Table of Contents


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, 2017March 31, 2024
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 PartnersLogo.jpg
Stagwell Inc.
(Exact name of registrant as specified in its charter)
Delaware86-1390679
Canada98-0364441
(State or other jurisdiction of

incorporation or organization)
(IRS Employer Identification No.)
745 Fifth Avenue
One World Trade Center, Floor 65
New York,New York1015110007
(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 Common Stock, par value $0.001 per shareSTGWNASDAQ
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes  ý☒ No   ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer;filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filerx
☐
Accelerated filer  ¨Filer☒
Non-accelerated Filer¨  (Do not check if a smaller reporting company)
☐
Smaller reporting company¨☐
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 numbersnumber of common shares outstanding as of October 27, 2017 were: 58,357,062April 29, 2024, was 117,581,272 shares of Class A subordinate votingCommon Stock and 151,648,741 shares 3,755of Class B multiple voting shares, and 95,000 Series 4 Convertible Preference Shares.C Common Stock.    



Table of Contents
MDC PARTNERS

STAGWELL INC.
 
QUARTERLY REPORT ON FORM 10-Q
 
TABLE OF CONTENTS
 
Page
Page
PART I. FINANCIAL INFORMATION
Item 1.
3
3
4
5
6
78
810
Item 2.
2730
Item 3.
6247
Item 4.
6348
PART II. OTHER INFORMATION
Item 1.
6549
Item 1A.
6549
Item 2.
6549
Item 3.
6550
Item 4.
6550
Item 5.
6550
Item 6.
50
6652




2
Table of Contents

EXPLANATORY NOTE
References in this Quarterly Report on Form 10-Q to “Stagwell,” “we,” “us,” “our” and the "Company" refer to Stagwell Inc. and, unless the context otherwise requires or otherwise is expressly stated, its subsidiaries.
All dollar amounts are stated in U.S. dollars unless otherwise stated.
Forward-Looking Statements
This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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, future financial performance, growth, and future prospects, the Company’s strategy, business and economic trends and growth, technological leadership and differentiation, potential and completed acquisitions, anticipated operating efficiencies and synergies and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “goal,” “guidance,” “in development,” “intend,” “likely,” “look,” “maintain,” “may,” “ongoing,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.

Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking 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;
•demand for the Company’s services, which may precipitate or exacerbate other risks and uncertainties;
•inflation and actions taken by central banks to counter inflation;
•the Company’s ability to attract new clients and retain existing clients;
•the impact of a 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 compete in the markets in which it operates;
•the Company’s ability to achieve its 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 Company’s ability to manage its growth effectively;
•the Company's ability to identify, complete and integrate acquisitions that complement and expand the Company’s business capabilities, to identify and complete divestitures and to achieve the anticipated benefits therefrom;
•the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
•the Company’s use of artificial intelligence, including generative artificial intelligence;
1
Table of Contents

•adverse tax consequences for the Company, its operations and its stockholders, that may differ from the expectations of the Company, including that future changes in tax laws, potential increases to corporate tax rates in the United States and disagreements with tax authorities on the Company’s determinations that may result in increased tax costs;
•adverse tax consequences in connection with the Transactions, including the incurrence of material Canadian federal income tax (including material “emigration tax”);
•the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting, including the risk that the Company’s internal controls will fail to detect misstatements in its financial statements;
•the Company’s ability to accurately forecast its future financial performance and provide accurate guidance;
•the Company’s ability to protect client data from security incidents or cyberattacks;
•economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflicts between Russia and Ukraine and in Israel and Gaza), terrorist activities and natural disasters;
•stock price volatility; and
•foreign currency fluctuations.
Investors should carefully consider these risks and the additional risk factors described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2024, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.


2
Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, of United States dollars, except per share amounts)
 Three Months Ended March 31,
 20242023
Revenue$670,059 $622,444 
Operating Expenses
Cost of services444,526 413,898 
Office and general expenses163,343 158,836 
Depreciation and amortization34,836 33,477 
Impairment and other losses1,500 — 
644,205 606,211 
Operating Income25,854 16,233 
Other income (expenses):
Interest expense, net(20,965)(18,189)
Foreign exchange, net(2,258)(670)
Other, net(1,267)220 
(24,490)(18,639)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates1,364 (2,406)
Income tax expense2,585 236 
Loss before equity in earnings of non-consolidated affiliates(1,221)(2,642)
Equity in income (loss) of non-consolidated affiliates508 (227)
Net loss(713)(2,869)
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests(569)4,258 
Net income (loss) attributable to Stagwell Inc. common shareholders$(1,282)$1,389 
Earnings (Loss) Per Common Share:
   Basic$(0.01)$0.01 
   Diluted$(0.01)$— 
Weighted Average Number of Common Shares Outstanding:
   Basic112,633 125,199 
   Diluted116,405 289,806 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenue: 
  
