$(103,501) (15.0)% $(72,773) (13.3)% $(12,077) (25.7)% $(18,651) (19.4)%
June 30, 2020$587,420
   $474,903
   $34,865
   $77,652
  
The negative foreign exchange impact of $4.7 million, or 0.7%, was attributable to the fluctuation of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro and British Pound.
For the six months ended June 30, 2020, organic revenue declined $89.0 million, or 12.9%, primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.

The table below provides a reconciliation between the revenue from acquired/disposed businesses in the statement of $706.7operations to non-GAAP acquisitions (dispositions), net for the six months ended June 30, 2020:
 All Other Total
 (Dollars in Thousands)
GAAP revenue from 2019 and 2020 acquisitions$—
 $—
Foreign exchange impact(248) (248)
Contribution to non-GAAP organic revenue growth(411) (411)
Prior year revenue from dispositions(9,130) (9,130)
Non-GAAP acquisitions (dispositions), net$(9,789) $(9,789)
The geographic mix in revenues for the six months ended June 30, 2020 and 2019 is as follows:
 2020 2019
United States80.9% 79.3%
Canada5.9% 6.8%
Other13.2% 13.9%
Impairment and Other Losses
The Company recognized a charge of $19.0 million for the six months ended June 30, 2018. See2020 consisting of a goodwill impairment of $13.4 million and an impairment of right-of-use lease assets and loss of $5.6 million.
Given the Advertisingimpact of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the second quarter of 2020. The interim test resulted in an impairment of goodwill of $13.4 million to write-down the excess carrying value above the fair value of goodwill of one reporting unit within the Integrated Networks - Group B reportable segment.
The Company recorded a loss of $5.6 million primarily to reduce the excess carrying value of certain right-of-use lease assets and Communications Group section belowrelated leasehold improvements above the fair value.
Operating Income
Operating income for a discussion regarding consolidated revenuesthe six months ended June 30, 2020 was $29.4 million compared to $39.1 million for the six months ended June 30, 2019, comparedrepresenting a decline of $9.7 million, driven by the decline in revenues, partially offset by a reduction in operating expenses to align our costs with revenues impacted by the COVID-19 pandemic.
Adjusted EBITDA
Adjusted EBITDA for the six months ended June 30, 2018.
Operating Profit
Operating profit2020 was $75.7 million, compared to $67.9 million for the six months ended June 30, 2019, was $39.1 million compared to $16.1 million for the six months ended June 30, 2018, representing a change of $23.0 million. The change was primarily driven by an increase of $7.8 million, principally resulting from the same reasons as the reduction in operatingOperating income, in the Advertising and Communications Groupaddition to an incremental reduction of $17.2 million. Additionally, Corporate operating expenses, decreased by $5.8 million,primarily related to lower compensation expense, stock-based compensationfrom the exclusion of the impairment and professional fees as well as an impairment chargeother losses of $2.3 million recognized in 2018.$19.0 million.
Other, Net
Other, net, for the six months ended June 30, 20192020 was income of $22.2 million, driven by a gain on the sale of Sloane and on the repurchase of a portion of the Company’s 6.50% Notes, compared to a loss of $4.1 million compared to income of $1.0 million for the six months ended June 30, 2018,2019, primarily driven by a loss on the sale of Kingsdale.
Foreign Exchange Transaction Gain (Loss)
ForeignThe foreign exchange gainloss for the six months ended June 30, 20192020 was $8.4$9.4 million compared to a lossgain of $13.2$8.4 million for the six months ended June 30, 2018.2019. The change in foreign exchange iswas primarily attributable to the strengtheningweakening of the Canadian dollar against the U.S. dollar. The change primarily related to U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company.

Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the six months ended June 30, 20192020 was $33.2$31.6 million compared to $32.9$33.2 million for the six months ended June 30, 2018,2019, representing an increasea decrease of $0.3$1.6 million, primarily driven by a decline in the average amounts outstanding under the Company’s revolving credit facility.
Income Tax Expense (Benefit)

Income tax expense for the six months ended June 30, 20192020 was $5.6 million (on pre-tax income of $10.7 million resulting in an effective tax rate of 52.2%) compared to an expense of $2.8 million (on pre-tax income of $10.2 million resulting in an effective tax rate of 27.8%) compared to a benefit of $6.4 million (on a loss of $29.0 million resulting in an effective tax rate of 21.9%) for the six months ended June 30, 2018. 2019.
The change in the effective tax rate was primarily driven by the jurisdictional mix of earnings.
Equity52.2% in Earnings (Losses) of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates represents the income or losses attributable to equity-accounted affiliate operations. The Company recorded $0.3 million of income for the six months ended June 30, 20192020 as compared to income of $0.1 million for27.8% in same period in 2019 was primarily attributable to an increase in the six months ended June 30, 2018.base erosion and anti-abuse tax (“BEAT”) in 2020.
Noncontrolling Interests
The effect of noncontrolling interests for the six months ended June 30, 20192020 was $3.5$3.9 million compared to $3.4$3.5 million for the six months ended June 30, 2018.

2019.
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 preference shares, net loss attributable to MDC Partners Inc. common shareholders for the six months ended June 30, 20192020 was $1.4$6.5 million, or $0.02$0.09 diluted loss per share, compared to net loss attributable to MDC Partners Inc. common shareholders of $30.1$1.4 million, or $0.53$0.02 diluted incomeloss per share, for the six months ended June 30, 2018.2019.
Advertising and Communications
Integrated Networks - Group A
The following discussion provides additional detailed disclosure for eachchange in expenses, operating income and Adjusted EBITDA as a percentage of revenue in the Company’s four (4)Integrated Networks - Group A reportable segments, plus the “All Other” category, within the Advertising and Communications Group.
The components of the fluctuations in revenuessegment for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
June 30, 2018$706,711
   $551,792
   $59,465
   $95,454
  
Components of revenue change:               
Foreign exchange impact(9,316) (1.3)% —
 — % (2,375) (4.0)% (6,941) (7.3)%
Non-GAAP acquisitions (dispositions), net5,635
 0.8 % 11,234
 2.0 % (7,281) (12.2)% 1,682
 1.8 %
Organic revenue growth (decline)(12,109) (1.7)% (15,350) (2.8)% (2,867) (4.8)% 6,108
 6.4 %
Total Change$(15,790) (2.2)% $(4,116) (0.7)% $(12,523) (21.1)% $849
 0.9 %
June 30, 2019$690,921
   $547,676
   $46,942
   $96,303
  
