MDC Partners Inc. Reports Results for the Three and Six Months Ended June 30, 2019

Financial Outlook

2019 financial guidance is maintained as follows:

2019 Outlook Commentary *

Organic Revenue Growth

We expect approximately 0% to 2% growth in organic revenue.

Foreign Exchange Impact, net

Assuming currency rates remain where they are, and based on our most recent projections, the net impact of foreign exchange is expected to decrease revenue by 1%.

Impact of Non-GAAP Acquisitions (Dispositions), net

Our current expectations are that the impact of acquisitions, net of disposition activity, will decrease revenue by approximately 90 basis points.

Covenant EBITDA and Adjustments

The Company expects to complete fiscal year 2019 with approximately $175 million to $185 million of Covenant EBITDA.  The Company has applied certain pro forma and other adjustments, as expressly provided under the credit facility to derive its 2019E Covenant EBITDA forecast.

* The Company has excluded a quantitative reconciliation with respect to the Company's 2019 guidance under the "unreasonable efforts" exception in item 10(e)(1)(i)(B) of Regulation S-K See "Non-GAAP Financial Measures" below for additional information

SCHEDULE 1

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ in 000s, Except per Share Amounts)

Six Months Ended June 30,

2019

2018

2019

2018

Revenue:

Services

$     362,130

379,743

690,921

$     706,711

Operating Expenses:

Cost of services sold

240,749

253,390

477,903

496,420

Office and general expenses

87,276

83,878

154,394

167,757

Depreciation and amortization

10,663

11,703

19,501

24,078

Other asset impairment

?

?

?

2,317

338,688

348,971

651,798

690,572

Operating income 

23,442

30,772

39,123

16,139

Other Income (Expenses):

Interest expense and finance charges, net

(16,413)

(16,859)

(33,174)

(32,942)

Foreign exchange gain (loss)

2,932

(6,549)

8,374

(13,209)

Other, net

(746)

592

(4,128)

1,033

(14,227)

(22,816)

(28,928)

(45,118)

Income (loss) before income taxes and equity in earnings of non-
consolidated affiliates

9,215

7,956

10,195

(28,979)

Income tax expense (benefit)

2,088

1,977

2,835

(6,353)

Income (loss) before equity in earnings of non-consolidated affiliates

7,127

5,979

7,360

(22,626)

Equity in earnings (losses) of non-consolidated affiliates

206

(28)

289

58

Net income (loss)

7,333

5,951

7,649

(22,568)

Net income attributable to the noncontrolling interest

(3,043)

(2,545)

(3,472)

(3,442)

Net income (loss) attributable to MDC Partners Inc. 

4,290

3,406

4,177

(26,010)

Accretion on and net income allocated to convertible preference
shares

(3,515)

(2,273)

(5,625)

(4,095)

Net income (loss) attributable to MDC Partners Inc. common
shareholders

775

1,133

(30,105)

Income (loss) Per Common Share:

Basic

Net income (loss) attributable to MDC Partners Inc. common
shareholders

$           0.01

$           0.02

$          (0.02)

$          (0.53)

Diluted

Net income (loss) attributable to MDC Partners Inc. common
shareholders

$           0.01

$           0.02

$          (0.02)

$          (0.53)

Weighted Average Number of Common Shares Outstanding:

Basic

71,915,832

57,439,823

66,118,749

56,924,208

Diluted

72,024,689

57,802,872

66,118,749

56,924,208

Three Months Ended

Six Months Ended

Revenue $

% Change

Revenue $

% Change

June 30, 2018 

$            379,743

$            706,711

Organic revenue growth (decline)⁽¹⁾

(2.4%)

(12,109)

(1.7%)

Non-GAAP acquisitions (dispositions), net

(4,218)

(1.1%)

5,635

0.8%

Foreign exchange impact

(4,176)

(1.1%)

(9,316)

(1.3%)

Total change

(17,613)

(4.6%)

(15,790)

(2.2%)

June 30, 2019

$            362,130

$            690,921

⁽¹⁾ "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the 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.

