UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One) 
 ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019March 31, 2020
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.
(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 Avenue330 Hudson Street, 10th Floor
New York, New York
 1015110013
(Address of principal executive offices) (Zip Code)
(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  x
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 October 18, 2019April 17, 2020 was 72,142,66872,479,423 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.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
   
 PART II. OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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 recent novel coronavirus outbreak (“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;
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 September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Revenue: 
  
     
  
Services$342,907
 $375,830
 $1,033,828
 $1,082,541
$327,742
 $328,791
Operating Expenses:          
Cost of services sold222,448
 238,690
 700,351
 735,110
222,693
 237,153
Office and general expenses79,726
 102,380
 234,120
 270,137
66,353
 67,118
Depreciation and amortization9,368
 11,134
 28,869
 35,212
9,206
 8,838
Goodwill and other asset impairment1,944
 21,008
 1,944
 23,325
Other asset impairment161
 
313,486
 373,212
 965,284
 1,063,784
298,413
 313,109
Operating income29,421
 2,618
 68,544
 18,757
29,329
 15,682
Other Income (Expenses):          
Interest expense and finance charges, net(16,110) (17,063) (49,284) (50,005)(15,612) (16,760)
Foreign exchange gain (loss)(3,973) 3,275
 4,401
 (9,934)(14,757) 5,442
Other, net(431) 189
 (4,559) 1,222
16,334
 (3,383)
(20,514) (13,599) (49,442) (58,717)(14,035) (14,701)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates8,907
 (10,981) 19,102
 (39,960)
Income tax expense (benefit)3,457
 2,986
 6,292
 (3,367)
Income (loss) before equity in earnings of non-consolidated affiliates5,450
 (13,967) 12,810
 (36,593)
Income before income taxes and equity in earnings of non-consolidated affiliates15,294
 981
Income tax expense13,500
 748
Income before equity in earnings of non-consolidated affiliates1,794
 233
Equity in earnings of non-consolidated affiliates63
 300
 352
 358

 83
Net income (loss)5,513
 (13,667) 13,162
 (36,235)
Net income1,794
 316
Net income attributable to the noncontrolling interest(7,265) (2,458) (10,737) (5,900)(791) (429)
Net income (loss) attributable to MDC Partners Inc.(1,752) (16,125) 2,425
 (42,135)1,003
 (113)
Accretion on and net income allocated to convertible preference shares(3,306) (2,109) (8,931) (6,204)(3,440) (2,383)
Net loss attributable to MDC Partners Inc. common shareholders$(5,058) $(18,234) $(6,506) $(48,339)$(2,437) $(2,496)
Loss Per Common Share: 
  
     
  
Basic 
  
     
  
Net loss attributable to MDC Partners Inc. common shareholders$(0.07) $(0.32) $(0.10) $(0.85)$(0.03) $(0.04)
Diluted          
Net loss attributable to MDC Partners Inc. common shareholders$(0.07) $(0.32) $(0.10) $(0.85)$(0.03) $(0.04)
Weighted Average Number of Common Shares Outstanding: 
  
     
  
Basic72,044,480
 57,498,661
 68,154,306
 57,117,797
72,397,661
 60,258,102
Diluted72,044,480
 57,498,661
 68,154,306
 57,117,797
72,397,661
 60,258,102
Stock-based compensation expense is included in the following line items above: 
  
    
Cost of services sold$5,193
 $4,390
 $12,180
 $11,784
Office and general expenses833
 1,852
 452
 5,098
Total$6,026
 $6,242
 $12,632
 $16,882
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 September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Comprehensive Income (Loss)   
       
Net income (loss)$5,513
 $(13,667) $13,162
 $(36,235)
       
Net income$1,794
 $316
Other comprehensive income (loss), net of applicable tax: 
  
     
  
Foreign currency translation adjustment(1,461) (1,327) (7,505) (898)7,429
 (4,659)
Other comprehensive loss(1,461) (1,327) (7,505) (898)
Other comprehensive income (loss)7,429
 (4,659)
Comprehensive income (loss) for the period4,052
 (14,994) 5,657
 (37,133)9,223
 (4,343)
Comprehensive income attributable to the noncontrolling interests(6,969) (2,931) (10,830) (4,367)(282) (780)
Comprehensive loss attributable to MDC Partners Inc.$(2,917) $(17,925) $(5,173) $(41,500)
Comprehensive income (loss) attributable to MDC Partners Inc.$8,941
 $(5,123)
See notes to the Unaudited Condensed Consolidated Financial Statements.

MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars)
September 30,
2019
 December 31,
2018
March 31,
2020
 December 31,
2019
(Unaudited)     
ASSETS 
  
 
  
Current Assets: 
  
 
  
Cash and cash equivalents$27,280
 $30,873
$221,102
 $106,933
Accounts receivable, less allowance for doubtful accounts of $2,728 and $1,879411,805
 395,200
Accounts receivable, less allowance for doubtful accounts of $2,118 and $3,304407,311
 450,403
Expenditures billable to clients38,652
 42,369
22,763
 30,133
Assets held for sale
 78,913
Other current assets35,939
 42,499
44,689
 35,613
Total Current Assets513,676
 589,854
695,865
 623,082
Fixed assets, at cost, less accumulated depreciation of $147,342 and $128,54682,946
 88,189
Fixed assets, at cost, less accumulated depreciation of $132,174 and $129,57975,767
 81,054
Right-of-use assets - operating leases234,137
 
216,194
 223,622
Investments in non-consolidated affiliates6,824
 6,556
Goodwill740,955
 740,955
725,390
 740,674
Other intangible assets, net of accumulated amortization of $171,941 and $161,86856,734
 67,765
Other intangible assets, net50,640
 54,893
Deferred tax assets92,439
 92,741
77,378
 85,988
Other assets24,018
 25,513
29,622
 30,179
Total Assets$1,751,729
 $1,611,573
$1,870,856
 $1,839,492
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT 
  
   
Current Liabilities: 
  
 
  
Accounts payable$178,946
 $221,995
$153,491
 $200,148
Accruals and other liabilities280,783
 313,141
325,826
 353,575
Liabilities held for sale
 35,967
Advance billings169,857
 138,505
146,803
 171,742
Current portion of lease liabilities - operating leases47,722
 
48,022
 48,659
Current portion of deferred acquisition consideration31,579
 32,928
46,337
 45,521
Total Current Liabilities708,887
 742,536
720,479
 819,645
Long-term debt895,379
 954,107
1,014,260
 887,630
Long-term portion of deferred acquisition consideration24,611
 50,767
26,399
 29,699
Long-term lease liabilities - operating leases230,209
 
211,254
 219,163
Other liabilities17,933
 54,255
35,523
 25,771
Deferred tax liabilities7,486
 5,329
Total Liabilities1,884,505
 1,806,994
2,007,915
 1,981,908
Redeemable Noncontrolling Interests41,519
 51,546
35,698
 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 September 30, 2019 and 95,000 at December 31, 2018152,746
 90,123
Convertible preference shares, 145,000 authorized, issued and outstanding at March 31, 2020 and December 31, 2019152,746
 152,746
Common stock and other paid-in capital98,364
 58,579
99,587
 101,469
Accumulated deficit(462,483) (464,903)(468,508) (469,593)
Accumulated other comprehensive (loss) income(2,878) 4,720
3,669
 (4,269)
MDC Partners Inc. Shareholders' Deficit(214,251) (311,481)(212,506) (219,647)
Noncontrolling interests39,956
 64,514
39,749
 40,258
Total Shareholders' Deficit(174,295) (246,967)(172,757) (179,389)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit$1,751,729
 $1,611,573
$1,870,856
 $1,839,492
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)

 Nine Months Ended September 30,

2019 2018
Cash flows from operating activities: 
  
Net income (loss)$13,162
 $(36,235)
Adjustments to reconcile net income (loss) to cash used in operating activities:   
Stock-based compensation12,632
 16,882
Depreciation18,796
 20,944
Amortization of intangibles10,073
 14,268
Amortization of deferred finance charges and debt discount2,504
 2,402
Goodwill and other asset impairment1,944
 23,325
Adjustment to deferred acquisition consideration(3,627) 8,522
Deferred income taxes6,292
 (6,690)
Loss on sale of assets3,361
 (1,408)
Earnings of non-consolidated affiliates(352) (358)
Other non-current assets and liabilities(3,017) (956)
Foreign exchange(5,145) 9,125
Changes in working capital:   
Accounts receivable835
 8,574
Expenditures billable to clients3,716
 (28,171)
Prepaid expenses and other current assets3,280
 (11,516)
Accounts payable, accruals and other current liabilities(96,527) (49,587)
Acquisition related payments(4,816) (28,263)
Advance billings31,049
 27,413
Net cash used in operating activities(5,840)
(31,729)
Cash flows from investing activities:   
Capital expenditures(13,786) (15,232)
Proceeds from sale of assets23,050
 
Acquisitions, net of cash acquired(5,778) (34,303)
Other investments(179) 1,180
Net cash provided by (used in) investing activities3,307

(48,355)
Cash flows from financing activities: 
  
Repayment of revolving credit facility(1,172,909) (1,121,300)
Proceeds from revolving credit facility1,112,857
 1,224,290
Proceeds from issuance of common and convertible preference shares, net of issuance costs98,620
 
Acquisition related payments(30,155) (32,240)
Distributions to noncontrolling interests(9,982) (10,410)
Payment of dividends(56) (182)
Purchase of shares(577) (776)
Other
 (260)
Net cash provided by (used in) financing activities(2,202)
59,122
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts8
 (161)
Net decrease in cash, cash equivalents, and cash held in trusts including cash classified within assets held for sale(4,727) (21,123)
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(3,593) (21,123)
Cash and cash equivalents at beginning of period30,873
 46,179

Nine Months Ended September 30,Three Months Ended March 31,

2019 20182020 2019
Cash flows from operating activities: 
  
Net income$1,794
 $316
Adjustments to reconcile net income to cash used in operating activities:   
Stock-based compensation3,070
 2,972
Depreciation and amortization9,206
 8,838
Other asset impairment161
 
Adjustment to deferred acquisition consideration(4,600) (7,643)
Deferred income taxes8,511
 748
Foreign exchange and other4,489
 (2,608)
Changes in working capital:   
Accounts receivable41,148
 (29,957)
Expenditures billable to clients7,370
 (4,294)
Prepaid expenses and other current assets(3,385) (3,373)
Accounts payable, accruals and other current liabilities(62,120) (75,105)
Acquisition related payments(782) (3,657)
Advance billings(24,816) 32,563
Net cash used in operating activities(19,954)
(81,200)
Cash flows from investing activities:   
Capital expenditures(1,546) (3,606)
Proceeds from sale of assets18,920
 23,050
Acquisitions, net of cash acquired(729) (1,050)
Other
 (293)
Net cash provided by investing activities16,645

18,101
Cash flows from financing activities: 
  
Net increase (decrease) in revolving credit facility125,000
 (35,340)
Proceeds from issuance of common and convertible preference shares, net of issuance costs
 97,629
Acquisition related payments(750) 
Other(4,608) (1,536)
Net cash provided by financing activities119,642

60,753
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts(2,164) (576)
Net increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale114,169
 (2,922)
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
 1,728
Net increase (decrease) in cash and cash equivalents114,169
 (4,501)
Cash and cash equivalents at beginning of period106,933
 30,873
Cash and cash equivalents at end of period$27,280
 $25,056
$221,102
 $26,372
Supplemental disclosures: 
  
 
  
Cash income taxes paid$3,631
 $4,822
$849
 $1,677
Cash interest paid$32,525
 $33,011
$145
 $1,629
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
 September 30, 2019
 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
 
   


(in thousands, except share amounts)Shares Amount
Shares   


Balance at June 30, 2019145,000
 $152,746
 71,947,743
 $97,455
 $(460,726) $(1,713) $(212,238) $40,261
 $(171,977)
Net loss attributable to MDC Partners Inc.
 
 
 
 (1,752) 
 (1,752) 
 (1,752)
Other comprehensive loss
 
 
 
 
 (1,165) (1,165) (296) (1,461)
Issuance of restricted stock
 
 372,953
 
 
 
 
 
 
Shares acquired and cancelled
 
 (174,279) (499) 
 
 (499) 
 (499)
Stock-based compensation
 
 
 1,409
 
 
 1,409
 
 1,409
Changes in redemption value of redeemable noncontrolling interests
 
 
 767
 
 
 767
 
 767
Business acquisitions and step-up transactions, net of tax
 
 
 (648) 
 
 (648) 
 (648)
Changes in ownership interest
 
 
 (109) 
 
 (109) 
 (109)
Other
 
 
 (11) (5) 
 (16) (9) (25)
Balance at September 30, 2019145,000
 $152,746
 72,146,417
 $98,364
 $(462,483) $(2,878) $(214,251) $39,956
 $(174,295)

 Nine Months Ended
 September 30, 2019
 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
        
(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)
Net income attributable to MDC Partners Inc.
 