Revenue for the Advertising2020 and Communications Group was $690.9 million for the six months ended June 30, 2019 compared to revenue of $706.7 million for the six months ended June 30, 2018, representing a decrease of $15.8 million, or 2.2%.
The negative foreign exchange impact of $9.3 million, or 1.3%, was attributed to the fluctuation of the U.S. dollar against the Canadian dollar, Swedish Króna, Euro and British Pound.
The Company also utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined above. For the six months ended June 30, 2019, organic revenue decreased by $12.1 million, or 1.7%, of which $16.6 million, or 2.3% pertained to Partner Firms the Company has owned throughout each of the comparable periods presented. The remaining revenue growth of $4.4 million, or 0.6%, was generated from acquired Partner Firms. The decline 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. Additionally, the change in revenue was driven by a decline in categories including health care, food and beverage and automotive, partially offset by growth in transportation and technology.

The table below provides a reconciliation between the revenue in the Advertising and Communications Group from acquired/disposed businesses in the statement of operations to non-GAAP acquisitions (dispositions), net for the six months ended June 30, 2019:
 Specialist Communications All Other Total
 (Dollars in Thousands)
GAAP revenue from 2018 and 2019 acquisitions$2,762
 $15,140
 $17,902
Contribution to non-GAAP organic revenue (growth) decline(643)—
(3,805)—
(4,448)
Prior year revenue from dispositions—
 (7,819) (7,819)
Non-GAAP acquisitions (dispositions), net$2,119
 $3,516
 $5,635
The geographic mix in revenues for the six months ended June 30, 2019 and 2018 is as follows:
 2019 2018
United States79.3% 78.1%
Canada6.8% 8.4%
Other13.9% 13.5%
Revenue growth was mixed through the geographic regions with a decline in the United States of 0.7%, a decline in Canada of 21.1% and growth of 0.9% in the other regions outside of North America partially attributable to the strengthening of the U.S. dollar.
The United States and Canada had organic revenue decline of 2.8% and 4.8%, respectively. Organic revenue growth outside of North America was 6.4% as we continue to extend capabilities into new markets throughout Europe, South America, Australia, and Asia.
The change in expenses and operating profit as a percentage of revenue in the Advertising and Communications Group for the six months ended June 30, 2019 and 2018 was as follows:
 2019 2018 Change 2020 2019 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
Integrated Networks - Group A $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue $690,921
   $706,711
   $(15,790) (2.2)% $173,356
   $176,987
   $(3,631) (2.1)%
Operating expenses                        
Cost of services sold 477,903
 69.2% 496,420
 70.2% (18,517) (3.7)% 115,717
 66.8% 133,086
 75.2% (17,369) (13.1)%
Office and general expenses 133,377
 19.3% 143,246
 20.3% (9,869) (6.9)% 27,695
 16.0% 28,500
 16.1% (805) (2.8)%
Depreciation and amortization 19,063
 2.8% 23,694
 3.4% (4,631) (19.5)% 3,307

1.9%
4,289

2.4%
(982)
(22.9)%
 $630,343
 91.2% $663,360
 93.9% $(33,017) (5.0)% $146,719

84.6% $165,875
 93.7% $(19,156) (11.5)%
Operating profit $60,578
 8.8% $43,351
 6.1% $17,227
 39.7 %
Operating income $26,637
 15.4% $11,112
 6.3% $15,525
 NM
            
Adjusted EBITDA $33,507
 19.3% $19,156
 10.8% $14,351
 74.9 %
The changedecrease in revenue was primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The decrease in operating profitincome was primarily attributable to athe decline in revenue, more thanpartially offset by lower operating expenses, as outlined below.

The change in the categories of expenses as a percentage of revenue in the Advertising and CommunicationsIntegrated Networks - Group for the six months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $116,492
 16.9 % $101,102
 14.3 % $15,390
 15.2 %
Staff costs (2)
 406,000
 58.8 % 437,655
 61.9 % (31,655) (7.2)%
Administrative 87,371
 12.6 % 95,219
 13.5 % (7,848) (8.2)%
Deferred acquisition consideration (5,570) (0.8)% (2,481) (0.4)% (3,089) NM
Stock-based compensation 6,987
 1.0 % 8,171
 1.2 % (1,184) (14.5)%
Depreciation and amortization 19,063
 2.8 % 23,694
 3.4 % (4,631) (19.5)%
Total operating expenses $630,343
 91.2 % $663,360
 93.9 % $(33,017) (5.0)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
Direct costs increased primarily attributed to higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was primarily attributed to staffing reductions at Partner Firms and lower costs to support the operations of Partner Firms.
The decrease in administrative costs is driven by lower spending in connection with savings initiatives.
Deferred acquisition consideration change for the six months ended June 30, 2019 was primarily attributed to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
Global Integrated Agencies
The change in expenses and operating profit as a percentage of revenue in the Global Integrated AgenciesA reportable segment for the six months ended June 30, 20192020 and 20182019 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  
Revenue $284,087
   $287,686
   $(3,599) (1.3)%
Operating expenses            
Cost of services sold 194,506
 68.5% 207,996
 72.3% (13,490) (6.5)%
Office and general expenses 56,588
 19.9% 62,778
 21.8% (6,190) (9.9)%
Depreciation and amortization 8,502
 3.0% 12,152
 4.2% (3,650) (30.0)%
  $259,596
 91.4% $282,926
 98.3% $(23,330) (8.2)%
Operating profit $24,491
 8.6% $4,760
 1.7% $19,731
 414.5 %
  2020 2019 Change
Integrated Networks - Group A $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs $18,403
 10.6% $23,809
 13.5 % $(5,406) (22.7)%
Staff costs 102,555
 59.2% 112,471
 63.5 % (9,916) (8.8)%
Administrative 18,891
 10.9% 21,551
 12.2 % (2,660) (12.3)%
Deferred acquisition consideration 1,707
 1.0% (479) (0.3)% 2,186
 NM
Stock-based compensation 1,856
 1.1% 4,234
 2.4 % (2,378) (56.2)%
Depreciation and amortization 3,307
 1.9% 4,289
 2.4 % (982) (22.9)%
Total operating expenses $146,719
 84.6% $165,875
 93.7 % $(19,156) (11.5)%
Revenue    Direct costs declined in line with the reduction in revenues as discussed above.
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 negative foreign exchange impact of $6.5 million, or 2.3%, partially offset by an increasedecline in revenuespending resulting from existing Partner Firms of $2.9 million, or 1.0%, primarily attributablethe orders to client wins at a certain agency.work-from-home given the COVID-19 pandemic and related cost containment initiatives.
The change in operating profitdeferred acquisition consideration for the six months ended June 30, 2020 was primarily attributedattributable to an increase in the projected performance of certain Partner Firms relative to previously projected expectations.
The increase in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income for the six months ended June 30, 2020.