Note: Actuals may not foot due to rounding

SCHEDULE 3

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Three Months Ended June 30, 2019

Global

Domestic

Advertising and

Integrated

Creative

Specialized

Media

All

Communications

Agencies

Agencies

Communications

Services

Other

Corporate

Total

Revenue

$             362,130

$   154,368

$     65,193

$            47,170

$      21,331

$     74,068

$           ?

$     362,130

Net income attributable to
MDC Partners Inc. common
shareholders

775

Adjustments to reconcile to
operating profit (loss):

Accretion on convertible
preference shares

3,515

Net income attributable to
the noncontrolling
interests

3,043

Equity in earning of non-
consolidated affiliates

(206)

Income tax benefit

2,088

Interest expense and
finance charges, net

16,413

Foreign exchange income

(2,932)

Other income, net

746

Operating income (loss)

$               40,073

$     20,720

$       8,730

$              6,683

$           991

$       2,949

$     (16,631)

$       23,442

margin

11.1%

13.4%

13.4%

14.2%

4.6%

4.0%

6.5%

Additional adjustments to
reconcile to Adjusted
EBITDA:

Depreciation and
amortization

10,442

4,437

1,547

698

794

2,966

221

10,663

Stock-based
compensation

2,442

1,232

522

52

(16)

652

1,192

3,634

Deferred acquisition
consideration adjustments

2,073

1,811

(166)

745

(615)

298

?

2,073

Distributions from non-
consolidated affiliates ⁽²⁾

?

?

?

?

?

?

31

31

Other items, net ⁽³⁾

?

?

?

?

?

?

6,594

6,594

Adjusted EBITDA ⁽¹⁾

$             55,030

$   28,200

$   10,633

$             8,178

$       1,154

$     6,865

$     (8,593)

$     46,437

margin

15.2%

18.3%

16.3%

17.3%

5.4%

9.3%

12.8%

⁽¹⁾ Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (loss) plus depreciation and amortization, stock-based
compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items.

⁽²⁾ Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration
from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses).

⁽³⁾ Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

SCHEDULE 4
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)

For the Six Months Ended June 30, 2019

Global

Domestic

Advertising and

Integrated

Creative

Specialized

Media

All

Communications

Agencies

Agencies

Communications

Services

Other

Corporate

Total

Revenue

$             690,921

$   284,087

$   132,201

$            86,123

$      41,510

$   147,000

$          ?

$     690,921

Net loss attributable to
MDC Partners Inc.
common shareholders

(1,448)

Adjustments to reconcile to
operating profit (loss):

Accretion on convertible
preference shares

5,625

Net income attributable
to the noncontrolling
interests

3,472

Equity in earning of non-
consolidated affiliates

(289)

Income tax benefit

2,835

Interest expense and
finance charges, net

33,174

Foreign exchange income

(8,374)

Other income, net

4,128

Operating income (loss)

$               60,577

$      24,491

$      14,207

$             13,760

$         (843)

$       8,962

$      (21,454)

$       39,123

margin

8.8%

8.6%

10.7%

16.0%

(2.0%)

6.1%

5.7%

Additional adjustments to
reconcile to Adjusted
EBITDA:

Depreciation and
amortization

19,063

8,502

2,786

1,265

1,485

5,025

438

19,501

Stock-based
compensation

6,987

4,999

986

78

(16)

940

(381)

6,606

Deferred acquisition
consideration
adjustments

(5,570)

(3,154)

(769)

(1,049)

73

(671)

?

(5,570)

Distributions from non-
consolidated affiliates ⁽²⁾

?

?

?

?

?

?

31

31

Other items, net ⁽³⁾

?

?

?

?

?

?

8,220

8,220

Adjusted EBITDA ⁽¹⁾

$             81,057

$      34,838

$     17,210

$           14,054

$          699

$     14,256

$      (13,146)

$       67,911

margin

11.7%

12.3%

13.0%

16.3%

1.7%

9.7%

9.8%

⁽¹⁾ Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items.