 
 
 2,425
 
 2,425
 
 2,425
Other comprehensive income (loss)
 
 
 
 
 (7,598) (7,598) 93
 (7,505)
Issuance of common and convertible preference shares50,000
 62,623
 14,285,714
 35,997
 
 
 98,620
 
 98,620
Issuance of restricted stock
 
 566,932
 
 
 
 
 
 
Shares acquired and cancelled
 
 (227,552) (577) 
 
 (577) 
 (577)
Stock-based compensation
 
 
 1,918
 
 
 1,918
 
 1,918
Changes in redemption value of redeemable noncontrolling interests
 
 
 3,496
 
 
 3,496
 
 3,496
Business acquisitions and step-up transactions, net of tax
 
 
 (745) 
 
 (745) 
 (745)
Changes in ownership interest
 
 
 (293) 
 
 (293) (24,642) (24,935)
Other
 
 
 (11) (5) 
 (16) (9) (25)
Balance at September 30, 2019145,000
 $152,746
 72,146,417
 $98,364
 $(462,483) $(2,878) $(214,251) $39,956
 $(174,295)








MDC PARTNERS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(thousands of United States dollars, except share amounts)

Three Months EndedThree Months Ended
September 30, 2018March 31, 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 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 June 30, 201895,000
 $90,123
 57,454,028
 $45,824
 $(367,180) $481
 $(230,752) $77,416
 $(153,336)
Net loss attributable to MDC Partners Inc.
 
 
 
 (16,125) 
 (16,125) 
 (16,125)
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 December 31, 2019145,000
 $152,746
 72,154,603
 
Net income attributable to MDC Partners Inc.
 
 
 
Other comprehensive income (loss)
 
 
 
 
 (1,800) (1,800) 473
 (1,327)
 
 
 
 
 7,938
 7,938
 (509) 7,429
Issuance of restricted stock
 
 115,500
 
 
 
 
 
 

 
 587,227
 
 
 
 
 
 
Shares acquired and cancelled
 
 (54,089) (283) 
 
 (283) 
 (283)
 
 (258,664) (637) 
 
 (637) 
 (637)
Stock-based compensation
 
 
 2,450
 
 
 2,450
 
 2,450

 
 
 476
 
 
 476
 
 476
Changes in redemption value of redeemable noncontrolling interests
 
 
 (2,347) 
 
 (2,347) 
 (2,347)
 
 
 (1,218) 
 
 (1,218) 
 (1,218)
Business acquisitions and step-up transactions, net of tax
 
 
 4,975
 
 
 4,975
 (11,947) (6,972)
 
 
 (503) 
 
 (503) 
 (503)
Balance at September 30, 201895,000
 $90,123
 57,515,439
 $50,619
 $(383,305) $(1,319) $(243,882) $65,942
 $(177,940)
Other
 
 
 
 82
 
 82
 
 82
Balance at March 31, 2020145,000
 $152,746
 72,483,166
 $99,587
 $(468,508) $3,669
 $(212,506) $39,749
 $(172,757)


Nine Months EndedThree Months Ended
September 30, 2018March 31, 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 December 31, 201795,000
 $90,220
 56,375,131
 $38,191
 $(340,000) $(1,954) $(213,543) $58,030
 $(155,513)
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, 201895,000
 $90,123
 57,521,323
 
Net loss attributable to MDC Partners Inc.
 
 
 
 (42,135) 
 (42,135) 
 (42,135)
 
 
 
Other comprehensive income (loss)
 
 
 
 
 635
 635
 (1,533) (898)
 
 
 
 
 (5,010) (5,010) 351
 (4,659)
Expenses for convertible preference shares
 (97) 
 
 
 
 (97) 
 (97)
Issuance of common and convertible preference shares50,000
 61,994
 14,285,714
 35,635
 
 
 97,629
 
 97,629
Issuance of restricted stock
 
 237,529
 
 
 
 
 
 

 
 117,000
 
 
 
 
 
 
Shares acquired and cancelled
 
 (108,782) (776) 
 
 (776) 
 (776)
 
 (34,016) (56) 
 
 (56) 
 (56)
Shares issued, acquisitions
 
 1,011,561
 7,030
 
 
 7,030
 
 7,030
Stock-based compensation
 
 
 6,774
 
 
 6,774
 
 6,774

 
 
 (1,291) 
 
 (1,291) 
 (1,291)
Changes in redemption value of redeemable noncontrolling interests
 
 
 (4,409) 
 
 (4,409) 
 (4,409)
 
 
 5,919
 
 
 5,919
 
 5,919
Business acquisitions and step-up transactions, net of tax
 
 
 3,809
 
 
 3,809
 15,410
 19,219
Changes in ownership interest
 
 
 
 
 
 
 (5,965) (5,965)
 
 
 (93) 
 
 (93) (24,642) (24,735)
Cumulative effect of adoption of ASC 606
 
 
 
 (1,170) 
 (1,170) 
 (1,170)
Balance at September 30, 201895,000
 $90,123
 57,515,439
 $50,619
 $(383,305) $(1,319) $(243,882) $65,942
 $(177,940)
Balance at March 31, 2019145,000
 $152,117
 71,890,021
 $98,693
 $(465,016) $(290) $(214,496) $40,223
 $(174,273)

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 Company expects the effects of the COVID-19 pandemic to negatively impact its results of operations, cash flows and financial position. While it is difficult to predict the full scale of the impact, the Company has been taking 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 were reflected into our judgments, assumptions and estimates to prepare 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 businesses 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 reclassification of certain businesses betweenchange in reportable segments. See Note 1214 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
Recent Developments
In April 2020, the Company repurchased approximately $30,000 of the total $900,000 6.50% Notes due in May 2024, at a weighted average price equal to 74% of the principal amount totaling approximately $22,000, and accrued interest of approximately $946. As a result of the repurchase, we will recognize an estimated extinguishment gain of $8,000.
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 purchase price of approximately $26,000, consisting of cash paid at closing plus contingent deferred payments expected to be paid over the next two years. The sale resulted in a gain of approximately $16,131, which is included in Other, net within the Unaudited Condensed Consolidated Statement 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 approximately $3,000, which was included in Other, net within the Unaudited Condensed Consolidated Statement 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 or interdependent, and 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 that 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.Company.
The following table presents revenue disaggregated by client industry vertical for the three and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
IndustryReportable Segment 2019 2018 2019 2018Reportable Segment 2020 2019
Food & BeverageAll $64,774
 $80,919
 $204,743
 $234,203
All $58,091
 $66,663
RetailAll 39,420
 40,421
 111,899
 116,832
All 36,303
 32,580
Consumer ProductsAll 38,510
 40,124
 119,866
 118,097
All 39,769
 35,001
CommunicationsAll 48,147
 46,779
 136,819
 128,232
All 41,045
 39,798
AutomotiveAll 19,125
 21,282
 55,857
 67,070
All 25,192
 18,191
TechnologyAll 28,148
 26,005
 84,294
 71,085
All 25,535
 26,616
HealthcareAll 25,152
 33,751
 74,403
 101,753
All 24,066
 23,297
FinancialsAll 28,054
 30,378
 81,049
 83,079
All 24,005
 25,126
Transportation and Travel/LodgingAll 20,541
 19,357
 65,111
 53,021
All 20,486
 17,441
OtherAll 31,036
 36,814
 99,787
 109,169
All 33,250
 44,078
 $342,907
 $375,830
 $1,033,828
 $1,082,541
 $327,742
 $328,791


MDC has historically largely focused 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 nine months ended September 30, 2019March 31, 2020 and 2018:
2019:


Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
Geographic LocationReportable Segment 2019 2018 2019 2018Reportable Segment 2020 2019
United StatesAll $271,671
 $296,544
 $819,347
 $848,336
All $264,561
 $263,017
CanadaAll, excluding Media Services 25,895
 32,132
 72,837
 91,597
All 18,256
 22,378
OtherAll, excluding Media Services 45,341
 47,154
 141,644
 142,608
All 44,925
 43,396
 $342,907
 $375,830
 $1,033,828
 $1,082,541
 $327,742
 $328,791

Contract assets and liabilities
Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Unbilled service fees were $81,703$76,753 and $64,362$66,119 at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, and are included as a component of accounts receivable on the Unaudited Condensed Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $38,652$22,763 and $42,369$30,133 at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, and are included on the Unaudited Condensed Consolidated Balance Sheets as expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services.
Contract liabilities consist of fees billed to clients in excess of fees recognized as revenue and are classified as advance billings on the Company’s Unaudited Condensed Consolidated Balance Sheets. Advance billings at September 30, 2019March 31, 2020 and December 31, 20182019 were $169,857$146,803 and $138,505,$171,742, respectively. The increasedecrease in the advance billings balance of $31,352$24,939 for the ninethree months ended September 30, 2019March 31, 2020 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $114,927$104,937 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 ninethree months ended September 30, 2019March 31, 2020 and December 31, 20182019 were not materially impacted by 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 $35,771 of unsatisfied performance obligations as of March 31, 2020, of which we expect to recognize approximately 87% in 2020, 11% 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 September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Numerator: 

 
     

 
Net income (loss) attributable to MDC Partners Inc.$(1,752) $(16,125) $2,425
 $(42,135)$1,003
 $(113)
Accretion on convertible preference shares(3,306)
(2,109) (8,931) (6,204)(3,440)
(2,383)
Net income allocated to convertible preference shares
 
 
 
Net loss attributable to MDC Partners Inc. common shareholders$(5,058)
$(18,234) $(6,506) $(48,339)
       
Adjustment to net income allocated to convertible preference shares
 
 
 
Numerator for dilutive loss per common share:       
Net loss attributable to MDC Partners Inc. common shareholders$(5,058)
$(18,234) $(6,506) $(48,339)$(2,437)
$(2,496)
Denominator:          
Basic weighted average number of common shares outstanding72,044,480

57,498,661
 68,154,306
 57,117,797
72,397,661

60,258,102
Effect of dilutive securities:       
Impact of stock options and non-vested stock under employee stock incentive plans
 
 
 
Diluted weighted average number of common shares outstanding72,044,480

57,498,661
 68,154,306
 57,117,797
72,397,661

60,258,102
Basic$(0.07)
$(0.32) $(0.10) $(0.85)$(0.03)
$(0.04)
Diluted$(0.07) $(0.32) $(0.10) $(0.85)$(0.03) $(0.04)
Anti-dilutive stock awards 3,714,595 1,524,218 3,714,595 1,524,2182,835,770 1,633,464

Restricted stock and restricted stock unit awards of 135,3862,203,717 and 1,015,637257,280 as of September 30,March 31, 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 September 30, 2019 and 2018, respectively.yet known. In addition, there were 145,000 and 95,000 Preference Shares outstanding which were convertible into 26,133,61327,189,411 and 10,755,60225,118,813 Class A common shares at September 30,March 31, 2020 and 2019, and 2018, respectively. These Preference Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted 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 $10,234, comprised of a closing cash payment of $3,890 and additional deferred acquisition payments with an estimated present value at the acquisition date of $6,344. 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 $9,486. The difference between the purchase price and the noncontrolling interest of $745 was recorded in common stock and other paid-in capital in the 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 the second quarter of 2019, 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.
2018 Acquisitions
On September 7, 2018, a subsidiary of the Company purchased a 100% interest in 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 are 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 of $1,166 between the purchase price and the noncontrolling interest 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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
September 30, December 31,March 31, December 31,
2019 20182020 2019
Beginning Balance of contingent payments$82,598
 $119,086
$74,671
 $82,598
Payments(30,719) (54,947)(1,125) (30,719)
Redemption value adjustments (1)
(2,617) 3,512
(2,575) 15,451
Additions - acquisitions and step-up transactions6,344
 14,943
1,389
 7,145
Other(2)35
 4
(185) 196
Ending Balance of contingent payments$55,641
 $82,598
$72,175
 $74,671
Fixed payments549
 1,097
561
 549
$56,190
 $83,695
$72,736
 $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 office and general expenses on the Unaudited Condensed Consolidated StatementsStatement of Operations.
(2) Other primarily consists of translation adjustments.
The following table presents the impact to the Company’s statement of operations due to the redemption value adjustments for the contingent deferred acquisition consideration:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
(Income) loss attributable to fair value adjustments$1,943
 $11,003
 $(3,627) $8,522
Income attributable to fair value adjustments$(4,600) $(7,643)
Stock-based compensation1,540
 3,076
 1,010
 7,758
2,025
 809
Redemption value adjustments$3,483
 $14,079
 $(2,617) $16,280
$(2,575) $(6,834)

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. The Company’s finance leases are immaterial.
The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets

are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of 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 Consolidated Statement 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.
The Company’s leases include options to extend or renew the lease 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 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America, Europe and Australia.
As of September 30, 2019,March 31, 2020, the Company has entered into twothree operating leases 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. One of the operating leases is related to the Company’s agreement, entered into on February 27, 2020, to lease space at One World Trade Center in connection with the centralization of our New York real estate portfolio. The lease term is for approximately eleven years, with rental payments totaling approximately $112,000, net of landlord for occupancy. reimbursements. As part of the centralization initiative, the Company will sublease existing properties currently under lease, resulting in the recovery of a portion of our rent obligation under such arrangements.
Accordingly, these three leases represent an obligation of the Company that is not onreflected within the Unaudited Consolidated Balance Sheet as of September 30, 2019.March 31, 2020. The aggregate future liability related to these leases is approximately $12 million.$124,233.
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 nine months ended September 30,March 31, 2020 and 2019:

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 20192020 2019
Lease Cost:      
Operating lease cost$16,605
 $50,519
$16,391
 $16,441
Variable lease cost4,960
 14,285
4,655
 4,964
Sublease rental income(2,376) (6,565)(2,805) (1,599)
Total lease cost$19,189
 $58,239
$18,241
 $19,806
Additional information:      
Cash paid for amounts included in the measurement of lease liabilities for operating leases
 

 
Operating cash flows$16,988
 $52,163
$17,635
 $15,652
      
Right-of-use assets obtained in exchange for operating lease liabilities$8,783
 $267,796
$7,119
 $256,818
Weighted average remaining lease term (in years) - Operating leases7.0
 7.0
7.0
 7.3
Weighted average discount rate - Operating leases8.7
 8.7
8.7
 8.7


In the three months ended September 30, 2019,March 31, 2020, the Company recorded an impairment charge of $1.9 million$161 to reduce the carrying value of a right-of-use lease asset and related leasehold improvements of one of its agencies within its Global Integrated Agencies Network reportable segment. 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 Other Asset Impairmentasset impairment within the Unaudited Condensed Consolidated Statement of Operations.