Integrated Networks - Group B
The change in expenses, operating income and Adjusted EBITDA as a percentage of revenue in the Integrated Networks - Group B reportable segment for the six months ended June 30, 2020 and 2019 was as follows:
  2020 2019 Change
Integrated Networks - Group B $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $211,105
   $266,565
   $(55,459) (20.8)%
Operating expenses            
Cost of services sold 129,303
 61.3% 165,135
 61.9% (35,832) (21.7)%
Office and general expenses 45,816
 21.7% 56,637
 21.2% (10,821) (19.1)%
Depreciation and amortization 8,913

4.2%
8,092

3.0%
821

10.1 %
Impairment and other losses
17,629

8.4%
—

—%
17,629

— %
  $201,661
 95.5% $229,864
 86.2% $(28,203)
(12.3)%
Operating income $9,444
 4.5% $36,701
 13.8% $(27,256) (74.3)%
             
Adjusted EBITDA $33,523
 15.9% $43,128
 16.2% $(9,605) (22.3)%
The decrease in revenue was primarily attributable to lower spending by clients in connection with the COVID-19 pandemic.
The decrease in operating income was primarily attributable to the 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 Global Integrated AgenciesNetworks - Group B reportable segment for the six months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
Integrated Networks - Group B $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $30,281
 10.7 % $17,738
 6.2 % $12,543
 70.7 % $22,100
 10.5 % $34,725
 13.0 % $(12,625) (36.4)%
Staff costs (2)
 180,600
 63.6 % 204,465
 71.1 % (23,865) (11.7)% 129,190
 61.2 % 154,752
 58.1 % (25,562) (16.5)%
Administrative 38,368
 13.5 % 44,810
 15.6 % (6,442) (14.4)% 26,292
 12.5 % 33,960
 12.7 % (7,668) (22.6)%
Deferred acquisition consideration (3,154) (1.1)% (1,174) (0.4)% (1,980) NM
 (4,109) (1.9)% (4,156) (1.6)% 47
 (1.1)%
Stock-based compensation 4,999
 1.8 % 4,935
 1.7 % 64
 1.3 % 1,646
 0.8 % 2,491
 0.9 % (845) (33.9)%
Depreciation and amortization 8,502
 3.0 % 12,152
 4.2 % (3,650) (30.0)% 8,913
 4.2 % 8,092
 3.0 % 821
 10.1 %
Impairment and other losses 17,629
 8.4 % —
 — % 17,629
 — %
Total operating expenses $259,596
 91.4 % $282,926
 98.3 % $(23,330) (8.2)% $201,661
 95.5 % $229,864
 86.2 % $(28,203) (12.3)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
Direct costs increased primarily attributed to higher billable costs for client arrangements accounted fordeclined in line with the reduction in revenues as principal.discussed above.
The decreasedecline in staff costs was attributedattributable to staffing reductions at certain Partner Firms.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.
The decreasechange in administrative costs is driven by lower spending in connection with savings initiatives.
Deferreddeferred acquisition consideration change for the six months ended June 30, 20192020 was primarily attributedattributable to a decrease in the aggregateprojected performance of certain Partner Firms in 2019 relative to the previously projected expectations.
Domestic Creative AgenciesThe increase in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income, in addition to an incremental reduction of operating expenses, primarily from the exclusion of the goodwill and right-of-use lease asset impairments.
Media & Data Network
The change in expenses, operating income (loss) and operating profitAdjusted EBITDA as a percentage of revenue in the Domestic Creative AgenciesMedia & Data Network reportable segment for the six months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
Media & Data Network $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue $132,201
   $139,625
   $(7,424) (5.3)% $69,609
   $82,688
   $(13,079) (15.8)%
Operating expenses                        
Cost of services sold 89,506
 67.7% 98,424
 70.5% (8,918) (9.1)% 50,788
 73.0% 63,587
 76.9 % (12,799) (20.1)%
Office and general expenses 25,702
 19.4% 30,672
 22.0% (4,970) (16.2)% 16,508
 23.7% 18,144
 21.9 % (1,636) (9.0)%
Depreciation and amortization 2,786
 2.1% 2,574
 1.8% 212
 8.2 % 1,615

2.3%
2,328

2.8 %
(713)
(30.6)%
Impairment and other losses
35

0.1%
—

— %
35

— %
 $117,994
 89.3% $131,670
 94.3% $(13,676) (10.4)% $68,946

99.0%
$84,059

101.7 %
$(15,113)
(18.0)%
Operating profit $14,207
 10.7% $7,955
 5.7% $6,252
 78.6 %
Operating income (loss) $663
 1.0% $(1,371) (1.7)% $2,034
 NM
            
Adjusted EBITDA $2,679
 3.8% $1,036
 1.3 % $1,643
 NM
The declinedecrease in revenue from existing Partner Firms was primarily attributable to client losses and a reduction inlower spending by certain clients partially offset by new client wins.in connection with the COVID-19 pandemic.
The change in operating profit was primarily attributed to the decline in revenue, offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the six months ended June 30, 2019 and 2018 was as follows:

  2019 2018 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $24,550
 18.6 % $23,139
 16.6% $1,411
 6.1 %
Staff costs (2)
 74,879
 56.6 % 85,209
 61.0% (10,330) (12.1)%
Administrative 15,562
 11.8 % 17,778
 12.7% (2,216) (12.5)%
Deferred acquisition consideration (769) (0.6)% 1,463
 1.0% (2,232) NM
Stock-based compensation 986
 0.7 % 1,507
 1.1% (521) (34.6)%
Depreciation and amortization 2,786
 2.1 % 2,574
 1.8% 212
 8.2 %
Total operating expenses $117,994
 89.3 % $131,670
 94.3% $(13,676) (10.4)%
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The decrease in staff costs was attributed to staffing reductions at certain Partner Firms.
Deferred acquisition consideration change for the six months ended June 30, 2019 was primarily attributed to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
Specialist Communications
The change in expenses and operating profit as a percentage of revenue in the Specialist Communications reportable segment for the six months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $86,123
   $79,128
   $6,995
 8.8 %
Operating expenses            
Cost of services sold 57,986
 67.3% 52,355
 66.2% 5,631
 10.8 %
Office and general expenses 13,112
 15.2% 14,870
 18.8% (1,758) (11.8)%
Depreciation and amortization 1,265
 1.5% 1,959
 2.5% (694) (35.4)%
  $72,363
 84.0% $69,184
 87.4% $3,179
 4.6 %
Operating profit $13,760
 16.0% $9,944
 12.6% $3,816
 38.4 %
The increase in revenue is primarily due to client wins at certain Partner firms as well as a contribution of $2.8 million from an acquired Partner Firm.
The change in operating profit was primarily attributed to an increase in revenue partially offset by an increase in operating expenses, as outlined below.

The change in the categories of expenses as a percentage of revenue in the Specialist Communications reportable segment for the six months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $20,842
 24.2 % $18,448
 23.3% $2,394
 13.0 %
Staff costs (2)
 41,147
 47.8 % 37,732
 47.7% 3,415
 9.1 %
Administrative 10,080
 11.7 % 10,041
 12.7% 39
 0.4 %
Deferred acquisition consideration (1,049) (1.2)% 765
 1.0% (1,814) NM
Stock-based compensation 78
 0.1 % 239
 0.3% (161) (67.3)%
Depreciation and amortization 1,265
 1.5 % 1,959
 2.5% (694) (35.4)%
Total operating expenses $72,363
 84.0 % $69,184
 87.4% $3,179
 4.6 %
NM - Not meaningful
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The increase in direct costs are in line with the growth in revenue.

The increase in staff costs was primarily attributed to contributions from an acquired Partner Firm, and higher costs to support the growth of certain Partner Firms.

Deferred acquisition consideration change for the six months ended June 30, 2019 was primarily attributed to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
Media Services
The change in expenses and operating profit as a percentage of revenue in the Media Services reportable segment for the six months ended June 30, 2019 and 2018 was as follows:
  2019 2018 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $41,510
   $46,082
   $(4,572) (9.9)%
Operating expenses            
Cost of services sold 29,629
 71.4 % 32,013
 69.5 % (2,384) (7.4)%
Office and general expenses 11,239
 27.1 % 14,534
 31.5 % (3,295) (22.7)%
Depreciation and amortization 1,485
 3.6 % 1,273
 2.8 % 212
 16.7 %
  $42,353
 102.0 % $47,820
 103.8 % $(5,467) (11.4)%
Operating (loss) profit $(843) (2.0)% $(1,738) (3.8)% $895
 51.5 %
The decline in revenue is primarily due to client losses and a reduction in spending by certain clients, partially offset by new client wins.
The change in operating profitincome (loss) was primarily attributable to athe 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 Media Services& Data Network reportable segment for the six months ended June 30, 20192020 and 20182019 was as follows:

 2019 2018 Change 2020 2019 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
Media & Data Network $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $7,645
 18.4 % $5,455
 11.8% $2,190
 40.2 % $18,684
 26.8 % $24,840
 30.0% $(6,156) (24.8)%
Staff costs (2)
 25,185
 60.7 % 32,380
 70.3% (7,195) (22.2)% 37,313
 53.6 % 43,787
 53.0% (6,474) (14.8)%
Administrative 7,981
 19.2 % 8,391
 18.2% (410) (4.9)% 10,933
 15.7 % 13,025
 15.8% (2,092) (16.1)%
Deferred acquisition consideration 73
 0.2 % 172
 0.4% (99) (57.6)% 375
 0.5 % 73
 0.1% 302
 NM
Stock-based compensation (16) — % 149
 0.3% (165) NM
 (9) — % 6
 —% (15) NM
Depreciation and amortization 1,485
 3.6 % 1,273
 2.8% 212
 16.7 % 1,615
 2.3 % 2,328
 2.8% (713) (30.6)%
Impairment and other losses 35
 0.1 % —
 —% 35
 — %
Total operating expenses $42,353
 102.0 % $47,820
 103.8% $(5,467) (11.4)% $68,946
 99.0 % $84,059
 101.7% $(15,113) (18.0)%
NM - Not meaningfulDirect costs declined in line with the reduction in revenues as discussed above.
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
The decreasedecline in staff costs was attributedattributable to staffing reductions at certain Partner Firms.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.
The decline in Adjusted EBITDA is principally for the same reasons as the reduction in Operating income (loss).
All Other
The change in expenses, operating income and operating profitAdjusted EBITDA as a percentage of revenue in the All Other category for the six months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ % $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue $147,000
   $154,190
   $(7,190) (4.7)% $133,350
   $164,681
   $(31,331) (19.0)%
Operating expenses                        
Cost of services sold 106,276
 72.3% 105,632
 68.5% 644
 0.6 % 92,517
 69.4% 116,095
 70.5% (23,578) (20.3)%
Office and general expenses 26,737
 18.2% 20,392
 13.2% 6,345
 31.1 % 23,980
 18.0% 30,097
 18.3% (6,117) (20.3)%
Depreciation and amortization 5,025
 3.4% 5,736
 3.7% (711) (12.4)% 3,802

2.9%
4,354

2.6%
(552)
(12.7)%
Impairment and other losses
207

0.2%
—

—%
207

— %
 $138,038
 93.9% $131,760
 85.5% $6,278
 4.8 % $120,506
 90.4% $150,546
 91.4% $(30,040) (20.0)%
Operating profit $8,962
 6.1% $22,430
 14.5% $(13,468) (60.0)%
Operating income $12,844
 9.6% $14,135
 8.6% $(1,291) (9.1)%
            
Adjusted EBITDA $16,790
 12.6% $17,737
 10.8% $(947) (5.3)%
The changedecrease in revenue was primarily attributable to revenue contributionslower spending by clients due to the COVID-19 pandemic and a reduction in revenues in connection with the sale of $15.1 million, or 10.3% from acquired Partner Firms,Sloane in 2020 and Kingsdale in 2019.
The decrease in operating income was attributable to the decline in revenue, partially offset by negative revenue impact of $7.8 million or 5.3% from the disposition of a Partner firm, a decline from existing Partner Firms of $13.0 million, or 8.9%, and negative foreign exchange impact of $1.4 million, or 0.9%.
The change in the categories oflower operating expenses, as a percentage of revenue in the All Other category for the six months ended June 30, 2019 and 2018 was as follows:

outlined below.