    
Services$375,800
 $349,254
 $1,111,032
 $995,343
Operating expenses:       
Cost of services sold249,418
 235,659
 754,803
 675,940
Office and general expenses77,910
 83,303
 251,313
 233,840
Depreciation and amortization11,252
 11,412
 32,916
 34,068
Goodwill impairment—
 29,631
 —
 29,631
 338,580
 360,005
 1,039,032
 973,479
Operating profit (loss)37,220
 (10,751) 72,000
 21,864
Other income (expense):       
Other, net8,649
 (6,008) 17,812
 9,530
Interest expense and finance charges(16,403) (16,540) (48,859) (49,289)
Loss on redemption of notes—
 —
 —
 (33,298)
Interest income145
 218
 550
 599
 (7,609) (22,330) (30,497) (72,458)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates29,611
 (33,081) 41,503
 (50,594)
Income tax expense (benefit)9,049
 (1,930) 17,659
 1,180
Income (loss) before equity in earnings of non-consolidated affiliates20,562
 (31,151) 23,844
 (51,774)
Equity in earnings of non-consolidated affiliates1,422
 70
 1,924
 9
Net income (loss)21,984
 (31,081) 25,768
 (51,765)
Net income attributable to noncontrolling interests(3,491) (1,059) (6,588) (3,172)
Net income (loss) attributable to MDC Partners Inc.18,493
 (32,140) 19,180
 (54,937)
Accretion on convertible preference shares(1,948) —
 (4,365) —
Net income (loss) attributable to MDC Partners Inc. common shareholders$16,545
 $(32,140) $14,815
 $(54,937)
        
Income (loss) per common share: 
  
    
Basic 

 





Net income (loss) attributable to MDC Partners Inc. common shareholders$0.25
 $(0.62) $0.24
 $(1.08)
        
Diluted 
  
    
Net income (loss) attributable to MDC Partners Inc. common shareholders$0.24
 $(0.62) $0.24
 $(1.08)
        
Weighted average number of common shares outstanding: 
  
    
Basic57,566,707
 52,244,819
 53,915,536
 50,861,890
Diluted57,943,080
 52,244,819
 54,228,208
 50,861,890
        
Stock-based compensation expense is included in the following line items above: 
  
    
Cost of services sold$5,310
 $3,026
 $12,558
 $10,393
Office and general expenses1,070
 2,202
 4,312
 5,050
Total$6,380
 $5,228
 $16,870
 $15,443
See notesNotes to the unaudited condensed consolidated financial statements.Unaudited Consolidated Financial Statements.

3
MDC PARTNERS
Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(thousands of United States dollars)amounts in thousands)
 Three Months Ended March 31,
 20242023
COMPREHENSIVE INCOME (LOSS)
Net loss$(713)$(2,869)
Other comprehensive income (loss) - Foreign currency translation adjustment(7,146)4,447 
Comprehensive income (loss) for the period(7,859)1,578 
Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests3,713 2,036 
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders$(4,146)$3,614 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Comprehensive income (loss) 
  
    
Net income (loss)$21,984
 $(31,081) $25,768
 $(51,765)
        
Other comprehensive (loss) income, net of applicable tax: 
  
    
Foreign currency translation adjustment(1,912) 2,331
 (1,294) (8,354)
Other comprehensive income (loss)(1,912) 2,331
 (1,294) (8,354)
Comprehensive income (loss) for the period20,072
 (28,750) 24,474
 (60,119)
Comprehensive income attributable to the noncontrolling interests(4,695) (569) (9,063) (4,481)
Comprehensive income (loss) attributable to MDC Partners Inc.$15,377
 $(29,319) $15,411
 $(64,600)
See notesNotes to the unaudited condensed consolidated financial statements.Unaudited Consolidated Financial Statements.