In the three months ended March 31, 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 Statement of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial. Rental expense for the three and nine months ended September 30, 2018 was $15,768 and $49,309, respectively, offset by $1,233 and $2,873, respectively in sublease rental income.
The following table presents minimum future rental payments under the Company’s leases at September 30, 2019March 31, 2020 and their reconciliation to the corresponding lease liabilities:

Maturity AnalysisMaturity Analysis
Remaining 2019$17,454
202068,981
Remaining 2020$52,025
202158,759
59,901
202248,272
49,774
202343,732
44,573
202438,111
Thereafter139,476
103,505
Total376,674
347,889
Less: Present value discount(98,743)(88,613)
Lease liability$277,931
$259,276

7. Debt
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, the Company’s indebtedness was comprised as follows:

September 30, 2019
December 31, 2018March 31, 2020
December 31, 2019
Revolving credit agreement$8,091
 $68,143
$125,000
 $
6.50% Notes due 2024900,000
 900,000
900,000
 900,000
Debt issuance costs(12,712) (14,036)(10,740) (12,370)
$895,379
 $954,107
$1,014,260
 $887,630
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 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 exceptions 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 approximately $30,000 of the 6.50% Notes. See Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
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 September 30, 2019.March 31, 2020.
Revolving Credit Agreement
The Company is party to a $250,000 secured revolving credit facility due May 3, 2021. The amounts outstanding under the revolving credit facility as of September 30, 2019 and December 31, 2018 are presented in the table above and additional details are provided below.
On March 12, 2019 (the “Amendment Effective Date”), the Company, Maxxcom Inc. (a subsidiary of the Company) (“Maxxcom”) and each of their subsidiaries party thereto entered into an 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 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 under the Credit Agreement to $250 million from $325 million.
Advances under the Credit Agreement bear interest as follows: (a)(i) LIBOR Rate Loans bear interest at the LIBOR Rate and (ii) Base Rate Loans bear interest at the Base Rate, plus (b) an applicable margin. The initial applicable margin for borrowing is 0.75% in the case of Base Rate Loans and 1.50% in the case of LIBOR 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 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 under the Credit Agreement to $250,000 from $325,000.
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 March 31, 2020.
At September 30, 2019March 31, 2020 and December 31, 2018,2019, the Company had issued undrawn outstanding letters of credit of $4,744$17,576 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 three months ended March 31, 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 interests791
Distributions made(3,973)
Other (1)
(856)
Balance, March 31, 2020$9,990
(1) Other primarily consists of translation adjustments.
Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three months ended March 31, 2020 and 2019 were as follows:
 Three Months Ended March 31,
 2020 2019
Net income (loss) attributable to MDC Partners Inc.$1,003
 $(113)
Transfers from the noncontrolling interest:   
Increase (decrease) in MDC Partners Inc. paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests(503) 
Net transfers from noncontrolling interests$(503) $
Change from net income (loss) attributable to MDC Partners Inc. and transfers to noncontrolling interests$500
 $(113)
Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:


8.
 Three Months Ended March 31, 2020 Year Ended December 31, 2019
Beginning Balance$36,973
 $51,546
Redemptions(1,615) (14,530)
Granted
 
Changes in redemption value1,218
 (3,163)
Currency translation adjustments(878) 3
Other (1)

 3,117
Ending Balance$35,698
 $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 $35,698 as of March 31, 2020, consists of $22,494 assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings level and such rights are exercised, $10,931upon termination of such owner’s employment with the applicable subsidiary or death and $2,273 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 March 31, 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 months ended March 31, 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 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 March 31, 2020, the Company had $17,576 of undrawn letters of credit.
The Company entered into operating leases for which the commencement date has not yet occurred as of March 31, 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 $50,000. 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 of Directors (the “Board”) and appointed two nominees designated by 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 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 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 ninethree months ended September 30, 2019,March 31, 2020, the Series 6 Preference Shares accreted at a monthly rate of $6.83,$7.10, for total accretion of $2,216,$1,065, bringing the aggregate liquidation preference to $52,217$54,326 as of September 30, 2019.March 31, 2020. The accretion is considered in the calculation of net 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 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 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 ninethree months ended September 30, 2019,March 31, 2020, the Series 4 Preference Shares accreted at a monthly rate of approximately $8.01$8.33 per Series 4 Preference Share, for total accretion of $6,715,$2,375, bringing the aggregate liquidation preference to $116,422$121,126 as of September 30, 2019.March 31, 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”)
These are an unlimited number of subordinate voting shares, carrying one 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 72,142,668 (including the Class A Shares issued to Stagwell)72,479,417 and 57,517,56872,150,854 Class A Shares issued and outstanding as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.
Class B Common Shares (“Class B Shares”)
These are an unlimited number of voting shares, carrying twenty 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 3,749 and 3,7553,749 Class B Shares issued and outstanding as of September 30, 2019March 31, 2020 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 nine months ended September 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 interests10,737
Distributions made(9,982)
Other (1)
(36)
Balance, September 30, 2019$9,997
(1)
Other consists of cumulative translation adjustments.
Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three and nine months ended September 30, 2019 and 2018 were as follows:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Net income (loss) attributable to MDC Partners Inc.$(1,752) $(16,125) $2,425
 $(42,135)
Transfers from the noncontrolling interest:       
Increase (decrease) in MDC Partners Inc. paid-in capital for purchase of equity interests in excess of redeemable noncontrolling interests and noncontrolling interests(648) 4,975
 (745) 3,809
Net transfers from noncontrolling interests$(648) $4,975
 $(745) $3,809
Change from net income (loss) attributable to MDC Partners Inc. and transfers to noncontrolling interests$(2,400) $(11,150) $1,680
 $(38,326)
Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
 Nine Months Ended September 30, 2019 Year Ended December 31, 2018
Beginning Balance$51,546
 $62,886
Redemptions(9,486) (11,943)
Granted
 
Changes in redemption value(3,306) 1,067
Currency translation adjustments(190) (464)
Other (1)
2,955
 
Ending Balance$41,519
 $51,546
(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. See Note 4 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
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 $41,519 as of September 30, 2019, consists of $19,193 assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings level and such rights are exercised, $19,106upon termination of such owner’s employment with the applicable subsidiary or death and $3,220 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 nine months ended September 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 September 30, 2019March 31, 2020 and December 31, 2018:2019:
September 30, 2019
December 31, 2018March 31, 2020
December 31, 2019
Carrying
Amount

Fair Value
Carrying
Amount

Fair ValueCarrying
Amount

Fair Value
Carrying
Amount

Fair Value
Liabilities: 

 

 

 
 

 

 

 
6.50% Senior Notes due 2024$900,000
 $823,500
 $900,000
 $834,750
$900,000
 $675,000
 $900,000
 $812,250
Our long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.

Financial Liabilities Measured at Fair Value on a Recurring Basis
Contingent deferred acquisition consideration (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 March 31, 2020, the discount rate asused to measure these liabilities was 9.91%.
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 measurement presented on the Consolidated Balance Sheet is 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 September 30, 2019March 31, 2020 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 assessment)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 did not recognize an impairment of goodwill or intangible assets in the three and nine months ended September 30, 2019 as compared to an impairment of goodwill, intangible assets,March 31, 2020 and other assets of $21.0 million and $23.3 million in the three and nine months ended September 30, 2018 respectively. See Note 11 of the Notes to the Unaudited Condensed Consolidated Financial Statements for information related to the measurement of the fair value of goodwill and the impairment. In addition, the2019.
The Company recognized an impairment charge of $1.9 million$161 to reduce the carrying value of a right-of-use lease asset and related leasehold i

mprovements in the three months ended September 30, 2019.March 31, 2020. 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 September 30, 2019March 31, 2020 and December 31, 2018,2019, accruals and other liabilities included accrued media of $163,777$213,915 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.
Goodwill and Indefinite Lived IntangiblesIntangible Assets
Goodwill and indefinite life intangible assets (trademarks) acquired as a result of a business combinationcombinations which areis not subject to amortization areis 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. Given the impact of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the first quarter of 2020. The interim test did not result in an impairment of goodwill but did result in the fair value of certain reporting units, with goodwill of approximately $230,000, exceeding their 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. The Company used an income approach to measure its goodwill for impairment. This methodology incorporates the use of the discounted cash flow (“DCF”) 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.
Goodwill balances as of each of September 30, 2019March 31, 2020 and December 31, 2018,2019, were $740,955.$725,390 and $740,674, respectively.
During the first quarter of 2020, the Company reassessed its estimate of the useful life of a trademark in the amount of $14,600, acquired as a result of a business combination. The Company revised the useful life to 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.
On 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 provisions, 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.
Income tax expense for the three months ended September 30, 2019March 31, 2020 was $3,457$13,500 (on income of $8,907$15,294 resulting in an effective tax rate of 38.8%88.3%) compared to an expense of $2,986$748 (on lossincome of $10,981$981 resulting in an effective tax rate of 27.2%76.2%) for the three months ended September 30, 2018.
Income tax expense for the nine months ended September 30, 2019 was $6,292 (on income of $19,102 resulting in an effective tax rate of 32.9%) compared to a benefit of $3,367 (on a loss of $39,960 resulting in an effective tax rate of 8.4%) for the nine months ended September 30, 2018.March 31, 2019.
The income tax expense and benefit for the three and nine months of 2018, respectively,ended March 31, 2020 were impacted by impairments andcapital gains, non-deductible stock compensation for which a tax benefit was not recognized.recognized, and the jurisdictional mix of earnings.

13. Related Party Transactions
12.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 $655 which is expected to be recognized through the end of 2020. As of March 31, 2020, $565 was owed to 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 March 31, 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 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. The total future rental income related to the sublease is approximately $229.
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”) 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.
Due to changesEffective in the compositionfirst quarter of 2020, the Company reorganized its management structure resulting in the aggregation of certain businessesPartner Firms into integrated groups (“Networks”). Mark Penn, Chief Executive Officer and Chairman of the Company’s internal management andCompany, appointed key agency executives, that report directly into him, to lead each Network. In connection with the reorganization, we reassessed our reportable segments to align our external reporting 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 reclassification of certain businesses betweenchange in reportable 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, 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.
Varick Media, previously within the Yes & Company operating segment, is now included within MDC Media Partners, which is included within the Media Services reportable segment.
The fourtwo reportable segments that result from applying the aggregation criteria are as follows: “Global Integrated Agencies”; “Domestic Creative Agencies”; “Specialist Communications”“Integrated Agencies Network”; and “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 Global Integrated Agencies Network reportable segment is comprised of the Company’s four global, integrated operating segments (72andSunny,(Constellation, Doner Partner Network, Anomaly Crispin Porter + Bogusky,Alliance, and Forsman & Bodenfors) serving multinational clients around the world.Colle McVoy). 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; andan

d (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 believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Global Integrated Agencies Network reportable segment.
The operating segments within the Global Integrated Agencies Network reportable segment providesprovide a range of different services for its clients, primarily 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,experiential, social media training,and influencer engagement, and events management.

marketing.
The Media Services& Data Network reportable segment is comprised of a single operating segment known as MDC Media Partners. MDC Media Partners, which operates primarily in North America, performsthat combines media buying and planning as its core competency across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast). with technology and data capabilities.
All Other consists of the Company’s remaining operating segments that provide a range of diverseservices 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 6Degrees Communications, ConcentricAllison & Partners, Gale Partners, Kenna, Kingsdale (through the date of sale on March 8, 2019), Instrument, Relevent,Bruce Mau, Forsman & Bodenfors, Hello, 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.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 September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Revenue:          
Global Integrated Agencies$145,890
 $157,308
 $429,977
 $444,995
Domestic Creative Agencies57,593
 59,151
 176,711
 183,504
Specialist Communications42,101
 38,838
 128,224
 117,966
Media Services21,222
 29,593
 75,815
 90,948
Integrated Agencies Network$208,328
 $206,910
Media & Data Network41,058
 43,232
All Other76,101
 90,940
 223,101
 245,128
78,356
 78,649
Total$342,907
 $375,830
 $1,033,828
 $1,082,541
$327,742
 $328,791
          
