Segment Information | 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 changes in the Company’s internal management and reporting structure during 2018, reportable segment results for periods presented prior to the second quarter of 2018 have been recast to reflect the reclassification of certain businesses between segments. The changes were as follows: • Source Marketing, previously within the All Other category, is included within the Doner operating segment, which is aggregated into the Global Integrated Agencies reportable segment • Yamamoto, previously within the All Other category, was operationally merged with Civilian and is now included within the Domestic Creative Agencies reportable segment • Bruce Mau Design, Hello Design and Northstar Research Partners, previously within the All Other category, and Varick Media Management, previously within the Media Services reportable segment, were included into a newly-formed operating segment, Yes & Company, which is aggregated within the Media Services reportable segment The four reportable segments that result from applying the aggregation criteria are as follows: “Global Integrated Agencies”; “Domestic Creative Agencies”; “Specialist Communications”; and “Media Services.” 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 Form 10-K for the year ended December 31, 2017. • The Global Integrated Agencies reportable segment is comprised of the Company’s six global, integrated operating segments with broad marketing communication capabilities, including advertising, branding, digital, social media, design and production services, serving multinational clients around the world. The Global Integrated Agencies reportable segment includes 72andSunny, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors, and kbs+. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of global clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Global Integrated Agencies reportable segment. • The Domestic Creative Agencies reportable segment is comprised of five operating segments that are national advertising agencies leveraging creative capabilities at their core. The Domestic Creative Agencies reportable segment includes, Colle + McVoy, Laird + Partners, Mono Advertising, Union and Yamamoto. These operating segments share similar characteristics related to (i) the nature of their creative advertising 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 Specialist Communications reportable segment is comprised of seven operating segments that are each communications agencies with core service offerings in public relations and related communications services. The Specialist Communications reportable segment includes Allison & Partners, HL Group Partners, Hunter PR, Kwittken, Luntz Global, Sloane & Company and Veritas. These operating segments share similar characteristics related to (i) the nature of their public relations and communication services, including content creation, social media and influencer marketing; (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 Media Services reportable segment is comprised of two operating segments, MDC Media Partners and Yes & Company. These operating segments perform media buying and planning as their core competency and provide other services, including influencer marketing, content, insights & analytics, out-of-home, paid search, social media, lead generation, programmatic, artificial intelligence, and corporate barter. • All Other consists of the Company’s remaining operating segments that provide a range of diverse marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. The All Other category includes 6Degrees Communications, Concentric Partners, Gale Partners, Kenna, Kingsdale, Instrument, Redscout, Relevent, Team, Vitro, and Y Media Labs. The nature of the specialist services provided by these operating segments vary among each other and from those operating segments aggregated into the reportable segments. This results in these operating segments having current and long-term performance expectations inconsistent with those operating segments aggregated in the reportable segments. • 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 Six Months Ended 2018 2017 2018 2017 Revenue: Global Integrated Agencies $ 182,607 $ 209,090 $ 332,962 $ 388,316 Domestic Creative Agencies 26,388 25,486 50,705 49,229 Specialist Communications 43,938 44,116 87,088 84,800 Media Services 33,293 42,648 69,438 83,893 All Other 93,517 69,192 166,518 128,994 Total $ 379,743 $ 390,532 $ 706,711 $ 735,232 Operating profit (loss): Global Integrated Agencies $ 19,227 $ 13,811 $ 3,466 $ 13,172 Domestic Creative Agencies 4,993 4,959 8,919 8,784 Specialist Communications 5,767 4,300 9,794 8,648 Media Services (1,183 ) 3,955 (980 ) 6,614 All Other 15,108 9,044 22,152 15,819 Corporate (13,140 ) (9,688 ) (27,212 ) (18,257 ) Total $ 30,772 $ 26,381 $ 16,139 $ 34,780 Other income (expense): Other (expense) income, net (5,957 ) 6,596 (12,176 ) 9,163 Interest expense and finance charges, net (16,859 ) (15,510 ) (32,942 ) (32,051 ) Income (loss) before income taxes and equity in earnings (losses) of non-consolidated affiliates 7,956 17,467 (28,979 ) 11,892 Income tax expense (benefit) 1,977 4,641 (6,353 ) 8,610 Income (loss) before equity in earnings (losses) of non-consolidated affiliates 5,979 12,826 (22,626 ) 3,282 Equity in earnings (losses) of non-consolidated affiliates (28 ) 641 58 502 Net income (loss) 5,951 13,467 (22,568 ) 3,784 Net income attributable to the noncontrolling interest (2,545 ) (2,214 ) (3,442 ) (3,097 ) Net income (loss) attributable to MDC Partners Inc. $ 3,406 $ 11,253 $ (26,010 ) $ 687 Three Months Ended Six Months Ended 2018 2017 2018 2017 Depreciation and amortization: Global Integrated Agencies $ 5,329 $ 5,587 $ 13,345 $ 11,548 Domestic Creative Agencies 396 403 789 797 Specialist Communications 1,027 1,221 2,029 2,437 Media Services 767 1,112 1,534 2,221 All Other 4,024 2,144 5,997 4,053 Corporate 160 299 384 608 Total $ 11,703 $ 10,766 $ 24,078 $ 21,664 Stock-based compensation: Global Integrated Agencies $ 2,585 $ 3,080 $ 5,132 $ 6,070 Domestic Creative Agencies 610 181 770 346 Specialist Communications 163 1,087 499 1,605 Media Services 85 165 170 335 All Other 939 509 1,600 1,012 Corporate 1,221 518 2,469 1,122 Total $ 5,603 $ 5,540 $ 10,640 $ 10,490 Capital expenditures: Global Integrated Agencies $ 2,620 $ 8,788 $ 5,457 $ 15,696 Domestic Creative Agencies 269 300 489 613 Specialist Communications 2,225 175 2,465 467 Media Services 185 298 418 1,799 All Other 567 2,180 828 2,578 Corporate 24 2 32 3 Total $ 5,890 $ 11,743 $ 9,689 $ 21,156 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 2 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 six months ended June 30, 2018 and 2017 . |