The change in the categories of expenses as a percentage of revenue in the All Other category for the six months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Change 2020 2019 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ % $ % of
Revenue		 $ % of
Revenue		 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $33,174
 22.6 % $36,322
 23.6 % $(3,148) (8.7)% $26,919
 20.2 % $33,118
 20.1 % $(6,199)
(18.7)%
Staff costs (2)
 84,188
 57.3 % 77,869
 50.5 % 6,319
 8.1 % 76,415
 57.3 % 94,988
 57.7 % (18,573)
(19.6)%
Administrative 15,382
 10.5 % 14,199
 9.2 % 1,183
 8.3 % 13,226
 9.9 % 18,838
 11.4 % (5,612)
(29.8)%
Deferred acquisition consideration (671) (0.5)% (3,707) (2.4)% 3,036
 81.9 % (261) (0.2)% (1,008) (0.6)% 747

(74.1)%
Stock-based compensation 940
 0.6 % 1,341
 0.9 % (401) (29.9)% 198
 0.1 % 256
 0.2 % (58)
(22.7)%
Depreciation and amortization 5,025
 3.4 % 5,736
 3.7 % (711) (12.4)% 3,802
 2.9 % 4,354
 2.6 % (552) (12.7)%
Impairment and other losses 207
 0.2 % —
 — % 207
 — %
Total operating expenses $138,038
 93.9 % $131,760
 85.5 % $6,278
 4.8 % $120,506
 90.4 % $150,546
 91.4 % $(30,040) (20.0)%
(1)Excludes staff costs.
(2)Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses.
Direct costs declined in line with the reduction in revenues as discussed above.
The increasedecline in staff costs was primarily attributedattributable to contributionsa reduction in staff to combat the impact on the business from an acquired Partner Firm.the COVID-19 pandemic.
Deferred acquisition consideration increase was primarily attributedAdministrative costs were lower due to a decline in spending resulting from the aggregate performance of certain Partner Firmsorders to work-from-home given the COVID-19 pandemic and other cost containment initiatives.
The decline in 2019 relative toAdjusted EBITDA is principally for the previously projected expectations.same reasons as the reduction in Operating income.
Corporate
The change in operating expenses and Adjusted EBITDA for Corporate for the six months ended June 30, 20192020 and 20182019 was as follows:
 2019 2018 Variance 2020 2019 Change
Corporate $ $ $ % $ $ $ %
 (Dollars in Thousands) (Dollars in Thousands)
Staff costs (1)
 $13,851
 $11,742
 $2,109
 18.0 % $8,690
 $13,851
 $(5,161) (37.3)%
Administrative 7,546
 10,301
 (2,755) (26.7)% 9,456
 7,546
 1,910
 25.3 %
Stock-based compensation (381) 2,469
 (2,850) NM
 418
 (381) 799
 NM
Depreciation and amortization 438
 384
 54
 14.1 % 468
 438
 30
 6.8 %
Other asset impairment —
 2,317
 (2,317) (100.0)%
Impairment and other losses 1,129
 —
 1,129
 — %
Total operating expenses $21,454
 $27,213
 $(5,759) (21.2)% $20,161
 $21,454
 $(1,293) (6.0)%
        
Adjusted EBITDA $(10,770) $(13,146) $2,376
 (18.1)%
NM - Not meaningful
(1)Excludes stock-based compensation.
Staff costs increased due to a $6.7 million severance charge, partially offset by lower compensation expense associated with aThe reduction in staff costs is primarily driven by a severance charge in 2019 not repeated in 2020.
Administrative costs were higher due to an increase in occupancy costs related to certain actions takenthe Company’s new space at One World Trade Center as part of the centralization of its New York real estate portfolio.
In connection with the forfeiture of performance-based equity awards, stock-based compensation expense in the prior year.

The decrease in administrative costs was primarily related to lower professional fees as the prior year included fees related to the implementation of a new accounting pronouncement.
Stock-based compensation was a credit in the six months ended June 30, 2019 due to the reversal of expense previously recognized.
The impairment was recognized to write-down the carrying value of a right-of-use lease asset to its fair value.
The improvement in connectionAdjusted EBITDA is a result of the change in operating expenses, and the exclusion of the impairment charge and occupancy costs associated with the forfeiturecentralization of a performance based equity award.our New York real estate portfolio.





Liquidity and Capital Resources:
Liquidity
The following table provides summary information about the Company’s liquidity position:

As of and for the six months ended June 30, 2019 As of and for the six months ended June 30, 2018 As of and for the year ended December 31, 2018
 
(In Thousands, Except for Long-Term Debt to
Shareholders’ Equity Ratio)

Cash and cash equivalents$27,304

$24,999

$30,873
Working capital (deficit)$(184,620)
$(176,959)
$(152,682)
Cash provided by (used in) operating activities$(40,237) $(61,713)
$17,280
Cash provided by (used in) investing activities$9,818
 $(36,121)
$(50,431)
Cash provided by (used in) financing activities$25,712
 $76,343