⁽²⁾ Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses).

⁽³⁾ Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

SCHEDULE 5
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)

For the Three Months Ended June 30, 2018

Global

Domestic

Advertising and

Integrated

Creative

Specialized

Media

All

Communications

Agencies

Agencies

Communications

Services

Other

Corporate

Total

Revenue

$             379,743

$    158,163

$     72,971

$            40,304

$      21,398

$     86,907

$            ?

$     379,743

Net income attributable to MDC
Partners Inc. common
shareholders

1,133

Adjustments to reconcile to
operating profit (loss):

Accretion on convertible
preference shares

2,273

Net income attributable to the
noncontrolling interests

2,545

Equity in losses of non-
consolidated affiliates

28

Income tax benefit

1,977

Interest expense and finance
charges, net

16,859

Foreign exchange loss

6,549

Other income, net

(592)

Operating income (loss)

$               43,912

$     18,352

$       5,077

$              6,216

$       (1,719)

$     15,986

$     (13,140)

$       30,772

margin

11.6%

11.6%

7.0%

15.4%

(8.0%)

18.4%

8.1%

Additional adjustments to
reconcile to Adjusted EBITDA:

Depreciation and amortization

11,543

4,743

1,281

992

635

3,892

160

11,703

Stock-based compensation

4,382

2,475

1,097

52

74

684

1,221

5,603

Deferred acquisition
consideration adjustments

(5,067)

(2,609)

1,233

257

90

(4,038)

?

(5,067)

Distributions from non-
consolidated affiliates⁽²⁾

?

?

?

?

?

?

11

11

Other items, net⁽³⁾

?

?

?

?

?

?

(68)

(68)

Adjusted EBITDA ⁽¹⁾

$              54,770

$     22,961

$       8,688

$              7,517

$        (920)

$     16,524

$      (11,816)

$      42,954

margin

14.4%

14.5%

11.9%

18.7%

-4.3%

19.0%

11.3%

⁽¹⁾ Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items.

⁽²⁾ Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses).

⁽³⁾ Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

SCHEDULE 6
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)

For the Six Months Ended June 30, 2018

Global

Domestic

Advertising and

Integrated

Creative

Specialized

Media

All

Communications

Agencies

Agencies

Communications

Services

Other

Corporate

Total

Revenue

$             706,711

$      287,686

$      139,625

$            79,128

$       46,082

$      154,190

$            ?

$     706,711

Net loss attributable to MDC
Partners Inc.
common shareholders

(30,105)

Adjustments to reconcile to
operating profit (loss):

Accretion on convertible
preference shares

4,095

Net income attributable to the
noncontrolling interests

3,442

Equity in earning of non-
consolidated affiliates

(58)

Income tax benefit

(6,353)

Interest expense and finance charges, net

32,942

Foreign exchange loss

13,209

Other income, net

(1,033)

Operating income (loss)

$               43,351

$        4,760

$         7,955

$              9,944

$        (1,738)

$       22,430

$     (27,212)

$       16,139

margin

6.1%

1.7%

5.7%

12.6%

(3.8%)

14.5%

2.3%

Additional adjustments to
reconcile to Adjusted EBITDA:

Depreciation and amortization

23,694

12,152

2,574

1,959

1,273

5,736

384

24,078

Stock-based compensation

8,171

4,935

1,507

239

149

1,341

2,469

10,640

Deferred acquisition
consideration adjustments

(2,481)

(1,174)

1,463

765

172

(3,707)

?

(2,481)

Distributions from non-
consolidated affiliates ⁽²⁾

?

?

?

?

?

?

31

31

Other items, net ⁽³⁾

?

?

?

?

?

?

54

54

Adjusted EBITDA ⁽¹⁾

$             72,735

$      20,673

$        13,499

$           12,907

$         (144)

$       25,800

$   (21,957)

$     50,778

margin

10.3%

7.2%

9.7%

16.3%

-0.3%

16.7%

7.2%

(1) Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (loss) plus depreciation and amortization, other asset impairment, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items.