4
MDC PARTNERS
Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars)amounts in thousands)
 March 31,
2024		December 31,
2023
 
ASSETS  
Current Assets  
Cash and cash equivalents$129,824 $119,737 
Accounts receivable, net744,287 697,178 
Expenditures billable to clients111,721 114,097 
Other current assets119,215 94,054 
Total Current Assets1,105,047 1,025,066 
Fixed assets, net77,215 77,825 
Right-of-use lease assets - operating leases241,709 254,278 
Goodwill1,495,313 1,498,815 
Other intangible assets, net800,691 818,220 
Other assets95,144 92,843 
Total Assets$3,815,119 $3,767,047 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS ("RNCI"), AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$437,021 $414,980 
Accrued media270,491 291,777 
Accruals and other liabilities194,967 233,046 
Advance billings302,484 301,674 
Current portion of lease liabilities - operating leases64,039 65,899 
Current portion of deferred acquisition consideration64,907 66,953 
Total Current Liabilities1,333,909 1,374,329 
Long-term debt1,269,527 1,145,828 
Long-term portion of deferred acquisition consideration35,897 34,105 
Long-term lease liabilities - operating leases271,380 281,307 
Deferred tax liabilities, net38,856 40,509 
Other liabilities56,655 54,905 
Total Liabilities3,006,224 2,930,983 
Redeemable Noncontrolling Interests11,305 10,792 
Commitments, Contingencies and Guarantees (Note 10)
Shareholders’ Equity
Common shares - Class A & B115 118 
Common shares - Class C2 2 
Paid-in capital333,896 348,494 
Retained earnings19,618 21,148 
Accumulated other comprehensive loss(15,931)(13,067)
Stagwell Inc. Shareholders’ Equity337,700 356,695 
Noncontrolling interests459,890 468,577 
Total Shareholders’ Equity797,590 825,272 
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity$3,815,119 $3,767,047 
 September 30,
2017		 December 31,
2016
 (Unaudited)  
ASSETS 
  
Current assets: 
  
Cash and cash equivalents$18,861
 $27,921
Cash held in trusts5,182
 5,341
Accounts receivable, less allowance for doubtful accounts of $2,800 and $1,523438,765
 388,340
Expenditures billable to clients42,332
 33,118
Other current assets27,647
 34,862
Total current assets532,787
 489,582
Fixed assets, at cost, less accumulated depreciation of $118,241 and $105,13491,153
 78,377
Investments in non-consolidated affiliates5,655
 4,745
Goodwill839,361
 844,759
Other intangible assets, net74,685
 85,071
Deferred tax assets39,598
 41,793
Other assets34,592
 33,051
Total assets$1,617,831
 $1,577,378
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT 
  
Current liabilities: 
  
Accounts payable$232,704
 $251,456
Trust liability5,182
 5,341
Accruals and other liabilities289,471
 303,581
Advance billings165,600
 133,925
Current portion of long-term debt300
 228
Current portion of deferred acquisition consideration59,849
 108,290
Total current liabilities753,106
 802,821
Long-term debt, less current portion930,889
 936,208
Long-term portion of deferred acquisition consideration88,419
 121,274
Other liabilities54,657
 56,012
Deferred tax liabilities119,602
 110,359
Total liabilities1,946,673
 2,026,674
    
Redeemable noncontrolling interests (Note 2)60,092
 60,180
Commitments, contingencies, and guarantees (Note 12)

 

Shareholders’ deficit: 
  
Convertible preference shares (liquidation preference $99,365)90,220
 —
Common shares351,075
 317,784
Shares to be issued, 100,000 shares in 2016—
 2,360
Charges in excess of capital(307,454) (311,581)
Accumulated deficit(562,668) (581,848)
Accumulated other comprehensive loss(5,593) (1,824)
MDC Partners Inc. shareholders’ deficit(434,420) (575,109)
Noncontrolling interests45,486
 65,633
Total shareholders’ deficit(388,934) (509,476)
Total liabilities, redeemable noncontrolling interests, and shareholders’ deficit$1,617,831
 $1,577,378
See notesNotes to the unaudited condensed consolidated financial statements.Unaudited Consolidated Financial Statements.