$21,434
Ratio of long-term debt to shareholders' deficit-5.32

-6.52

-3.87

June 30, 2020 June 30, 2019
Net cash used in operating activities$(33,678) $(40,237)
Net cash provided by investing activities$14,643
 $9,818
Net cash provided by (used in) financing activities$(1,434) $25,712
The effects of the COVID-19 pandemic have negatively impacted the Company’s cash flows; however, the extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19. While it is difficult to predict the full scale of the impact, the Company has taken various actions as discussed in the Executive Summary section above. In order to maintain financial flexibility, we borrowed $125 million under our revolving credit facility, of which half was repaid and $62.5 million remains outstanding as of June 30, 2020.
The Company had cash and cash equivalents of $85.5 million and $106.9 million as of June 30, 2020 and December 31, 2019, respectively. The Company intends to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months. The Company has historically been able to maintain and expand its business using cash generated from operating activities, funds available under its Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing. At June 30, 2019,2020, the Company had $27.5$62.5 million of borrowings outstanding and $202.7$111.8 million available under the Credit Agreement.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition payments, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 6.50% Senior Notes due 2024. 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’s Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the foreseeable future.next twelve months. The Company’s ability to make scheduled deferred acquisition payments, principal and interest payments, to refinance indebtedness or to fund planned capital expenditures will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in the Company’s 2018 Annual Report on2019 Form 10-K and in the Company’s other SEC filings.
As market conditions warrant, the Company may from time to time seek to purchase its notes, in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing its indebtedness, any purchase made by the Company may be funded by the net proceeds from any asset dispositions or the use of cash on its balance sheet. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material.
Working Capital
At June 30, 2019, the Company had a working capital deficit of $184.6 million compared to a deficit of $152.7 million at December 31, 2018. 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 used in operating activities for the six months ended June 30, 2020 was $33.7 million, primarily reflecting unfavorable working capital requirements, driven by seasonal media flows and other supplier payments.
Cash flows used in operating activities for the six months ended June 30, 2019 was $40.2 million, primarily reflecting unfavorable working capital requirements, driven by media and other supplier payments.
Cash flows used in operating activities forInvesting Activities
During the six months ended June 30, 20182020, cash flows provided by investing activities was $61.7$14.6 million, which primarily reflecting unfavorable workingconsisted of proceeds of $19.6 million from the sale of the Company’s equity interest in Sloane, partially offset by $3.7 million of capital requirements, driven by mediaexpenditures and other supplier payments, deferred acquisition consideration payments as well as net income (loss) adjusted to reconcile to net cash used in operating activities.



Investing Activities

$0.7 million paid for acquisitions.
During the six months ended June 30, 2019, cash flows provided by investing activities was $9.8 million, which primarily consisted of proceeds of $23.1 million from the sale of the Company’s equity interest in Kingsdale, partially offset by $7.9 million of capital expenditures related primarily to computer equipment, furniture and fixtures, and leasehold improvements and $5.1 million paid for acquisitions.expenditures.
Financing Activities
During the six months ended June 30, 2018,2020, cash flows used in investingfinancing activities was $36.1$1.4 million, primarily consisting of cash paid of $27.3driven by $62.5 million in net borrowings under the Credit Agreement, offset by $30.9 million in deferred acquisition consideration payments, $22.0 million for a portion of the acquisition of Instrument6.50% Notes and capital expenditures related primarily to computer equipment, furniture and fixtures, and leasehold improvements of $9.7 million.
Financing Activities$10.3 million in distributions for minority interest.
During the six months ended June 30, 2019, cash flows provided by financing activities was $25.7 million, primarily driven by $98.6 million in proceeds net of fees from the issuance of common and preferred shares, partially offset by $40.6 million in net repayments under the Credit Agreement, and $24.2 million in deferred acquisition consideration paymentspayments.
During the six months ended June 30, 2018, cash flows provided by financing activities was $76.3 million, primarily driven by $115.2 million in net borrowings under the Credit Agreement and $29.2 million of acquisition related payments.
Total Debt
Debt, net of debt issuance costs, as of June 30, 20192020 was $914.1$922.5 million as compared to $954.1$887.6 million outstanding at December 31, 2018.2019. The decreaseincrease of $40$34.9 million in debt was primarily a result of the Company’s net repayments onborrowings under the Credit Agreement.Agreement, partially offset by the repurchase of a portion of its 6.50% Notes. See Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements for information regarding the Company’s $900 million aggregate principal amount of its senior unsecured notes due 20246.50% Notes and $250$211.5 million senior secured revolving credit agreement due MayFebruary 3, 20212022 (the “Credit Agreement”).
The Company is currently in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will 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 Credit Agreement, or if the Company uses the maximum available amount under the Credit 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, 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.
Pursuant to the 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 specifically defined in the Credit Agreement. For the period ended June 30, 2019,2020, the Company’s calculation of each of these covenants, and the specific requirements under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
June 30, 2019June 30, 2020
Total Senior Leverage Ratio0.11
0.10
Maximum per covenant2.00
2.00
 
 
Total Leverage Ratio4.91
4.60
Maximum per covenant6.25
6.25
 
 
Fixed Charges Ratio2.45
2.94
Minimum per covenant1.00
1.00
 
 
Earnings before interest, taxes, depreciation and amortization (in millions)$187,920
$193.3
Minimum per covenant (in millions)$105,000
$120.0
These ratios and measures are not based on generally accepted accounting principlesGAAP 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 Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

Commitments, Contingencies,Contractual Obligations and GuaranteesOther Commercial Commitments
The Company’s agencies enter into contractual commitments with media providers and agreements with production companies on behalf of ourits clients at levels that exceed the revenue from services. Some of our agencies purchase media for clients and act as an agent for a disclosed principal. These commitments are included in accountsAccounts payable and Accruals and other liabilities when the media services are delivered by the media providers. MDC takes precautions against default on payment for these services and has historically had a very low incidence of default. MDC 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 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. See Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding contingent deferred acquisition consideration.