Segment operating income (loss):          
Global Integrated Agencies$21,036
 $23,486
 $45,527
 $28,247
Domestic Creative Agencies7,216
 (14,031) 22,533
 (6,887)
Specialist Communications5,129
 3,703
 18,889
 13,646
Media Services(1,677) 850
 (3,630) (78)
Integrated Agencies Network$29,193
 $15,512
Media & Data Network617
 (1,649)
All Other6,828
 6,634
 15,790
 29,065
7,857
 6,641
Corporate(9,111) (18,024) (30,565) (45,236)(8,338) (4,822)
Total$29,421
 $2,618
 $68,544
 $18,757
$29,329
 $15,682
          
Other Income (Expenses):          
Interest expense and finance charges, net$(16,110) $(17,063) $(49,284) $(50,005)$(15,612) $(16,760)
Foreign exchange gain (loss)(3,973) 3,275
 4,401
 (9,934)(14,757) 5,442
Other, net(431) 189
 (4,559) 1,222
16,334
 (3,383)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates8,907
 (10,981) 19,102
 (39,960)
Income tax expense (benefit)3,457
 2,986
 6,292
 (3,367)
Income (loss) before equity in earnings of non-consolidated affiliates5,450
 (13,967) 12,810
 (36,593)
Income before income taxes and equity in earnings of non-consolidated affiliates15,294
 981
Income tax expense13,500
 748
Income before equity in earnings of non-consolidated affiliates1,794
 233
Equity in earnings of non-consolidated affiliates63
 300
 352
 358

 83
Net income (loss)5,513
 (13,667) 13,162
 (36,235)
Net income1,794
 316
Net income attributable to the noncontrolling interest(7,265) (2,458) (10,737) (5,900)(791) (429)
Net income (loss) attributable to MDC Partners Inc.$(1,752) $(16,125) $2,425
 $(42,135)$1,003
 $(113)




Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31, 
2019 2018 2019 20182020 2019 
Depreciation and amortization:           
Global Integrated Agencies$4,009
 $4,553
 $12,511
 $16,705
Domestic Creative Agencies1,213
 1,266
 3,708
 3,793
Specialist Communications644
 1,100
 1,909
 3,059
Media Services755
 675
 2,531
 1,995
Integrated Agencies Network$6,267
 $5,715
 
Media & Data Network808
 993
 
All Other2,555
 3,341
 7,580
 9,077
1,899
 1,913
 
Corporate192
 199
 630
 583
232
 217
 
Total$9,368
 $11,134
 $28,869
 $35,212
$9,206
 $8,838
 
           
Stock-based compensation:           
Global Integrated Agencies$4,673
 $3,241
 $9,672
 $8,176
Domestic Creative Agencies352
 550
 1,338
 2,056
Specialist Communications45
 52
 123
 291
Media Services5
 102
 (11) 251
Integrated Agencies Network$2,861
 $4,459
 
Media & Data Network(13) 
 
All Other118
 677
 1,058
 2,019
80
 86
 
Corporate833
 1,620
 452
 4,089
142
 (1,573) 
Total$6,026
 $6,242
 $12,632
 $16,882
$3,070
 $2,972
 
           
Capital expenditures:           
Global Integrated Agencies$3,470
 $1,927
 $6,704
 $6,581
Domestic Creative Agencies694
 967
 1,757
 2,440
Specialist Communications198
 732
 680
 3,176
Media Services(2) 385
 165
 699
Integrated Agencies Network$835
 $3,049
 
Media & Data Network86
 138
 
All Other1,492
 1,500
 4,450
 2,271
323
 418
 
Corporate11
 32
 30
 65
302
 1
 
Total$5,863
 $5,543
 $13,786
 $15,232
$1,546
 $3,606
 
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 and nine months ended September 30, 2019March 31, 2020 and 2018.

2019.
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 nine months ended September 30, 2019 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 September 30, 2019, the Company had $4,744 of undrawn letters of credit.

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 lease 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 generally accepted accounting principles of the United States of America (“U.S. GAAP”).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 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. GAAPnon-GAAP measures are “organic revenue growth” or “organic revenue decline” that 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.”
The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018 and the financial condition of the Company as of September 30, 2019.March 31, 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 on2019 Form 10-K for10-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 (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 will negatively impact our results of operations, cash flows and financial position; 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 been taking swift and decisive actions over the last few weeks in order to address the pandemic. Our Partner Firms have altered how they work and responded 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 Firmsbusiness 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 12the first quarter of 2020, 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 Company, appointed key agency executives, that report directly into him, to lead each Network. In connection with the reorganization, we reassessed our reportable segments to align our external reporting with how we operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments.
The two reportable segments that result from applying the aggregation criteria are as follows: “Integrated Agencies Network”; and “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 the Company aggregates operating segments that meet the aggregation criteria detailed in ASC 280 into oneand Note 2 of the four reportable segments and combines and discloses those operating segments that do not meet the aggregation criteria in the All Other category. Due to changes in the composition of certain businesses and the Company’s internal management and reporting structure during 2019 reportable segment results for the 2018 periods presented have been recast to reflect the reclassification of certain businesses between segments. Form 10-K.
See Note 1214 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for a description of each of our reportable segments and the All Other category and further information regarding the reclassification of certain businesses between segments.category.
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 September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Revenue:(Dollars in Thousands)(Dollars in Thousands)
Global Integrated Agencies$145,890
 $157,308
 $429,977
 $444,995
Domestic Creative Agencies57,593
 59,151
 176,711
 183,504
Specialist Communications42,101
 38,838
 128,224
 117,966
Media Services21,222
 29,593
 75,815
 90,948
Integrated Agencies Network$208,328
 $206,910
Media & Data Network41,058
 43,232
All Other76,101
 90,940
 223,101
 245,128
78,356
 78,649
Total$342,907
 $375,830
 $1,033,828
 $1,082,541
$327,742
 $328,791
          
Segment operating income (loss):          
Global Integrated Agencies$21,036
 $23,486
 $45,527
 $28,247
Domestic Creative Agencies7,216
 (14,031) 22,533
 (6,887)
Specialist Communications5,129
 3,703
 18,889
 13,646
Media Services(1,677) 850
 (3,630) (78)
Integrated Agencies Network$29,193
 $15,512
Media & Data Network617
 (1,649)
All Other6,828
 6,634
 15,790
 29,065
7,857
 6,641
Corporate(9,111) (18,024) (30,565) (45,236)(8,338) (4,822)
Total$29,421
 $2,618
 $68,544
 $18,757
$29,329
 $15,682
          
Other Income (Expenses):          
Interest expense and finance charges, net$(16,110) $(17,063) $(49,284) $(50,005)$(15,612) $(16,760)
Foreign exchange gain (loss)(3,973) 3,275
 4,401
 (9,934)(14,757) 5,442
Other, net(431) 189
 (4,559) 1,222
16,334
 (3,383)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates8,907
 (10,981) 19,102
 (39,960)
Income tax expense (benefit)3,457
 2,986
 6,292
 (3,367)
Income (loss) before equity in earnings of non-consolidated affiliates5,450
 (13,967) 12,810
 (36,593)
Income before income taxes and equity in earnings of non-consolidated affiliates15,294
 981
Income tax expense13,500
 748
Income before equity in earnings of non-consolidated affiliates1,794
 233
Equity in earnings of non-consolidated affiliates63
 300
 352
 358

 83
Net income (loss)5,513
 (13,667) 13,162
 (36,235)
Net income1,794
 316
Net income attributable to the noncontrolling interest(7,265) (2,458) (10,737) (5,900)(791) (429)
Net income (loss) attributable to MDC Partners Inc.$(1,752) $(16,125) $2,425
 $(42,135)$1,003
 $(113)



Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Depreciation and amortization:(Dollars in Thousands)(Dollars in Thousands)
Global Integrated Agencies$4,009
 $4,553
 $12,511
 $16,705
Domestic Creative Agencies1,213
 1,266
 3,708
 3,793
Specialist Communications644
 1,100
 1,909
 3,059
Media Services755
 675
 2,531
 1,995
Integrated Agencies Network$6,267
 $5,715
Media & Data Network808
 993
All Other2,555
 3,341
 7,580
 9,077
1,899
 1,913
Corporate192
 199
 630
 583
232
 217
Total$9,368
 $11,134
 $28,869
 $35,212
$9,206
 $8,838
          
Stock-based compensation:          
Global Integrated Agencies$4,673
 $3,241
 $9,672
 $8,176
Domestic Creative Agencies352
 550
 1,338
 2,056
Specialist Communications45
 52
 123
 291
Media Services5
 102
 (11) 251
Integrated Agencies Network$2,861
 $4,459
Media & Data Network(13) 
All Other118
 677
 1,058
 2,019
80
 86
Corporate833
 1,620
 452
 4,089
142
 (1,573)
Total$6,026
 $6,242
 $12,632
 $16,882
$3,070
 $2,972
          
Capital expenditures:          
Global Integrated Agencies$3,470
 $1,927
 $6,704
 $6,581
Domestic Creative Agencies694
 967
 1,757
 2,440
Specialist Communications198
 732
 680
 3,176
Media Services(2) 385
 165
 699
Integrated Agencies Network$835
 $3,049
Media & Data Network86
 138
All Other1,492
 1,500
 4,450
 2,271
323
 418
Corporate11
 32
 30
 65
302
 1
Total$5,863
 $5,543
 $13,786
 $15,232
$1,546
 $3,606


THREE MONTHS ENDED SEPTEMBER 30, 2019MARCH 31, 2020 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2018

MARCH 31, 2019
Consolidated Results of Operations

Revenues
Revenue was $342.9$327.7 million for the three months ended September 30, 2019March 31, 2020 compared to revenue of $375.8$328.8 million for the three months ended September 30, 2018. SeeMarch 31, 2019.
The components of the Advertising and Communications Group section below for a discussion regarding consolidatedfluctuations in revenues for the three months ended September 30, 2019March 31, 2020 compared to the three months ended September 30, 2018.March 31, 2019 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
March 31, 2019$328,791
   $263,017
   $22,378
   $43,396
  
Components of revenue change:               
Foreign exchange impact(1,800) (0.5)% 
  % (29) (0.1)% (1,771) (4.1)%
Non-GAAP acquisitions (dispositions), net(5,683) (1.7)% (1,978) (0.8)% (3,705) (16.6)% 
  %
Organic revenue6,434
 2.0 % 3,522
 1.3 % (388) (1.7)% 3,300
 7.6 %
Total Change$(1,049) (0.3)% $1,544
 0.6 % $(4,122) (18.4)% $1,529
 3.5 %
March 31, 2020$327,742
   $264,561
   $18,256
   $44,925
  
The negative foreign exchange impact of $1.8 million, or 0.5%, was attributable 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 three months ended March 31, 2020, organic revenue increased $6.4 million, or 2.0%, attributable to higher spending by clients and new client wins, partially offset client losses and a reduction in spending by certain other clients.
The table below provides a reconciliation between revenue from acquired/disposed businesses in the statement of operations to non-GAAP acquisitions (dispositions), net for the three months ended March 31, 2020:
 All Other Total
 (Dollars in Thousands)
GAAP revenue from 2019 and 2020 acquisitions$
 $
Foreign exchange impact(248) (248)
Contribution to non-GAAP organic revenue growth (decline)(411)
(411)
Prior year revenue from dispositions(5,024) (5,024)
Non-GAAP acquisitions (dispositions), net$(5,683) $(5,683)
The geographic mix in revenues for the three months ended March 31, 2020 and 2019 is as follows:
 2020 2019
United States80.7% 80.0%
Canada5.6% 6.8%
Other13.7% 13.2%
Operating Income
Operating income for the three months ended September 30, 2019March 31, 2020 was $29.4$29.3 million, compared to $2.6$15.7 million for the three months ended September 30, 2018,March 31, 2019, representing an increase of $26.8 million. The increase was$13.6 million, primarily driven by lower operating expenses in connection with cost savings initiatives.
Given the impact of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the first quarter of 2020. The interim test did not result in an impairment charge and severance expense recognizedof goodwill but did result in the prior year quarter. Forfair value of certain reporting units, with goodwill of approximately $230 million, exceeding their carrying value by a minimal percentage. If the three months ended September 30, 2018,duration of the AdvertisingCOVID-19

pandemic is longer and Communications Group recognized a $21.0 millionthe operational impact is greater than estimated, the Company could recognize an impairment pertaining toof goodwill withinin the Domestic Creative Agencies reportable segment and a trademark within the Global Integrated Agencies reportable segment, as well as severance expense and other restructuring costs of $7.7 million at Corporate.future.
Other, Net
Other, net, for the three months ended September 30, 2019March 31, 2020 was income of $16.3 million, primarily driven by a gain on the sale of a Partner Firm, compared to a loss of $0.4 million compared to income of $0.2$3.4 million for the three months ended September 30, 2018.March 31, 2019.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange loss for the three months ended September 30, 2019March 31, 2020 was $4.0$14.8 million compared to a gain of $3.3$5.4 million for the three months ended September 30, 2018.March 31, 2019. The change in the foreign exchange impact was primarily attributable to the weakening 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 three months ended September 30, 2019March 31, 2020 was $16.1$15.6 million compared to $17.1$16.8 million for the three months ended September 30, 2018,March 31, 2019, representing a decrease of $1.0$1.1 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 three months ended September 30, 2019March 31, 2020 was $3.5$13.5 million (on income of $8.9$15.3 million resulting in an effective tax rate of 38.8%88.3%) compared to an expense of $3.0$0.7 million (on lossincome of $11.0$1.0 million resulting in an effective tax rate of 27.1%76.2%) for the three months ended September 30, 2018.  IncomeMarch 31, 2019. The income tax expense and benefit for the three months ended September 30, 2018, wasMarch 31, 2020 were impacted by impairments andcapital gains, non-deductible stock compensation for which a tax benefit was not recognized.
Equity in Earnings (Losses)recognized, and the jurisdictional mix of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates represents the income or losses attributable to equity method investments. Income recorded for the three months ended September 30, 2019 was $0.1 million compared to income of $0.3 million for the three months ended September 30, 2018.earnings.
Noncontrolling Interests
The effect of noncontrolling interests for the three months ended September 30, 2019March 31, 2020 was $7.3$0.8 million compared to $2.5$0.4 million for the three months ended September 30, 2018.