(2) Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses).

(3)  Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

SCHEDULE 7
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA
(US$ in 000s)

2018

2019

Covenant EBITDA
(LTM) ⁽¹⁾

Q2

Q3

Q4

 Q1 

Q2

Q1-2019 -
LTM

Q2-2019 -
LTM

Net income (loss) attributable to MDC Partners
Inc. common shareholders

$               1,133

$           (18,234)

$           (83,749)

$             (2,496)

$                  775

$         (103,346)

$         (103,704)

Adjustments to reconcile to operating profit
(loss):

Accretion on and net income allocated to
convertible preference shares

2,273

2,109

2,151

2,383

3,515

8,916

10,158

Net income attributable to the noncontrolling
interests

2,545

2,458

5,885

429

3,043

11,317

11,815

Equity in earnings (losses) of non-consolidated
affiliates

28

(300)

296

(83)

(206)

(59)

(293)

Income tax expense

1,977

2,986

34,970

748

2,088

40,681

40,792

Interest expense and finance charges, net

16,859

17,063

17,070

16,761

16,413

67,753

67,307

Foreign exchange loss (gain)

6,549

(3,275)

13,324

(5,442)

(2,932)

11,156

1,675

Other income, net

(592)

(189)

992

3,383

746

3,594

4,932

Operating income (loss)

30,772

2,618

(9,061)

15,683

23,442

40,012

32,682

Adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

11,703

11,134

10,984

8,838

10,663

42,659

41,619

Goodwill and other asset impairment

?

21,008

56,732

?

?

77,740

77,740

Stock-based compensation

5,603

6,242

1,534

2,972

3,634

16,351

14,382

Deferred acquisition consideration adjustments

(5,067)

11,003

(8,980)

(7,643)

2,073

(10,687)

(3,547)

Distributions from non- consolidated affiliates

11

478

270

?

31

759

779

Other items, net ⁽²⁾

(68)

7,347

478

1,626

6,594

9,383

16,045

Adjusted EBITDA

42,954

59,830

51,957

21,476

46,437

176,217

179,700

Adjustments to reconcile to Covenant EBITDA:

Proforma acquisitions/dispositions

(3,558)

(1,195)

(2,148)

(1,965)

?

(8,866)

(5,308)

Severance due to eliminated positions

4,169

1,155

3,615

1,534

2,346

10,473

8,650

Other adjustments, net ⁽³⁾

2,067

600

1,877

1,412

989

5,956

4,878

$           45,632

$           60,390

$           55,301

$           22,457

$           49,772

$        183,780

$        187,920

(1) Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one-time charges, and other adjustments, as defined in
the Credit Agreement. Covenant EBITDA is calculated as the aggregate of operating results for the rolling last twelve months (LTM). Each quarter is
presented to provide the information utilized to calculate Covenant EBITDA. Historical Covenant EBITDA may be recasted in the current period for any proforma
adjustments related to acquisitions and/or dispositions in the current period.

(2) Other items, net includes items such as severance expense and other restructuring expenses and costs associated with the company's strategic review process.
See Schedule 10 for a reconciliation of amounts.

(3) Other adjustments, net primarily includes one time professional fees and costs associated with real estate consolidation.

SCHEDULE 8
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in 000s)

June 30,
2019

December 31,
2018

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$                    27,304

$                    30,873

Accounts receivable, less allowance for doubtful accounts of $2,792 and $1,879

434,512

395,200

Expenditures billable to clients

40,605

42,369

Assets held for sale

?

78,913

Other current assets

44,815

42,499

Total Current Assets

547,236

589,854

Fixed assets, at cost, less accumulated depreciation of $141,167 and $128,546

83,950

88,189

Right of use assets - operating leases

237,418

?