The following table presents the changes in the deferred acquisition consideration by segment for the six months ended June 30, 2019:2020:
June 30, 2019June 30, 2020
Global Integrated Agencies Domestic Creative Agencies Specialist Communication Agencies Media Services All Other TotalIntegrated Networks - Group A Integrated Networks - Group B Media & Data Network All Other Total
(Dollars in Thousands)   
Beginning Balance of contingent payments$47,880
 $3,747
 $13,193
 $2,689
 $15,089
 $82,598
$36,124
 $27,060
 $—
 $11,487
 $74,671
Payments(20,773) (526) (2,031) (250) (912) (24,492)(17,792) (15,242) (375) (2,578) (35,987)
Additions - acquisitions and step up transactions—
 —
 5,695
 —
 —
 5,695
Additions - acquisitions and step-up transactions—
 1,389
 
 —
 1,389
Redemption value adjustments (1)
(3,154) (769) (1,049) 73
 (671) (5,570)1,707
 (4,109) 375
 (261) (2,288)
Stock-based compensation(1,711) 26
 —
 —
 1,155
 (530)720
 809
 —
 —
 1,529
Other(2)—
 —
 —
 —
 —
 —

 (130) —
 (195) (325)
Ending Balance of contingent payments22,242
 2,478
 15,808
 2,512
 14,661
 57,701
20,759
 9,777
 —
 8,453
 38,989
Fixed payments263
 279
 —
 —
 —
 542

 263
 
 
 263
$22,505
 $2,757
 $15,808
 $2,512
 $14,661
 $58,243
$20,759
 $10,040
 $—
 $8,453
 $39,252


(1)
Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments and stock-based compensation charges relating to acquisition payments that are tied to continued employment.
Deferred acquisition consideration excludes future payments with an estimated fair value(2) Other primarily consists of $8.6 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. Of this amount, the Company estimates $0.2 million will be paid in the current year and $8.4 million will be paid in one to three yearstranslation adjustments.
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 incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 98 of the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding redeemable noncontrolling interest.interests.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Credit Agreement (and refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity. The ultimate amount payable and the incremental operating income 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.

The following table summarizes the potential timing of the consideration and incremental operating income before depreciation and amortization based on assumptions as described above:
Consideration (4)
 2019 2020 2021 2022 
2023 &
Thereafter
 Total 
  (Dollars in Thousands) 
Cash $4,671
 $1,673
 $3,798
 $2,720
 $6,149
 $19,011
 
Shares 16
 32
 49
 33
 17
 $147
 
  $4,687
 $1,705
 $3,847
 $2,753
 $6,166
 $19,158
(1) 
Operating income before depreciation and amortization to be received (2)
 $2,001
 $80
 $1,768
 $—
 $569
 $4,418
 
Cumulative operating income before depreciation and amortization (3)
 $2,001
 $2,081
 $3,849
 $3,849
 $4,418
  
(5) 
(1)This amount is in addition to (i) the $19.9 million of options to purchase only exercisable upon termination not within the control of the Company, or death, and (ii) the $3.6 million excess of the initial redemption value recorded in redeemable noncontrolling interests over the amount the Company would be required to pay to the holders should the Company acquire the remaining ownership interests.
(2)This financial measure is presented because it is the basis of the calculation used in the underlying agreements relating to the put rights and is based on actual operating results. This amount represents additional amounts to be attributable to MDC Partners Inc., commencing in the year the put is exercised.
(3)Cumulative operating income before depreciation and amortization represents the cumulative amounts to be received by the Company.
(4)The timing of consideration to be paid varies by contract and does not necessarily correspond to the date of the exercise of the put.
(5)Amounts are not presented as they would not be meaningful due to multiple periods included.

Critical Accounting Policies
See the Company’s Annual Report on2019 Form 10-K for the year ended December 31, 2018 for information regarding the Company’s critical accounting policies.

New Accounting Pronouncements
Information regarding new accounting pronouncements can be found in Note 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein.
Risks and Uncertainties
This document contains forward-looking statements. The Company’s representatives may also make forward-looking statements orally from time to time. Statements in this document that are not historical facts, including, without limitation, statements about the Company’s beliefs and expectations, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Words such as “estimates,” “expects,” “contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. These 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. 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 severe effects of international, national and regional economic conditions;
the Company’s ability to attract new clients and retain existing clients;
the spending patterns and financial success of the Company’s clients;

the Company’s ability to retain and attract key employees;
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 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.
Investors should carefully consider these risk factors, and the risk factors outlined in more detail in Company’s Annual Report on Form 10-K, for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2019 and accessible on the SEC’s website at www.sec.gov., under the caption “Risk Factors,” and in the Company’s other SEC filings.
Website Access to Company Reports and Information
MDC Partners Inc.’s Internet website address is www.mdc-partners.com. The Company’s Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC.  The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this quarterly report on Form 10-Q. From time to time, the Company may use its website as a channel of distribution of material company information.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.
Debt Instruments:  At June 30, 2019,2020, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the Senior6.5% Notes. The Senior6.5% Notes bear a fixed 6.50% interest rate. The Credit Agreement bears interest at variable rates based upon the EurodollarEuro rate, U.S. bank prime rate and U.S. base rate, at the Company’s option. 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 $27.5$62.5 million in borrowings under the Credit Agreement, as of June 30, 2019,2020, a 1.0% increase or decrease in the weighted average interest rate, which was 5.01%2.71% at June 30, 2019,2020, would have an interest impact of approximately $0.3$0.6 million.

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 Annual Report on2019 Form 10-K for the year ended December 31, 2018.10-K. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This minimizes 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 earnings.earnings (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 $1.0$1.4 million.
Impairment Risk: At June 30, 2019,2020, the Company had goodwill of $743.6 million and other intangible assets of $60.8$706.9 million. The Company reviews goodwill and other intangible assets with indefinite lives not subject to amortization for impairment annually as of October 1st of each year or more frequently if indicators of potential impairment exist. See the Critical Accounting Policies and Estimates section in the Company’s 20182019 Form 10-K for information related to impairment testing and the risk of potential impairment charges in future periods. Given the impact of the COVID-19 pandemic, the Company performed interim goodwill impairment tests in 2020. The company recognized a goodwill impairment of $13.4 million for the six months ended June 30, 2020. Additionally, the interim test resulted in the fair value of one reporting unit, with goodwill of approximately $130.0 million, exceeding its carrying value by a minimal percentage. If the duration of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the Company could recognize an impairment of goodwill in the future.
Item 4.    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 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 Rule 13a-15(e) and 15(d)-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weakness identified in our internal controls over financial reporting with respect to accounting for income taxes, as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, our CEO and CFO concluded that, as of June 30, 2019,2020, our disclosure controls and procedures are effectiveineffective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 20192020 is appropriate.
Changes in Internal Control Over Financial Reporting
ThereWe have given consideration to the impact of the COVID-19 and have concluded that there have been no changes in our internal controls over financial reporting during the three months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the period covered by this Quarterly Report on Form 10-Q, we are actively engaged in remediation efforts to enhance and improve our internal controls over financial reporting with respect to accounting for income taxes, but have not yet remediated the material weakness described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Our remediation efforts will continue to be implemented throughout our 2020 fiscal year. We believe the controls that will be put in place will eliminate the material weakness with respect to accounting for income taxes and solidify the effectiveness of our internal control over financial reporting.