March 31, 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 three months ended September 30, 2019March 31, 2020 was $5.1$2.4 million, or $0.07$0.03 diluted loss per share, compared to net loss attributable to MDC Partners Inc. common shareholders of $18.2$2.5 million, or $0.32$0.04 diluted loss per share, for the three months ended September 30, 2018.March 31, 2019.

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.
The components of the fluctuations in revenues for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
September 30, 2018$375,830
   $296,544
   $32,132
   $47,154
  
Components of revenue change:               
Foreign exchange impact(2,358) (0.6)% 
  % (345) (1.1)% (2,014) (4.3)%
Non-GAAP acquisitions (dispositions), net(2,438) (0.6)% 290
 0.1 % (3,628) (11.3)% 900
 1.9 %
Organic revenue decline(28,127) (7.5)% (25,163) (8.5)% (2,264) (7.0)% (699) (1.5)%
Total Change$(32,923) (8.8)% $(24,873) (8.4)% $(6,237) (19.4)% $(1,813) (3.8)%
September 30, 2019$342,907
   $271,671
   $25,895
   $45,341
  
Revenue was $342.9 million for the three months ended September 30, 2019 compared to revenue of $375.8 million for the three months ended September 30, 2018, representing a decline of $32.9 million.

The negative foreign exchange impact of $2.4 million, or 0.6%, was attributable 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 decline and non-GAAP acquisitions (dispositions), net, as defined above. For the three months ended September 30, 2019, organic revenue declined by $28.1 million, or 7.5%, of which primarily all pertained to Partner Firms the Company has owned throughout each of the comparable periods presented. The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients. Additionally, the change in revenue was primarily driven by a decline in categories including healthcare, food and beverage, other and automotive, partially offset by growth in transportation and travel/lodging 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 September 30, 2019:
 Specialist Communications All Other Total
 (Dollars in Thousands)
GAAP revenue from 2018 and 2019 acquisitions$2,456
 $
 $2,456
Foreign exchange impact9
 461
 470
Contribution to non-GAAP organic revenue decline78

(2,263)
(2,185)
Prior year revenue from dispositions
 (3,179) (3,179)
Non-GAAP acquisitions (dispositions), net$2,543
 $(4,981) $(2,438)

The geographic mix in revenues for the three months ended September 30, 2019 and 2018 is as follows:
 2019 2018
United States79.2% 79.0%
Canada7.6% 8.5%
Other13.2% 12.5%

Integrated Agencies Network
The change in expenses and operating profit as a percentage of revenue in the Advertising and Communications GroupIntegrated Agencies Network reportable segment for the three months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:
 2019 2018 Change 2020 2019 Change
Advertising and Communications Group $ % of
Revenue
 $ % of
Revenue
 $ %
Integrated Agencies Network $ % of
Revenue
 $ % of
Revenue
 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Revenue: $342,907
   $375,830
   $(32,923) (8.8)% $208,328
   $206,910
   $1,418
 0.7 %
Operating expenses                        
Cost of services sold 222,448
 64.9% 238,690
 63.5% (16,242) (6.8)% 136,545
 65.5% 147,614
 71.3% (11,069) (7.5)%
Office and general expenses 70,807
 20.6% 84,555
 22.5% (13,748) (16.3)% 36,162
 17.4% 38,069
 18.4% (1,907) (5.0)%
Depreciation and amortization 9,176
 2.7% 10,935
 2.9% (1,759) (16.1)% 6,267
 3.0% 5,715
 2.8% 552
 9.7 %
Goodwill and other asset impairment charge 1,944
 0.6% 21,008
 5.6% (19,064) (90.7)%
Other asset impairment 161
 0.1% 
 % 161
  %
 $304,375
 88.8% $355,188
 94.5% $(50,813) (14.3)% $179,135
 86.0% $191,398
 92.5% $(12,263) (6.4)%
Operating profit $38,532
 11.2% $20,642
 5.5% $17,890
 86.7 % $29,193
 14.0% $15,512
 7.5% $13,681
 88.2 %
The increase in revenue was attributable to higher spending by clients and client wins, partially offset by client losses and a reduction in spending by certain other clients.
The increase in operating profit was attributable to lowerthe increase in revenue and a decline in operating expenses, as outlined below, partially offset by a decline in revenue.below.

The change in the categories of expenses as a percentage of revenue in the Advertising and Communications GroupIntegrated Agencies Network reportable segment for the three months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:
 2019 2018 Change 2020 2019 Change
Advertising and Communications Group $ % of
Revenue
 $ % of
Revenue
 $ %
Integrated Agencies Network $ % of
Revenue
 $ % of
Revenue
 $ %
 (Dollars in Thousands) (Dollars in Thousands)
Direct costs (1)
 $51,152
 14.9% $51,774
 13.8% $(622) (1.2)% $25,212
 12.1 % $27,018
 13.1 % $(1,806) (6.7)%
Staff costs (2)
 190,810
 55.6% 209,409
 55.7% (18,599) (8.9)% 124,086
 59.6 % 132,648
 64.1 % (8,562) (6.5)%
Administrative 44,157
 12.9% 46,437
 12.4% (2,280) (4.9)% 25,592
 12.3 % 28,049
 13.6 % (2,457) (8.8)%
Deferred acquisition consideration 1,943
 0.6% 11,003
 2.9% (9,060) (82.3)% (5,044) (2.4)% (6,491) (3.1)% 1,447
 (22.3)%
Stock-based compensation 5,193
 1.5% 4,622
 1.2% 571
 12.4 % 2,861
 1.4 % 4,459
 2.2 % (1,598) (35.8)%
Depreciation and amortization 9,176
 2.7% 10,935
 2.9% (1,759) (16.1)% 6,267
 3.0 % 5,715
 2.8 % 552
 9.7 %
Goodwill and other asset impairment charge 1,944
 0.6% 21,008
 5.6% (19,064) (90.7)%
Other asset impairment 161
 0.1 % 
  % 161
  %
Total operating expenses $304,375
 88.8% $355,188
 94.5% $(50,813) (14.3)% $179,135
 86.0 % $191,398
 92.5 % $(12,263) (6.4)%

Direct costs were lower driven by a decline in non-billable expenses.
(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 attributable to staffing reductions at Partner Firms in connection with the decline in revenue and cost savings initiatives.
The decrease in administrative costs was attributable to a decline in various costs in connection with cost savings initiatives.
Deferred acquisition consideration change for the three months ended September 30, 2019March 31, 2020 was primarily attributable to a decline in the aggregateprojected performance of certain Partner Firms in 2019 relative to the previously projected expectations.
For the three months ended September 30, 2019, an impairment charge of $1.9 million was recognized to reduce the carrying value of a right-of-use lease asset and related leasehold improvements within the Global Integrated Agencies segment.
For the three months ended September 30, 2018, an impairment charge of $21.0 million was recognized pertaining to goodwill within the Domestic Creative Agencies reportable segment and a trademark within the Global Integrated Agencies reportable segment.

Global Integrated AgenciesMedia & Data Network
The change in expenses and operating profit (loss) as a percentage of revenue in the Global Integrated AgenciesMedia & Data Network reportable segment for the three months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue: $145,890
   $157,308
   $(11,418) (7.3)%
Operating expenses            
Cost of services sold 89,708
 61.5% 89,408
 56.8% 300
 0.3 %
Office and general expenses 29,193
 20.0% 36,681
 23.3% (7,488) (20.4)%
Depreciation and amortization 4,009
 2.7% 4,553
 2.9% (544) (11.9)%
Other asset impairment 1,944
 1.3% 3,180
 2.0% (1,236) (38.9)%
  $124,854
 85.6% $133,822
 85.1% $(8,968) (6.7)%
Operating profit $21,036
 14.4% $23,486
 14.9% $(2,450) (10.4)%
The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.
The decline in operating profit was primarily attributable to lower revenue, partially offset by a decline in operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Global Integrated Agencies reportable segment for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $13,269
 9.1 % $5,310
 3.4% $7,959
 NM
Staff costs (2)
 81,688
 56.0 % 91,026
 57.9% (9,338) (10.3)%
Administrative 19,744
 13.5 % 22,559
 14.3% (2,815) (12.5)%
Deferred acquisition consideration (473) (0.3)% 3,953
 2.5% (4,426) NM
Stock-based compensation 4,673
 3.2 % 3,241
 2.1% 1,432
 44.2 %
Depreciation and amortization 4,009
 2.7 % 4,553
 2.9% (544) (11.9)%
Other asset impairment 1,944
 1.3 % 3,180
 2.0% (1,236) (38.9)%
Total operating expenses $124,854
 85.6 % $133,822
 85.1% $(8,968) (6.7)%
(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 were higher, inclusive of higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
Deferred acquisition consideration change for the three months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
For the three months ended September 30, 2019, an impairment charge of $1.9 million was recognized to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
For three months ended September 30, 2018, an impairment charge of $3.2 million was recognized to reduce the carrying value of a trademark.

Domestic Creative Agencies
The change in expenses and operating profit as a percentage of revenue in the Domestic Creative Agencies reportable segment for the three months ended September 30, 2019 and 2018 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 $57,593
   $59,151
   $(1,558) (2.6)% $41,058
   $43,232
   $(2,174) (5.0)%
Operating expenses                        
Cost of services sold 35,420
 61.5% 42,115
 71.2 % (6,695) (15.9)% 29,906
 72.8% 34,180
 79.1 % (4,274) (12.5)%
Office and general expenses 13,744
 23.9% 11,973
 20.2 % 1,771
 14.8 % 9,727
 23.7% 9,708
 22.5 % 19
 0.2 %
Depreciation and amortization 1,213
 2.1% 1,266
 2.1 % (53) (4.2)% 808
 2.0% 993
 2.3 % (185) (18.6)%
Goodwill impairment 
 % 17,828
 30.1 % (17,828) (100.0)%
 $50,377
 87.5% $73,182
 123.7 % $(22,805) (31.2)% $40,441
 98.5% $44,881
 103.8 % $(4,440) (9.9)%
Operating profit (loss) $7,216
 12.5% $(14,031) (23.7)% $21,247
 NM
 $617
 1.5% $(1,649) (3.8)% $2,266
 NM
The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.
The change in operating profit was primarily attributable to declining operating expenses driven by goodwill impairment in 2018, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Domestic Creative Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $5,148
 8.9% $8,166
 13.8 % $(3,018) (37.0)%
Staff costs (2)
 35,448
 61.5% 39,105
 66.1 % (3,657) (9.4)%
Administrative 7,538
 13.1% 7,190
 12.2 % 348
 4.8 %
Deferred acquisition consideration 678
 1.2% (923) (1.6)% 1,601
 NM
Stock-based compensation 352
 0.6% 550
 0.9 % (198) (36.0)%
Depreciation and amortization 1,213
 2.1% 1,266
 2.1 % (53) (4.2)%
Goodwill impairment 
 % 17,828
 30.1 % (17,828) (100.0)%
Total operating expenses $50,377
 87.5% $73,182
 123.7 % $(22,805) (31.2)%
(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 was attributable to lower revenues.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
Deferred acquisition consideration change for the three months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
For the three months ended September 30, 2018, an impairment charge of $17.8 million was recognized to reduce the carrying value of goodwill.