5
MDC PARTNERS
Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousandsamounts in thousands)

 Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net income$(713)$(2,869)
Adjustments to reconcile net income to cash used in operating activities:
Stock-based compensation16,116 12,004 
Depreciation and amortization34,836 33,477 
Amortization of right-of-use lease assets and lease liability interest20,912 19,520 
Impairment and other losses1,500 — 
Deferred income taxes(655)(714)
Adjustment to deferred acquisition consideration154 4,088 
Other, net292 (1,527)
Changes in working capital:
Accounts receivable(42,976)(12,425)
Expenditures billable to clients6,681 (4,173)
Other assets(19,584)(5,986)
Accounts payable22,206 (48,841)
Accrued expenses and other liabilities(63,856)(52,334)
Advance billings(6,124)(2,986)
Current portion of lease liabilities - operating leases(21,660)(22,347)
Deferred acquisition related payments(250)— 
Net cash used in operating activities(53,121)(85,113)
Cash flows from investing activities:
Capital expenditures(5,439)(3,435)
Acquisitions, net of cash acquired(11,673)(220)
Capitalized software(8,794)(6,735)
Other(218)(425)
Net cash used in investing activities(26,124)(10,815)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility(417,000)(426,500)
Proceeds from borrowings under revolving credit facility540,000 476,500 
Shares repurchased and cancelled(29,698)(26,129)
Distributions to noncontrolling interests(559)(10,948)
Payment of deferred consideration(1,657)— 
Net cash provided by financing activities91,086 12,923 
Effect of exchange rate changes on cash and cash equivalents(1,754)945 
Net increase (decrease) in cash and cash equivalents10,087 (82,060)
Cash and cash equivalents at beginning of period119,737 220,589 
Cash and cash equivalents at end of period$129,824 $138,529 
Supplemental Cash Flow Information:
Cash income taxes paid$8,535 $15,107 
Cash interest paid35,253 33,459 
Non-cash investing and financing activities:
6
Table of United States dollars)
Contents
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities: 
  
Net income (loss)$25,768
 $(51,765)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

 

Stock-based compensation16,870
 15,443
Depreciation18,000
 16,853
Amortization of intangibles14,916
 17,215
Amortization of deferred finance charges2,018
 8,736
Goodwill impairment—
 29,631
Loss on redemption of notes—
 26,873
Adjustment to deferred acquisition consideration13,354
 17,363
Deferred income tax8,125
 (553)
Loss on sale of assets1,245
 377
Earnings of non-consolidated affiliates(1,924) (9)
Other non-current assets and liabilities(4,388) 1,853
Foreign exchange(15,113) (12,806)
Changes in working capital:   
Accounts receivable(54,723) (47,767)
Expenditures billable to clients(9,294) 5,551
Prepaid expenses and other current assets6,400
 (16,851)
Accounts payable, accruals and other liabilities(31,149) (77,355)
Advance billings32,015
 25,824
Net cash provided by (used in) operating activities22,120

(41,387)
Cash flows used in investing activities:

 

Capital expenditures(28,305) (19,723)
Deposits(1,461) —
Acquisitions, net of cash acquired—
 2,531
Proceeds from sale of assets11,120
 215
Distributions from non-consolidated affiliates673
 4,885
Other investments(1,530) (2,571)
Net cash used in investing activities(19,503)
(14,663)
Cash flows (used in) provided by financing activities: 
  
Proceeds from issuance of 6.50% Notes—
 900,000
Repayment of 6.75% Notes—
 (735,000)
Repayments of revolving credit agreement(1,093,508) (1,255,608)
Proceeds from revolving credit agreement1,087,688
 1,326,105
Proceeds from issuance of convertible preference shares95,000
 —
Convertible preference shares issuance costs(4,632) —
Acquisition related payments(89,126) (129,616)
Repayment of long-term debt(310) (381)
Purchase of shares(1,239) (2,798)
Premium paid on redemption of notes—
 (26,873)
Deferred financing costs—
 (21,569)
Distributions to noncontrolling interests(5,272) (6,549)
Payment of dividends(284) (32,580)
Net cash (used in) provided by financing activities(11,683)
15,131
Effect of exchange rate changes on cash and cash equivalents6
 1,196
Decrease in cash and cash equivalents(9,060) (39,723)
Cash and cash equivalents at beginning of period27,921
 61,458
Cash and cash equivalents at end of period$18,861
 $21,735
    
Supplemental disclosures: 
  
Cash income taxes paid$6,909
 $2,798
Cash interest paid$32,324
 $27,979
Change in cash held in trusts$(159) $147
    
Non-cash transactions:

   
Capital leases$621
 $—
Dividends payable$453
 $1,077
Deferred acquisition consideration settled through issuance of shares$28,727
 $10,458
Value of shares issued for acquisition$—
 $34,219
Leasehold improvements paid for directly by landlord$—
 $7,250

See notes to the unaudited condensed consolidated financial statements.