PART II. OTHER INFORMATION
 
Item 1.    Legal Proceedings
The Company’s operating entitiesIn the ordinary course of business, we are involved in various legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believeproceedings. We do not currently expect that the outcome of suchthese proceedings or claims will have a material adverse effect on its financial condition orour results of operations.operations, cash flows or financial position.
ItemItem 1A.    Risk Factors
There are no material changes in
In addition to the risk factorsother information set forth in Part I, Item 1A ofthis report, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019, the factors discussed in “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and the Risk Factors described below, which could materially and adversely affect our business, results of operations or financial condition.
Our business, results of operations and financial condition 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, results of operations and financial condition.
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.
The downturn in the economy is having, and we expect will continue to have, a negative impact on our clients. 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, results of operations and financial condition.
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. 
The effects of the COVID-19 pandemic may also limit the resources afforded to or delay the implementation of our strategic initiatives 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, which could adversely impact our competitive position, business, results of operations and financial condition. 
We continue to have substantial sources of liquidity, including cash, cash from operations and access to our Credit Facility, but a prolonged period of generating lower cash from operations could adversely affect our financial condition.
The extent to which COVID-19 will continue to adversely impact our business, results of operations and financial condition is highly uncertain, cannot be predicted, and will depend on:
•the duration and scope of the pandemic;
•governmental, business and individual actions that have been and continue to be taken in response to the pandemic;
•the impact of the pandemic and the economic downturn on our clients; and
•the duration of the downturn in the economy.
Any of the foregoing factors could materially adversely affect our business, results of operations or financial condition.
Potential uncertainty resulting from a proposed business combination and related matters may adversely affect our business.
On June 26, 2020, MDC announced that its Board of Directors formed a Special Committee of independent directors to review the preliminary, non-binding proposal made by Stagwell Media LP with respect to a potential merger with the Company (the “Potential Transaction”). Mark Penn, Chairman and Chief Executive Officer of the Company, is also the manager of The Stagwell Group LLC, the general partner of Stagwell Media LP. The Special Committee has retained legal counsel and an independent financial advisor to assist in its evaluation of the Potential Transaction. The Special Committee has not reached any conclusion regarding the Potential Transaction. There can be no assurance that the Potential Transaction will be completed, or as to the terms of any such potential transaction. The review and consideration of the Potential Transaction, as well as any alternatives that may become available to the Company, may require the expenditure of significant time and resources by us. Such a proposal may create unce

rtainty for our employees, customers and business partners. The market price of our Class A shares may reflect various assumptions as to whether the proposed transaction with Stagwell Media LP will occur or perceived uncertainties in our future direction and variations in our share price may occur as a result of changing assumptions or perceptions regarding the Potential Transaction. A definitive agreement regarding a transaction, or a failure to reach a definitive agreement regarding a transaction, could result in a significant change in the market price of our Class A shares. These matters, alone or in combination, may harm our business.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
For the three months ended June 30, 2019,2020, the Company made no open market purchases of its Class A shares or its Class B shares. Pursuant to its Credit Agreement and the indenture governing the 6.50% Notes, the Company is currently limited from repurchasing itsas to the dollar amount of shares it may repurchase in the open market.
For the three months ended June 30, 2019,2020, 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 June 30, 2019.2020. The following table details those shares withheld during the second quarter of 2019:2020:
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares That May Yet Be Purchased Under the Program
4/1/2019 - 4/30/2019 $—
 $—
 $—
 $—
5/1/2019 - 5/31/2019 5,602
 2.61
 —
 —
6/1/2019 - 6/30/2019 13,655
 2.91
 —
 —
Total $19,257
 $2.70
 $—
 $—
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares That May Yet Be Purchased Under the Program
4/1/2020 - 4/30/2020 —
 $—
 —
 —
5/1/2020 - 5/31/2020 29,860
 1.29
 —
 —
6/1/2020 - 6/30/2020 39,250
 1.36
 —
 —
Total 69,110
 $1.33
 —
 —


Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
None.None
Item 6.    Exhibits
The exhibits required by this item are listed on the Exhibit Index.

EXHIBIT INDEX
 
Exhibit No. Description
3.1
 Articles of Amalgamation, dated January 1, 2004 (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 10, 2004).
3.1.1
 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).
3.1.2
 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).
3.1.3
 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).
3.1.4
 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).
3.1.5
 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).
3.1.6
 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).
3.1.7
 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, 2017).
3.1.8
 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).
3.2
 General By-law No. 1, as amended on April 29, 2005 (incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K filed on March 16, 2007).
10.1
 Second Amendment, dated as of May 29, 2020, to the Second Amended and Restated Credit Agreement, dated April 19, 2019, by and betweenas of May 3, 2016, among the Company, Maxxcom Inc., each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent and FrontFour Capital Group LLC, on behalf of itself and its affiliatesthe lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 22, 2019)June 1, 2020).
10.2
 
Employment Agreement, dated as of May 6, 2019, byMDC Partners Inc. Amended and between the Company and Frank LanutoRestated 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on May 8, 2019).

10.3
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).

10.4
Employment Agreement, dated as of May 16, 2019, by and between the Company and Seth Gardner (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on May 23, 2019).

10.5
Separation and Release Agreement, dated as of May 9, 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).
10.6
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).
10.7
Agreement of Settlement and Release, dated as of June 3, 2019, by and between the Company and Stephanie Nerlich (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on June 6, 2019)29, 2020).

†
10.8
Amendment to Incentive/Retention Agreement, dated June 4, 2019, by and between the Company and David Ross (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed on June 6, 2019).

31.1
 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.*
31.2
 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.*
32.1
 Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2
 Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1
 Schedule of Advertising and Communications Companies.*
101 Interactive data file.*
* Filed electronically herewith.

† Indicates management contract or compensatory plan.

SIGNATURES
 
Pursuant to the requirements 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 PARTNERS INC.
 
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer and Authorized Signatory
(Principal Financial Officer)
August 10, 2020
 
/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer


(Authorized Signatory)
August 7, 201910, 2020


5755