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 September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $42,101
   $38,838
   $3,263
 8.4 %
Operating expenses            
Cost of services sold 27,466
 65.2% 25,756
 66.3% 1,710
 6.6 %
Office and general expenses 8,862
 21.0% 8,279
 21.3% 583
 7.0 %
Depreciation and amortization 644
 1.5% 1,100
 2.8% (456) (41.5)%
  $36,972
 87.8% $35,135
 90.5% $1,837
 5.2 %
Operating profit $5,129
 12.2% $3,703
 9.5% $1,426
 38.5 %
The increase in revenue was primarily due to client wins at certain Partner firms as well as a contribution of $1.2 million from an acquired Partner Firm.
The increase in operating profit was attributable to higher 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 September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $9,229
 21.9% $8,866
 22.8% $363
 4.1 %
Staff costs (2)
 20,396
 48.4% 18,729
 48.2% 1,667
 8.9 %
Administrative 5,191
 12.3% 4,936
 12.7% 255
 5.2 %
Deferred acquisition consideration 1,467
 3.5% 1,452
 3.7% 15
 1.0 %
Stock-based compensation 45
 0.1% 52
 0.1% (7) (13.5)%
Depreciation and amortization 644
 1.5% 1,100
 2.8% (456) (41.5)%
Total operating expenses $36,972
 87.8% $35,135
 90.5% $1,837
 5.2 %
(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 was attributable to higher revenues.
The increase in staff costs was primarily attributable to contributions from an acquired Partner Firm and higher costs to support the growth of certain Partner Firms.

Media Services
The change in expenses and operating loss as a percentage of revenue in the Media Services reportable segment for the three months ended September 30, 2019 and 2018 was as follows:

  2019 2018 Change
Media Services $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $21,222
   $29,593
   $(8,371) (28.3)%
Operating expenses            
Cost of services sold 16,176
 76.2 % 20,406
 69.0% (4,230) (20.7)%
Office and general expenses 5,968
 28.1 % 7,662
 25.9% (1,694) (22.1)%
Depreciation and amortization 755
 3.6 % 675
 2.3% 80
 11.9 %
  $22,899
 107.9 % $28,743
 97.1% $(5,844) (20.3)%
Operating loss $(1,677) (7.9)% $850
 2.9% $(2,527) NM
The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.
The change in operating loss was attributable to a decline in revenue, partially offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Media Services reportable segment for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Media Services $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $4,697
 22.1% $7,047
 23.8 % $(2,350) (33.3)%
Staff costs (2)
 13,348
 62.9% 16,352
 55.3 % (3,004) (18.4)%
Administrative 4,092
 19.3% 4,594
 15.5 % (502) (10.9)%
Deferred acquisition consideration 2
 % (27) (0.1)% 29
 NM
Stock-based compensation 5
 % 102
 0.3 % (97) (95.1)%
Depreciation and amortization 755
 3.6% 675
 2.3 % 80
 11.9 %
Total operating expenses $22,899
 107.9% $28,743
 97.1 % $(5,844) (20.3)%
(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 was attributable to lower revenues.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
The decrease in administrative costs was attributable to a decline in various costs in connection with cost savings initiatives.



All Other
The change in expenses and operating profit as a percentage of revenue in the All Other category for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
All Other $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $76,101
   $90,940
   $(14,839) (16.3)%
Operating expenses            
Cost of services sold 53,678
 70.5% 61,005
 67.1% (7,327) (12.0)%
Office and general expenses 13,040
 17.1% 19,960
 21.9% (6,920) (34.7)%
Depreciation and amortization 2,555
 3.4% 3,341
 3.7% (786) (23.5)%
  $69,273
 91.0% $84,306
 92.7% $(15,033) (17.8)%
Operating profit $6,828
 9.0% $6,634
 7.3% $194
 2.9 %
The decline in revenue was attributable to client losses, a reduction in spending by certain clients and a disposition of a Partner Firm with an impact of $3.6 million, partially offset by new client wins and higher spending by other clients.
The increase in operating profit was attributable to lower operating expenses, as outlined below, partially offset by a decline in revenue.
The change in the categories of expenses as a percentage of revenue in the All Other category for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
All Other $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $18,809
 24.7% $22,385
 24.6% $(3,576) (16.0)%
Staff costs (2)
 39,930
 52.5% 44,197
 48.6% (4,267) (9.7)%
Administrative 7,592
 10.0% 7,158
 7.9% 434
 6.1 %
Deferred acquisition consideration 269
 0.4% 6,548
 7.2% (6,279) (95.9)%
Stock-based compensation 118
 0.2% 677
 0.7% (559) (82.6)%
Depreciation and amortization 2,555
 3.4% 3,341
 3.7% (786) (23.5)%
Total operating expenses $69,273
 91.0% $84,306
 92.7% $(15,033) (17.8)%
(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 was attributable to lower revenues.
The decrease in staff costs was primarily attributable to staffing reductions at certain Partner Firms in connection with the decline in revenues and cost savings initiatives. In addition, staff costs included a positive benefit from the disposition of a Partner Firm.
Deferred acquisition consideration change for the three months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.

Corporate
The change in operating expenses for Corporate for the three months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Variance
Corporate $ $ $ %
  (Dollars in Thousands)
Staff costs (1)
 $5,772
 $12,888
 $(7,116) (55.2)%
Administrative 2,314
 3,317
 (1,003) (30.2)%
Stock-based compensation 833
 1,620
 (787) (48.6)%
Depreciation and amortization 192
 199
 (7) (3.5)%
Total operating expenses $9,111
 $18,024
 $(8,913) (49.5)%
(1)
Excludes stock-based compensation.
The decline in Corporate operating expenses was primarily attributable to lower staff costs, due to a decline in severance expense of $6.6 million and a reduction in staff and administrative costs, due to lower professional fees and occupancy costs.

NINE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2018

Consolidated Results of Operations

Revenues
Revenue was $1.03 billion for the nine months ended September 30, 2019 compared to revenue of $1.08 billion for the nine months ended September 30, 2018. See the Advertising and Communications Group section below for a discussion regarding consolidated revenues for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.
Operating Income
Operating income for the nine months ended September 30, 2019 was $68.5 million compared to $18.8 million for the nine months ended September 30, 2018, representing a change of $49.7 million. The change was primarily driven by an increase in operating income in the Advertising and Communications Group of $35.1 million, as a decline in revenue was more than offset by lower operating expenses, primarily related to a goodwill impairment in 2018. Additionally, Corporate operating expenses decreased by $14.7 million, primarily related to lower compensation expense, stock-based compensation and professional fees as well as an asset impairment in 2018.
Other, Net
Other, net, for the nine months ended September 30, 2019 was a loss of $4.6 million compared to income of $1.2 million for the nine months ended September 30, 2018, primarily driven by a loss on the sale of Kingsdale in 2019.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange gain for the nine months ended September 30, 2019 was $4.4 million compared to a loss of $9.9 million for the nine months ended September 30, 2018. The change in foreign exchange was primarily attributable to the strengthening 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 nine months ended September 30, 2019 was $49.3 million compared to $50.0 million for the nine months ended September 30, 2018, representing a decrease of $0.7 million.
Income Tax Expense (Benefit)
Income tax expense for the nine months ended September 30, 2019 was $6.3 million (on income of $19.1 million resulting in an effective tax rate of 32.9%) compared to a benefit of $3.4 million (on a loss of $40.0 million resulting in an effective tax rate of 8.4%) for the nine months ended September 30, 2018. The income tax benefit for the nine months ended September 30, 2018, was impacted by impairments and non-deductible stock compensation for which a tax benefit was not recognized.


Equity in Earnings (Losses) of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates represents the income or losses attributable to equity method investments. The Company recorded $0.4 million of income for both the nine months ended September 30, 2019 and the nine months ended September 30, 2018.
Noncontrolling Interests
The effect of noncontrolling interests for the nine months ended September 30, 2019 was $10.7 million compared to $5.9 million for the nine months ended September 30, 2018.

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 nine months ended September 30, 2019 was $6.5 million, or $0.10 diluted loss per share, compared to net loss attributable to MDC Partners Inc. common shareholders of $48.3 million, or $0.85 diluted income per share, for the nine months ended September 30, 2018.
Advertising and Communications Group
The following discussion provides additional detailed disclosure for each of the Company’s four (4) reportable segments, plus the “All Other” category, within the Advertising and Communications Group.
The components of the fluctuations in revenues for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 are as follows:
 Total United States Canada Other
 $ % $ % $ % $ %
 (Dollars in Thousands)
September 30, 2018$1,082,541
   $848,336
   $91,597
   $142,608
  
Components of revenue change:               
Foreign exchange impact(11,673) (1.1)% 
  % (2,719) (3.0)% (8,954) (6.3)%
Non-GAAP acquisitions (dispositions), net3,197
 0.3 % 11,524
 1.4 % (10,909) (11.9)% 2,582
 1.8 %
Organic revenue growth (decline)(40,237) (3.7)% (40,513) (4.8)% (5,132) (5.6)% 5,408
 3.8 %
Total Change$(48,713) (4.5)% $(28,989) (3.4)% $(18,760) (20.5)% $(964) (0.7)%
September 30, 2019$1,033,828
   $819,347
   $72,837
   $141,644
  
Revenue for the Advertising and Communications Group was $1.03 billion for the nine months ended September 30, 2019 compared to revenue of $1.08 billion for the nine months ended September 30, 2018, representing a decrease of $48.7 million, or 4.5%.
The negative foreign exchange impact of $11.7 million, or 1.1%, was attributable 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 nine months ended September 30, 2019, organic revenue decreased by $40.2 million or 3.7%, of which $46.9 million, or 4.3% pertained to Partner Firms the Company has owned throughout each of the comparable periods presented, offset by growth of $6.6 million, or 0.6%, 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 and higher spending by other clients. Additionally, the change in revenue was driven by a decline in categories including healthcare, food and beverage and automotive, partially offset by growth in transportation and travel/lodging 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 nine months ended September 30, 2019:
 Specialist Communications All Other Total
 (Dollars in Thousands)
GAAP revenue from 2018 and 2019 acquisitions$3,872
 $16,486
 $20,358
Foreign exchange impact9
 461
 470
Contribution to non-GAAP organic revenue growth(566)
(6,067)
(6,633)
Prior year revenue from dispositions
 (10,998) (10,998)
Non-GAAP acquisitions (dispositions), net$3,315
 $(118) $3,197
The geographic mix in revenues for the nine months ended September 30, 2019 and 2018 is as follows:
 2019 2018
United States79.3% 78.4%
Canada7.0% 8.5%
Other13.7% 13.1%
The change in expenses and operating profit as a percentage of revenue in the Advertising and Communications Group for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Advertising and Communications Group $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $1,033,828
   $1,082,541
   $(48,713) (4.5)%
Operating expenses            
Cost of services sold 700,351
 67.7% 735,110
 67.9% (34,759) (4.7)%
Office and general expenses 204,185
 19.8% 227,801
 21.0% (23,616) (10.4)%
Depreciation and amortization 28,239
 2.7% 34,629
 3.2% (6,390) (18.5)%
Goodwill and other asset impairment charge 1,944
 0.2% 21,008
 1.9% (19,064) (90.7)%
  $934,719
 90.4% $1,018,548
 94.1% $(83,829) (8.2)%
Operating profit $99,109
 9.6% $63,993
 5.9% $35,116
 54.9 %

The change in operating profit(loss) was attributable to a decline in revenue, more than offset by lower operating expenses, as outlined below.

The change in the categories of expenses as a percentage of revenue in the Advertising and Communications GroupMedia & Data Network reportable segment for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:
  2019 2018 Change
Advertising and Communications Group $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $167,645
 16.2 % $152,877
 14.1% $14,768
 9.7 %
Staff costs (2)
 596,810
 57.7 % 647,063
 59.8% (50,253) (7.8)%
Administrative 131,528
 12.7 % 141,656
 13.1% (10,128) (7.1)%
Deferred acquisition consideration (3,627) (0.4)% 8,522
 0.8% (12,149) NM
Stock-based compensation 12,180
 1.2 % 12,793
 1.2% (613) (4.8)%
Depreciation and amortization 28,239
 2.7 % 34,629
 3.2% (6,390) (18.5)%
Goodwill and other asset impairment charge 1,944
 0.2 % 21,008
 1.9% (19,064) (90.7)%
Total operating expenses $934,719
 90.4 % $1,018,548
 94.1% $(83,829) (8.2)%
(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 were higher, inclusive of higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was primarily attributable to staffing reductions at Partner Firms in connection with the decline in revenues and cost savings initiatives.
The decrease in administrative costs was driven by lower spending in connection with savings initiatives.
Deferred acquisition consideration change for the nine months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
For the nine months ended September 30, 2019, an impairment charge of $1.9 million was recognized to reduce the carrying value of a right-of-use lease asset and related leasehold improvements within the Global Integrated Agencies segment.
For the nine months ended September 30, 2018, an impairment charge of $21.0 million was recognized pertaining to goodwill within the Domestic Creative Agencies reportable segment and a trademark within the Global Integrated Agencies reportable segment.
Global Integrated Agencies
The change in expenses and operating profit as a percentage of revenue in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $429,977
   $444,995
   $(15,018) (3.4)%
Operating expenses            
Cost of services sold 284,214
 66.1% 297,403
 66.8% (13,189) (4.4)%
Office and general expenses 85,781
 20.0% 99,460
 22.4% (13,679) (13.8)%
Depreciation and amortization 12,511
 2.9% 16,705
 3.8% (4,194) (25.1)%
Other asset impairment 1,944
 0.5% 3,180
 0.7% (1,236) (38.9)%
  $384,450
 89.4% $416,748
 93.7% $(32,298) (7.8)%
Operating profit $45,527
 10.6% $28,247
 6.3% $17,280
 61.2 %
Revenue was lower by $8.4 million, or 1.9%, due to a negative foreign exchange impact and by $6.6 million, or 1.5%, driven by client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.