MDC PARTNERSSTAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(amounts in thousands)

 Three Months Ended March 31,
20242023
Acquisitions of business6,139 — 
Acquisitions of noncontrolling interest10,167 — 
Share issuances341 — 

See Notes to the Unaudited Consolidated Financial Statements.
7
Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICITEQUITY
(thousandsamounts in thousands)





Three Months Ended March 31, 2024
 
Common Shares -
Class A
Common Shares -
Class C		Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders’ EquityNoncontrolling InterestsShareholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 2023118,469 $118 151,649 $2 $348,494 $21,148 $(13,067)$356,695 $468,577 $825,272 
Net income (loss)— — — — — (1,282)— (1,282)569 (713)
Other comprehensive loss— — — — — — (2,864)(2,864)(4,282)(7,146)
Total other comprehensive loss— — — — — (1,282)(2,864)(4,146)(3,713)(7,859)
Purchases of noncontrolling interest— — — — 1,744 — — 1,744 (10,226)(8,482)
Changes in redemption value of RNCI— — — — — (250)— (250)— (250)
Restricted awards granted or vested151 — — — 254 — — 254 — 254 
Shares repurchased and cancelled(4,828)(5)— — (30,581)— — (30,586)— (30,586)
Restricted shares forfeited(18)— — — — — — — — — 
Stock-based compensation— — — — 13,550 — — 13,550 — 13,550 
Change in ownership held by Class C shareholders— — — — (6,047)— — (6,047)6,047 — 
Shares issued, acquisitions993 1 — — 6,138 — — 6,139 — 6,139 
Other52 1 — — 344 2 — 347 (795)(448)
Balance at March 31, 2024114,819 $115 151,649 $2 $333,896 $19,618 $(15,931)$337,700 $459,890 $797,590 



See Notes to the Unaudited Consolidated Financial Statements.



8
Table of United States dollars)Contents

STAGWELL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(amounts in thousands)

 Convertible Preference Shares Common Shares Share Capital to Be Issued 
Additional
Paid-in Capital
 
Charges in
Excess of
Capital
 
Accumulated
Deficit
 
Accumulated Other
Comprehensive
Loss
 
MDC Partners Inc.
Shareholders’
Deficit
 
Noncontrolling
Interests
 Total
Shareholders’
Deficit
          
 Shares Amount Shares Amount Shares Amount       
Balance at December 31, 2016—
 $—
 52,802,058
 $317,784
 100,000
 $2,360
 $—
 $(311,581) $(581,848) $(1,824) $(575,109) $65,633
 $(509,476)
Net income attributable to MDC Partners Inc.—
 —
 —
 —
 —
 —
 —
 —
 19,180
 —
 19,180
 —
 19,180
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 —
 —
 —
 (3,769) (3,769) 2,475
 (1,294)
Issuance of Series 4 convertible preference shares in private placement95,000
 90,220
 —
 —
 —
 —
 —
 —
 —
 —
 90,220
 —
 90,220
Issuance of restricted stock—
 —
 273,169
 5,803
 —
 —
 (5,803) —
 —
 —
 —
 —
 —
Shares acquired and canceled—
 —
 (114,822) (1,239) —
 —
 —
 —
 —
 —
 (1,239) —
 (1,239)
Deferred acquisition consideration settled through issuance of shares—
 —
 3,353,939
 28,727
 (100,000) (2,360) 1,485
 —
 —
 —
 27,852
 —
 27,852
Stock-based compensation—
 —
 —
 —
 —
 —
 6,082
 —
 —
 —
 6,082
 —
 6,082
Changes in redemption value of redeemable noncontrolling interests—
 —
 —
 —
 —
 —
 (300) —
 —
 —
 (300)   (300)
Decrease in noncontrolling interests and redeemable noncontrolling interests from business acquisitions and step-up transactions—
 —
 —
 —
 —
 —
 2,315
 —
 —
 —
 2,315
 (11,965) (9,650)
Dispositions—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (10,657) (10,657)
Other—
 —
 —
 —
 —
 —
 348
 —
 —
 —
 348
   348
Transfer to charges in excess of capital—
 —
 —
 —
 —
 —
 (4,127) 4,127
 —
 —
 —
 —
 —
Balance at September 30, 201795,000
 $90,220
 56,314,344
 $351,075
 —
 $—
 $—
 $(307,454) $(562,668) $(5,593) $(434,420) $45,486
 $(388,934)
Three Months Ended March 31, 2023
 Common Shares -
Class A & B		Common Shares -
Class C		Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders’ EquityNoncontrolling InterestsShareholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 2022131,724 $132 160,909 $2 $491,899 $22,095 $(15,478)$498,650 $430,164 $928,814 
Net income— — — — — 1,389 — 1,389 (4,258)(2,869)
Other comprehensive loss— — — — — — 2,225 2,225 2,222 4,447 
Total other comprehensive income (loss)— — — — — 1,389 2,225 3,614 (2,036)1,578 
Distributions to noncontrolling interests— — — — — — — — (8,025)(8,025)
Changes in redemption value of RNCI— — — — — 1,076 — 1,076 — 1,076 
Restricted awards granted or vested1,838 2 — — (2)— — — — — 
Shares repurchased and cancelled(3,766)(4)— — (26,125)— — (26,129)— (26,129)
Stock-based compensation— — — — 7,392 — — 7,392 — 7,392 
Change in ownership held by Class C shareholders— — — — (3,273)— — (3,273)3,273 — 
Other— — — — — (640)— (640)1,217 577 
Balance at March 31, 2023129,796 $130 160,909 $2 $469,891 $23,920 $(13,253)$480,690 $424,593 $905,283 


