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 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. 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 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, 2018. • The Global Integrated Agencies reportable segment is comprised of the Company’s four global, integrated operating segments (72andSunny, Anomaly, Crispin Porter + Bogusky, and Forsman & Bodenfors) serving multinational clients around the world. 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 operating segments within the Global Integrated Agencies reportable segment provides a range of different services for its clients, including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast). • The Domestic Creative Agencies reportable segment is comprised of seven operating segments that are primarily national advertising agencies (Colle McVoy, Doner, Laird + Partners, Mono Advertising, Union, Yamamoto, and Yes & Company) leveraging creative capabilities at their core. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of domestic client accounts and the methods used to provide services; and (iii) the extent to which they may be impacted by domestic economic and policy factors within North America. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Domestic Creative Agencies reportable segment. The operating segments within the Domestic Creative Agencies reportable segment provide similar services as the Global Integrated Agencies. • The Specialist Communications reportable segment is comprised of four operating segments that are each communications agencies (Allison & Partners, Hunter, KWT Global, and Veritas) with core service offerings in public relations and related communications services. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of client accounts and the methods used to provide services; (iii) the extent to which they may be impacted by domestic economic and policy factors within North America; and (iv) the regulatory environment regarding public relations and social media. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Specialist Communications reportable segment. The operating segments within the Specialist Communications reportable segment provide public relations and communications services including strategy, editorial, crisis support or issues management, media training, influencer engagement, and events management. • The Media Services reportable segment is comprised of a single operating segment known as MDC Media Partners. MDC Media Partners, which operates primarily in North America, performs media buying and planning as its core competency across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast). • All Other consists of the Company’s remaining operating segments that provide a range of diverse marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. The All Other category includes 6Degrees Communications, Concentric Partners, Gale Partners, Kenna, Kingsdale (through the date of sale on March 8, 2019), Instrument, Relevent, Team, Vitro, and Y Media Labs. The nature of the specialist services provided by these operating segments vary among each other and from those operating segments aggregated into the reportable segments. This results in these operating segments having current and long-term performance expectations inconsistent with those operating segments aggregated in the reportable segments. The operating segments within All Other provide a range of diverse marketing communication services, including application and website design and development, data and analytics, experiential marketing, customer research management, creative services, and branding. • Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Revenue: Global Integrated Agencies $ 145,890 $ 157,308 $ 429,977 $ 444,995 Domestic Creative Agencies 57,593 59,151 176,711 183,504 Specialist Communications 42,101 38,838 128,224 117,966 Media Services 21,222 29,593 75,815 90,948 All Other 76,101 90,940 223,101 245,128 Total $ 342,907 $ 375,830 $ 1,033,828 $ 1,082,541 Segment operating income (loss): Global Integrated Agencies $ 21,036 $ 23,486 $ 45,527 $ 28,247 Domestic Creative Agencies 7,216 (14,031 ) 22,533 (6,887 ) Specialist Communications 5,129 3,703 18,889 13,646 Media Services (1,677 ) 850 (3,630 ) (78 ) All Other 6,828 6,634 15,790 29,065 Corporate (9,111 ) (18,024 ) (30,565 ) (45,236 ) Total $ 29,421 $ 2,618 $ 68,544 $ 18,757 Other Income (Expenses): Interest expense and finance charges, net $ (16,110 ) $ (17,063 ) $ (49,284 ) $ (50,005 ) Foreign exchange gain (loss) (3,973 ) 3,275 4,401 (9,934 ) Other, net (431 ) 189 (4,559 ) 1,222 Income (loss) before income taxes and equity in earnings of non-consolidated affiliates 8,907 (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 affiliates 5,450 (13,967 ) 12,810 (36,593 ) Equity in earnings of non-consolidated affiliates 63 300 352 358 Net income (loss) 5,513 (13,667 ) 13,162 (36,235 ) Net income attributable to the noncontrolling interest (7,265 ) (2,458 ) (10,737 ) (5,900 ) Net income (loss) attributable to MDC Partners Inc. $ (1,752 ) $ (16,125 ) $ 2,425 $ (42,135 ) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Depreciation and amortization: Global Integrated Agencies $ 4,009 $ 4,553 $ 12,511 $ 16,705 Domestic Creative Agencies 1,213 1,266 3,708 3,793 Specialist Communications 644 1,100 1,909 3,059 Media Services 755 675 2,531 1,995 All Other 2,555 3,341 7,580 9,077 Corporate 192 199 630 583 Total $ 9,368 $ 11,134 $ 28,869 $ 35,212 Stock-based compensation: Global Integrated Agencies $ 4,673 $ 3,241 $ 9,672 $ 8,176 Domestic Creative Agencies 352 550 1,338 2,056 Specialist Communications 45 52 123 291 Media Services 5 102 (11 ) 251 All Other 118 677 1,058 2,019 Corporate 833 1,620 452 4,089 Total $ 6,026 $ 6,242 $ 12,632 $ 16,882 Capital expenditures: Global Integrated Agencies $ 3,470 $ 1,927 $ 6,704 $ 6,581 Domestic Creative Agencies 694 967 1,757 2,440 Specialist Communications 198 732 680 3,176 Media Services (2 ) 385 165 699 All Other 1,492 1,500 4,450 2,271 Corporate 11 32 30 65 Total $ 5,863 $ 5,543 $ 13,786 $ 15,232 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 nine months ended September 30, 2019 and 2018 . |