The increase in operating profit was primarily attributable to lower operating expenses, as outlined below, partially offset by a decline in revenue.
The change in the categories of expenses as a percentage of revenue in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Global Integrated Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $43,550
 10.1 % $23,048
 5.2% $20,502
 89.0 %
Staff costs (2)
 262,288
 61.0 % 295,491
 66.4% (33,203) (11.2)%
Administrative 58,112
 13.5 % 67,369
 15.1% (9,257) (13.7)%
Deferred acquisition consideration (3,627) (0.8)% 2,779
 0.6% (6,406) NM
Stock-based compensation 9,672
 2.2 % 8,176
 1.8% 1,496
 18.3 %
Depreciation and amortization 12,511
 2.9 % 16,705
 3.8% (4,194) (25.1)%
Other asset impairment 1,944
 0.5 % 3,180
 0.7% (1,236) (38.9)%
Total operating expenses $384,450
 89.4 % $416,748
 93.7% $(32,298) (7.8)%
(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 were higher, inclusive of higher billable costs for client arrangements accounted for as principal.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
The decrease in administrative costs was driven by lower spending in connection with savings initiatives.
Deferred acquisition consideration change for the nine months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
For the nine months ended September 30, 2019, an impairment charge of $1.9 million was recognized to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
For the nine months ended September 30, 2018, an impairment charge of $3.2 million was recognized to reduce the carrying value of a trademark.
Domestic Creative Agencies
The change in expenses and operating profit as a percentage of revenue in the Domestic Creative Agencies reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Domestic Creative Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $176,711
   $183,504
   $(6,793) (3.7)%
Operating expenses            
Cost of services sold 112,453
 63.6% 127,403
 69.4 % (14,950) (11.7)%
Office and general expenses 38,017
 21.5% 41,367
 22.5 % (3,350) (8.1)%
Depreciation and amortization 3,708
 2.1% 3,793
 2.1 % (85) (2.2)%
Goodwill impairment 
 % 17,828
 9.7 % (17,828) (100.0)%
  $154,178
 87.2% $190,391
 103.8 % $(36,213) (19.0)%
Operating profit (loss) $22,533
 12.8% $(6,887) (3.8)% $29,420
 NM
  2020 2019 Change
Media & Data Network $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs $12,128
 29.5 % $14,675
 33.9% $(2,547) (17.4)%
Staff costs 20,600
 50.2 % 21,863
 50.6% (1,263) (5.8)%
Administrative 6,543
 15.9 % 6,663
 15.4% (120) (1.8)%
Deferred acquisition consideration 375
 0.9 % 687
 1.6% (312) (45.4)%
Stock-based compensation (13)  % 
 % (13)  %
Depreciation and amortization 808
 2.0 % 993
 2.3% (185) (18.6)%
Total operating expenses $40,441
 98.5 % $44,881
 103.8% $(4,440) (9.9)%
The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.

The change in operating profit was primarily attributable to lower operating expenses, as outlined below, partially offset by the decline in revenue.
The change in the categories of expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Domestic Creative Agencies $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $20,139
 11.4 % $21,855
 11.9% $(1,716) (7.9)%
Staff costs (2)
 107,214
 60.7 % 120,563
 65.7% (13,349) (11.1)%
Administrative 21,870
 12.4 % 23,757
 12.9% (1,887) (7.9)%
Deferred acquisition consideration (91) (0.1)% 539
 0.3% (630) NM
Stock-based compensation 1,338
 0.8 % 2,056
 1.1% (718) (34.9)%
Depreciation and amortization 3,708
 2.1 % 3,793
 2.1% (85) (2.2)%
Goodwill impairment 
  % 17,828
 9.7% (17,828) (100.0)%
Total operating expenses $154,178
 87.2 % $190,391
 103.8% $(36,213) (19.0)%
(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.
The decrease in direct costs was attributable to lower revenues.
The decrease in staff costs was attributable to staffing reductions at certain Partner Firms in connection with the decline in revenue and cost savings initiatives.
The decrease in administrative costs was driven by lower spending in connection with savings initiatives.
For the nine months ended September 30, 2018, an impairment charge of $17.8 million was recognized to reduce the carrying value of goodwill.

Specialist Communications
The change in expenses and operating profit as a percentage of revenue in the Specialist Communications reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $128,224
   $117,966
   $10,258
 8.7 %
Operating expenses            
Cost of services sold 85,452
 66.6% 78,111
 66.2% 7,341
 9.4 %
Office and general expenses 21,974
 17.1% 23,150
 19.6% (1,176) (5.1)%
Depreciation and amortization 1,909
 1.5% 3,059
 2.6% (1,150) (37.6)%
  $109,335
 85.3% $104,320
 88.4% $5,015
 4.8 %
Operating profit $18,889
 14.7% $13,646
 11.6% $5,243
 38.4 %
The increase in revenue is primarily due to client wins at certain Partner firms as well as a contribution of $3.3 million from an acquired Partner Firm.
The increase in operating profit was primarily attributable to higher 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 nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Specialist Communications $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $30,071
 23.5% $27,316
 23.2% $2,755
 10.1 %
Staff costs (2)
 61,543
 48.0% 56,461
 47.9% 5,082
 9.0 %
Administrative 15,271
 11.9% 14,977
 12.7% 294
 2.0 %
Deferred acquisition consideration 418
 0.3% 2,216
 1.9% (1,798) (81.1)%
Stock-based compensation 123
 0.1% 291
 0.2% (168) (57.7)%
Depreciation and amortization 1,909
 1.5% 3,059
 2.6% (1,150) (37.6)%
Total operating expenses $109,335
 85.3% $104,320
 88.4% $5,015
 4.8 %
(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 was attributable to the growth in revenue.

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

Deferred acquisition consideration change for the nine months ended September 30, 2019 was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.

Media Services
The change in expenses and operating loss as a percentage of revenue in the Media Services reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:
  2019 2018 Change
Media Services $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Revenue $75,815
   $90,948
   $(15,133) (16.6)%
Operating expenses            
Cost of services sold 58,278
 76.9 % 65,557
 72.1 % (7,279) (11.1)%
Office and general expenses 18,636
 24.6 % 23,474
 25.8 % (4,838) (20.6)%
Depreciation and amortization 2,531
 3.3 % 1,995
 2.2 % 536
 26.9 %
  $79,445
 104.8 % $91,026
 100.1 % $(11,581) (12.7)%
Operating loss $(3,630) (4.8)% $(78) (0.1)% $(3,552) NM
The decline in revenue was attributable to client losses and a reduction in spending by certain clients, partially offset by new client wins and higher spending by other clients.
The change in operating loss was primarily attributable to a decline in revenue, partially offset by lower operating expenses, as outlined below.
The change in the categories of expenses as a percentage of revenue in the Media Services reportable segment for the nine months ended September 30, 2019 and 2018 was as follows:

  2019 2018 Change
Media Services $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $21,902
 28.9 % $21,954
 24.1% $(52) (0.2)%
Staff costs (2)
 41,647
 54.9 % 52,484
 57.7% (10,837) (20.6)%
Administrative 13,301
 17.5 % 14,198
 15.6% (897) (6.3)%
Deferred acquisition consideration 75
 0.1 % 144
 0.2% (69) (47.9)%
Stock-based compensation (11)  % 251
 0.3% (262) NM
Depreciation and amortization 2,531
 3.3 % 1,995
 2.2% 536
 26.9 %
Total operating expenses $79,445
 104.8 % $91,026
 100.1% $(11,581) (12.7)%
(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 attributable to staffing reductions at certain Partner Firms.
All Other
The change in expenses and operating profit as a percentage of revenue in the All Other category for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018 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 $223,101
   $245,128
   $(22,027) (9.0)% $78,356
   $78,649
   $(293) (0.4)%
Operating expenses                        
Cost of services sold 159,954
 71.7% 166,636
 68.0% (6,682) (4.0)% 56,242
 71.8% 55,627
 70.7% 615
 1.1 %
Office and general expenses 39,777
 17.8% 40,350
 16.5% (573) (1.4)% 12,358
 15.8% 14,468
 18.4% (2,110) (14.6)%
Depreciation and amortization 7,580
 3.4% 9,077
 3.7% (1,497) (16.5)% 1,899
 2.4% 1,913
 2.4% (14) (0.7)%
 $207,311
 92.9% $216,063
 88.1% $(8,752) (4.1)% $70,499
 90.0% $72,008
 91.6% $(1,509) (2.1)%
Operating profit $15,790
 7.1% $29,065
 11.9% $(13,275) (45.7)% $7,857
 10.0% $6,641
 8.4% $1,216
 18.3 %
Revenue was relatively flat as an increase in revenue at certain Partner Firms, due to higher spending and client wins, was offset by a decline in revenue at Partner Firms that have been sold.
The changeincrease in revenueoperating profit was primarily attributable to revenue contributions of $11.3 million, or 4.6% from acquired Partner Firms, partially offset by a negative revenue impact of $11.5 million or 4.7% from the disposition of a Partner firm, a decline from existing Partner Firms of $20.4 million, or 8.3%, and negative foreign exchange impact of $1.5 million, or 0.6%.

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 ninethree months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:

  2019 2018 Change
All Other $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs (1)
 $51,983
 23.3 % $58,704
 23.9% $(6,721) (11.4)%
Staff costs (2)
 124,118
 55.6 % 122,064
 49.8% 2,054
 1.7 %
Administrative 22,974
 10.3 % 21,355
 8.7% 1,619
 7.6 %
Deferred acquisition consideration (402) (0.2)% 2,844
 1.2% (3,246) NM
Stock-based compensation 1,058
 0.5 % 2,019
 0.8% (961) (47.6)%
Depreciation and amortization 7,580
 3.4 % 9,077
 3.7% (1,497) (16.5)%
Total operating expenses $207,311
 92.9 % $216,063
 88.1% $(8,752) (4.1)%
(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 direct costs was attributable to lower revenues.
  2020 2019 Change
All Other $ % of
Revenue
 $ % of
Revenue
 $ %
  (Dollars in Thousands)
Direct costs $19,224
 24.5% $14,756
 18.8 % $4,468
 30.3 %
Staff costs 42,083
 53.7% 47,047
 59.8 % (4,964) (10.6)%
Administrative 7,144
 9.1% 10,045
 12.8 % (2,901) (28.9)%
Deferred acquisition consideration 69
 0.1% (1,839) (2.3)% 1,908
 (103.8)%
Stock-based compensation 80
 0.1% 86
 0.1 % (6) (7.0)%
Depreciation and amortization 1,899
 2.4% 1,913
 2.4 % (14) (0.7)%
Total operating expenses $70,499
 90.0% $72,008
 91.6 % $(1,509) (2.1)%
The increase in direct costs were in line with the higher revenue at certain Partner Firms.
The decrease in staff andcosts was primarily attributable to staffing reductions in connection with cost savings initiatives.
The decrease in administrative costs was primarily attributable to contributions from an acquired Partner Firm.a reduction in occupancy costs.
The increase in deferred acquisition consideration was primarily attributable to the aggregate performance of certain Partner Firms in 2019 relative to the previously projected expectations.
Corporate
The change in operating expenses for Corporate for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018 was as follows:
 2019 2018 Variance 2020 2019 Change
Corporate $ $ $ % $ $ $ %
 (Dollars in Thousands) (Dollars in Thousands)
Staff costs (1)
 $19,623
 $24,630
 $(5,007) (20.3)% $4,918
 $2,525
 $2,393
 94.8 %
Administrative 9,860
 13,617
 (3,757) (27.6)% 3,046
 3,653
 (607) (16.6)%
Stock-based compensation 452
 4,089
 (3,637) (88.9)% 142
 (1,573) 1,715
 (109.0)%
Depreciation and amortization 630
 583
 47
 8.1 % 232
 217
 15
 6.9 %
Other asset impairment 
 2,317
 (2,317) (100.0)%
Total operating expenses $30,565
 $45,236
 $(14,671) (32.4)% $8,338
 $4,822
 $3,516
 72.9 %

(1)
Excludes stock-based compensation.
Staff costs decreasedwere higher primarily due to a reduction in staffing.

The decrease in administrative costs was primarily related to lower professional fees and various other costs in connectionseverance expense associated with cost savings initiatives.
Administrative costs declined in connection with lower professional fees.
Stock-based compensation was lower in the nine months ended September 30, 2019 due to theincluded a reversal of expense previously recognized in connection withrelated to the forfeiture of a performance-based equity award.awards.