Investments in non-consolidated affiliates

6,761

6,556

Goodwill

743,582

740,955

Other intangible assets, net, less accumulated amortization of $168,748 and $161,868

60,848

67,765

Deferred tax assets

92,439

92,741

Other assets

26,415

25,513

Total Assets

1,798,649

1,611,573

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND
SHAREHOLDERS' DEFICIT

Current Liabilities:

Accounts payable

228,069

221,995

Accruals and other liabilities

253,868

313,141

Liabilities held for sale

?

35,967

Advance billings

168,142

138,505

Current portion of lease liabilities - operating leases

46,338

?

Current portion of deferred acquisition consideration

35,439

32,928

Total Current Liabilities

731,856

742,536

Long-term portion of deferred acquisition consideration

22,804

50,767

Long-term lease liabilities - operating leases

233,165

?

Other liabilities

19,503

54,255

Deferred tax liabilities

6,571

5,329

Total Liabilities

1,927,991

1,806,994

Redeemable Noncontrolling Interests

42,635

51,546

Commitments, Contingencies, and Guarantees

Shareholders' Deficit:

Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2019 and
95,000 at December 31, 2018

152,746

90,123

Common stock and other paid-in capital

97,455

58,579

Accumulated deficit

(460,726)

(464,903)

Accumulated other comprehensive loss (income)

(1,713)

4,720

MDC Partners Inc. Shareholders' Deficit

(212,238)

(311,481)

Noncontrolling interests

40,261

64,514

Total Shareholders' Deficit

(171,977)

(246,967)

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit

$                1,798,649

$                1,611,573

SCHEDULE 9
MDC PARTNERS INC.
UNAUDITED SUMMARY CASH FLOW DATA
(US$ in 000s)

2019

2018

Net cash used in operating activities

$         (40,237)

$         (61,713)

Net cash provided by (used in) investing activities

9,818

(36,121)

Net cash provided by financing activities

25,712

76,343

Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts

4

311

Net decrease in cash, cash equivalents, and cash held in trusts including cash
classified within assets held for sale

$           (4,703)

$         (21,180)

Change in cash and cash equivalents held in trusts classified within held for sale

(3,307)

?

Change in cash and cash equivalents classified within assets held for sale

4,441

?

Net decrease in cash and cash equivalents

$           (3,569)

$         (21,180)

SCHEDULE 10
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF COMPONENTS OF NON- GAAP MEASURES
(US$ in 000s)

2018

2019

Q1

Q2

Q3

Q4

FY

Q1

Q2

YTD

NON-GAAP ACQUISITIONS (DISPOSITIONS), NET

GAAP revenue from current year acquisitions

$            ?

$    11,066

$    12,734

$   12,317

$   36,117

$             ?

$         698

$         698

GAAP revenue from prior year acquisitions ⁽¹⁾

?

?

?

?

?

15,685

1,519

17,204

Impact of adoption of ASC 606 exclusion

?

450

(1,122)

504

(168)

?

?

?

Foreign exchange impact

?

?

?

?

?

?

?

?

Contribution to organic revenue (growth) decline⁽²⁾

?

(3,417)

(945)

(3,243)

(7,605)

(4,008)

(440)

(4,448)

Prior year revenue from dispositions ⁽³⁾

(5,261)

(5,592)

(3,847)

?

(14,700)

(1,825)

(5,995)

(7,820)

Non-GAAP acquisitions (dispositions), net

$     (5,261)

$     6,820

$     9,578

$   13,644

$       9,852

$     (4,218)

$     5,634

2018

2019

Q1

Q2

Q3

Q4

FY

Q1

Q2

YTD

OTHER ITEMS, NET

SEC investigation and class action litigation expenses

$         122

$        235

$        (88)

$        131

$        400

?

?

?

D&O insurance proceeds

?

(303)

(231)

(24)

(558)

?

?

?

Severance and other restructuring expenses

?

?

7,665

372

8,037

?

6,703

6,703

Strategic review process costs

?

?

?

?

?

1,626

(109)