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

As of and for the nine months ended September 30, 2019 As of and for the nine months ended September 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$27,280

$25,056

$30,873
Working capital deficit$(195,211)
$(181,724)
$(152,682)
Cash provided by (used in) operating activities$(5,840) $(31,729)
$17,280
Cash provided by (used in) investing activities$3,307
 $(48,355)
$(50,431)
Cash provided by (used in) financing activities$(2,202) $59,122

$21,434
Ratio of long-term debt to shareholders' deficit-5.14

-5.55

-3.87

March 31, 2020 March 31, 2019
Cash provided by (used in) operating activities$(19,954) $(81,200)
Cash provided by investing activities$16,645
 $18,101
Cash provided by financing activities$119,642
 $60,753
The effects of the COVID-19 pandemic will negatively impact 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 been taking 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.
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 September 30, 2019,March 31, 2020, the Company had $8.1$125.0 million of borrowings outstanding and $213.4$86.2 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,6.50% 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 with 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 September 30, 2019, the Company had a working capital deficit of $195.2 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 ninethree months ended September 30, 2019March 31, 2020 was $5.8$20.0 million, primarily reflecting unfavorable working capital requirements, driven by media and other supplier payments.
Cash flows used in operating activities for the ninethree months ended September 30, 2018March 31, 2019 was $31.7$81.2 million, primarily reflecting unfavorable working capital requirements, driven by media and other supplier payments, deferred acquisition consideration payments as well as net income (loss) adjusted to reconcile to net cash used in operating activities.payments.
Investing Activities
During the ninethree months ended September 30,March 31, 2020, cash flows provided by investing activities was $16.6 million, which primarily consisted of proceeds of $18.9 million from the sale of the Company’s equity interest in Sloane, partially offset by $1.5 million of capital expenditures and $0.7 million paid for acquisitions.
During the three months ended March 31, 2019, cash flows provided by investing activities was $3.3$18.1 million, which primarily consisted of proceeds of $23.1 million from the sale of the Company’s equity interest in Kingsdale, partially offset by $13.8$3.6 million of capital expenditures related primarily to computer equipment, furniture and fixtures, and leasehold improvements and $5.8 million paid for acquisitions.

During the nine months ended September 30, 2018, cash flows used in investing activities was $48.4 million, primarily consisting of cash paid of $34.3 million for the acquisition of Instrument and capital expenditures related primarily to computer equipment, furniture and fixtures, and leasehold improvements of $15.2 million..
Financing Activities
During the ninethree months ended September 30, 2019,March 31, 2020, cash flows used inprovided by financing activities was $2.2$119.6 million, primarily driven by $98.6$125.0 million in new borrowings under the Credit Agreement.
During the three months ended March 31, 2019, cash flows provided by financing activities was $60.8 million, driven by $100.0 million in proceeds net of fees, from the issuance of common and preferred shares, more thanpartially offset by $60.1$35.3 million in net repayments under the Credit Agreement, $30.2 million in deferred acquisition consideration payments and $10.0 million in distribution payments.
During the nine months ended September 30, 2018, cash flows provided by financing activities was $59.1 million, primarily driven by $103.0 million in net borrowings under the Credit Agreement and $32.2 million of acquisition related payments.Agreement.
Total Debt
Debt, net of debt issuance costs, as of September 30, 2019March 31, 2020 was $895.4$1,014.3 million as compared to $954.1$887.6 million outstanding at December 31, 2018.2019. The decreaseincrease of $58.7$126.6 million in debt was primarily a result of the Company’s net repayments onborrowings under the Credit Agreement. 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 2024 and $250 million senior secured revolving credit agreement due May 3, 2021 (the “Credit Agreement”).
In April 2020, the Company repurchased approximately $30 million of the 6.50% Notes. See Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information.
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) 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 September 30, 2019,March 31, 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:
September 30, 2019March 31, 2020
Total Senior Leverage Ratio0.003
(0.20)
Maximum per covenant2.00
2.00
 
 
Total Leverage Ratio5.04
4.29
Maximum per covenant6.25
6.25
 
 
Fixed Charges Ratio2.41
2.95
Minimum per covenant1.00
1.00
 
 
Earnings before interest, taxes, depreciation and amortization (in millions)$178,920
$200.7
Minimum per covenant (in millions)$105,000
$105.0
These ratios and measures are not based on generally accepted accounting principles 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 its 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 accounts payable 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 ninethree months ended September 30, 2019:March 31, 2020:
September 30, 2019March 31, 2020
Global Integrated Agencies Domestic Creative Agencies Specialist Communications Agencies Media Services All Other TotalIntegrated Agencies Network Media Services All Other Total
(Dollars in Thousands) 
Beginning Balance of contingent payments$47,880
 $3,747
 $13,193
 $2,689
 $15,089
 $82,598
$66,089
 $1
 $8,581
 $74,671
Payments(20,788) (801) (3,830) (2,763) (2,537) (30,719)(750) (375) 
 (1,125)
Additions - acquisitions and step-up transactions
 
 6,344
 
 
 6,344
1,389
 
 
 1,389
Redemption value adjustments (1)
(3,627) (91) 418
 75
 (402) (3,627)(5,044) 375
 69
 (4,600)
Stock-based compensation11
 33
 
 
 966
 1,010
2,025
 
 
 2,025
Other(2)
 
 
 
 35
 35

 
 (185) (185)
Ending Balance of contingent payments23,476
 2,888
 16,125
 1
 13,151
 55,641
63,709
 1
 8,465
 72,175
Fixed payments263
 286
 
 
 
 549
561
 
 
 561
$23,739
 $3,174
 $16,125
 $1
 $13,151
 $56,190
$64,270
 $1
 $8,465
 $72,736

(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 $8.2 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 $0.1 million will be paid in the current year and $8.1 million will be paid in one to three years.translation 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 $4,665
 $1,670
 $3,852
 $2,792
 $6,070
 $19,049
 
Shares 16
 32
 48
 32
 16
 $144
 
  $4,681
 $1,702
 $3,900
 $2,824
 $6,086
 $19,193
(1) 
Operating income before depreciation and amortization to be received (2)
 $2,005
 $79
 $1,767
 $
 $552
 $4.403
 
Cumulative operating income before depreciation and amortization (3)
 $2,005
 $2,084
 $3,851
 $3,851
 $4,403
  
(5) 
(1)
This amount is in addition to (i) the $19.1 million of options to purchase only exercisable upon termination not within the control of the Company, or death, and (ii) the $3.2 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 the 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 September 30, 2019,March 31, 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 $8.1$125.0 million in borrowings under the Credit Agreement, as of September 30, 2019,March 31, 2020, a 1.0% increase or decrease in the weighted average interest rate, which was 4.79%2.46% at September 30, 2019,March 31, 2020, would have an interest impact of approximately $0.02$1.3 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 $3.5$3.1 million.
Impairment Risk: At September 30, 2019,March 31, 2020, the Company had goodwill of $741.0$725.4 million and other intangible assets of $56.7$50.6 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 an interim goodwill impairment test in the first quarter of 2020. The interim test did not result in an impairment of goodwill but did result in

the fair value of certain reporting units, with goodwill of approximately $230 million, exceeding their 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 September 30, 2019,March 31, 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 September 30, 2019March 31, 2020 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 September 30, 2019March 31, 2020 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 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 its financial condition or results of operations.operations of the Company.
Item 1A.    Risk Factors
There are no material changes inYou should carefully consider the risk factors set forth in Part I,1, Item 1A of the Company’s Annual Report2019 Form 10-K. In addition, you should consider the evolving impacts on Form 10-Kthe Company’s business from the COVID-19 outbreak. COVID-19, related government actions such as travel restrictions, limitations on public gatherings, shelter-in-place orders and mandatory closures, and the economic downturn arising from the outbreak and the response to the outbreak will adversely affect our operations. The downturn in the economy has begun to have, and we expect will continue to have, a negative impact on many of our clients. Some clients have begun responding to weak economic and financial conditions by reducing their marketing budgets, thereby decreasing the market and demand for our services. All of the year ended December 31, 2018.foregoing has impacted and will continue to impact our business, financial condition, and results of operations.

The extent to which the COVID-19 outbreak will adversely impact our business, financial condition and results of operations is highly uncertain, cannot be predicted, and will depend on:

the duration and scope of the outbreak;
governmental, business and individual actions that have been and continue to be taken in response to the outbreak;
the impact of the outbreak and the economic downturn on our clients, who have reduced or may reduce their marketing budgets; and
the duration of the downturn in the economy.

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 September 30, 2019,March 31, 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 its shares in the open market.
For the three months ended September 30, 2019,March 31, 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 September 30, 2019.March 31, 2020. The following table details those shares withheld during the thirdfirst 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
7/1/2019 - 7/31/2019 1,718
 $2.44
 
 
8/1/2019 - 8/31/2019 149,411
 2.31 
 
9/1/2019 - 9/30/2019 23,150
 2.71 
 
Total 174,279
 $2.41
 
 
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
1/1/2020 - 1/31/2020 258,664
 $2.46
 
 
2/1/2020 - 2/29/2020 
 
 
 
3/1/2020 - 3/31/2020 
 
 
 
Total 258,664
 $2.46
 
 


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

Item 5.    Other Information
On November 4, 2019, the Human Resources and Compensation Committee of the Board of Directors of the Company approved grants of long-term cash incentive (“Cash LTIP Awards”) and stock incentive awards (“Stock LTIP Awards” and, together with the Cash LTIP Awards, the “LTIP Awards”) to certain key executives of the Company, including Messrs. Mark Penn (Chief Executive Officer), Frank Lanuto (Chief Financial Officer), and David Ross (Executive Vice President) (the “Officers”) pursuant to the Company’s 2011 Stock Incentive Plan, 2016 Stock Incentive Plan, and 2014 Long-Term Cash Incentive Compensation Plan (the “2014 Cash LTIP Plan” and, collectively with the Company’s 2011 Stock Incentive Plan and the 2016 Stock Incentive Plan, the “Plans”), as applicable. 
The purpose of the Plans and LTIP Awards is to provide key executives of the Company with an incentive to achieve and exceed the long term financial objectives established by the Company; facilitate the achievement of forward-looking long term performance goals by key executives; align the motivations and performance goals of the key executives with the Company’s commercial goals and the interests of the Company’s shareholders; and enable the Company to attract and retain executives who will pursue the long term financial goals established by the Company.
The Cash LTIP Awards provide for a cash payment based on the achievement of certain Company financial goals over a three-year period from 2020 through the end of 2022 and the Officers’ continued employment, subject to limited exceptions, throughout the three-year performance period. Based on the level of achievement of the financial goals, payments under the Cash LTIP Awards can range from 0% to 200% of the target payout amount (the “Target Cash Awards”), subject to a minimum threshold level of achievement.
The Stock LTIP Awards provide for the grant of a target number of shares of restricted Class A stock (the “Target Stock Awards”) which vest based on the achievement of certain Company financial goals during fiscal 2020 and the Officers’ continued employment, subject to limited exceptions, through 2022. Based on the level of achievement of the financial goals during 2020, vesting of the restricted stock can range from 0% to 100% of the target number, subject to a minimum threshold level of achievement.
The Target Cash Awards and Target Stock Awards for each of the Officers are set forth below.
Mr. Penn’s Target Cash Award is $1,155,000 and his Target Stock Award is 577,500 shares of restricted Class A stock.
Mr. Lanuto’s Target Cash Award is $198,000 and his Target Stock Award is 99,000 shares of restricted Class A stock.
Mr. Ross’s Target Cash Award is $400,000 and his Target Stock Award is 200,000 shares of restricted Class A stock.
The form of Cash LTIP award is generally consistent with previously disclosed awards to executive officers pursuant to the 2014 Cash LTIP Plan, except that the performance measures solely relate to achievement of cumulative EBITDA (as defined in the Company’s Credit Agreement) for the period 2020-2022.  The form of Stock LTIP award is generally consistent with previously disclosed awards to executive officers, except that the performance measures solely relate to achievement of EBITDA (as defined in the Company’s Credit Agreement) for the fiscal year 2020. 
The form of Cash LTIP award is attached as Exhibit 10.2 to this Quarterly Report on Form 10-Q.  The form of Stock LTIP award is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q.  This summary of the LTIP Awards is qualified by reference to the full text of the forms of LTIP Award and the Plans, each of which is incorporated by reference herein.

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

EXHIBIT INDEX
 
Exhibit No. Description
 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).
 Articles of Continuance, dated June 28, 2004 (incorporated by reference to Exhibit 3.3 to the Company’s Form 10-Q filed on August 4, 2004).
 Articles of Amalgamation, dated July 1, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on July 30, 2010).
 Articles of Amalgamation, dated May 1, 2011 (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 2, 2011).
 Articles of Amalgamation, dated January 1, 2013 (incorporated by reference to Exhibit 3.1.4 to the Company’s Form 10-K filed on March 10, 2014).
 Articles of Amalgamation, dated April 1, 2013 (incorporated by reference to Exhibit 3.1.5 to the Company’s Form 10-K filed on March 10, 2014).
 Articles of Amalgamation, dated July 1, 2013 (incorporated by reference to Exhibit 3.1.6 to the Company’s Form 10-K filed on March 10, 2014).
 Articles of Amendment, dated March 7, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on March 7, 2017).
 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).
 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).
Form of Financial Performance-Based Restricted Stock Agreement (2019).*
Form of Long-Term Cash Incentive Compensation Plan 2019 Award Agreement.*
 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.*
 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.*
 Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 Schedule of Advertising and Communications Companies.*
101 Interactive data file.*
* Filed electronically herewith.

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
 
November 6, 2019May 11, 2020

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