See notesNotes to the unaudited condensed consolidated financial statements.Unaudited Consolidated Financial Statements

9
MDC PARTNERS
Table of Contents
STAGWELL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise stated)
1. Business and Basis of Presentation
MDC PartnersStagwell Inc. (the “Company”“Company,” “we,” or “MDC”“Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and its portfolio of marketing services firms (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity.Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.
The accompanying Unaudited Consolidated Financial Statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the unaudited condensed consolidated interim financial statements included herein in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain for reporting interim financial information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”) have been condensed or omittedon Form 10-Q. Accordingly, pursuant to these rules.rules, the footnotes do not include certain information and disclosures. 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 reports 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, 2023 (“2023 Form 10-K”).
The accompanying financial statements reflect all adjustments, consisting of normallynormal recurring accruals, which in the opinion of management are necessary for a fair presentation,statement, in all material respects, of the information contained therein. Results of operations for interim periods are not necessarily indicative of annual results.
References herein to “Partner Firms” generally refer to the Company’s subsidiary agencies.
These statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Amendment No. 1 on Form 10-K/A (the "Annual Report on Form 10-K/A") for the year ended December 31, 2016.
2. Significant Accounting Policies
The Company’s significant accounting policies are summarized as follows:
Principles of Consolidation. The accompanying condensed consolidated financial statements include the accounts of MDC Partners Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.
Reclassifications. Certain reclassifications have been made to the prior periodyear financial statementsinformation to conform to the current periodyear presentation. During
Revision of Previously Issued Unaudited Consolidated Financial Statements
In connection with the nine months ended September 30, 2017,preparation of the consolidated financial statements during 2023, the Company changedidentified the presentationfollowing errors in the areas of book overdrafts onincome taxes, noncontrolling interests, and accumulated other comprehensive loss related to its statementpreviously filed 2022 annual consolidated financial statements.

•In the first quarter of cash flows2023, we identified an error related to classify the associated cash flows as operating activities. Book overdrafts were previously presented within financing activities. This resulted in cash inflows of $17,532foreign currency gains and losses not being reclassifiedallocated from financing activitiesAccumulated other comprehensive loss to operating activities for the nine months ended September 30, 2016.noncontrolling interest shareholders. Noncontrolling interests and Accumulated other comprehensive loss was overstated by $23.5 million. There was no impact onto Total Shareholders’ Equity as of December 31, 2022. Also, we identified a $2.1 million understatement of income tax expense, and overstatement to income tax payable (Accruals and Other Liabilities) and deferred tax asset (Other Current Assets) of $2.4 million and $4.5 million, respectively, relating to an error in the calculation of valuation allowances. These errors were originally corrected within the first quarter of 2023 as management determined the errors were not material to the quarterly financial statements as of and for the three months ended March 31, 2023.

•In the second quarter of 2023, we identified an error related to an understatement of income tax expense and income tax payable (Accruals and Other Liabilities) by $5.3 million due to incorrect applications of tax payments. The Company also identified a misclassification of $12.9 million as a result of improper netting of income tax receivables (Other Current Assets) and payables (Accruals and Other Liabilities). This error resulted in an incremental $7.3 million misclassification of income tax receivables and payables as of March 31, 2023, which was originally corrected within the second quarter of 2023 as management determined the errors were not material to the quarterly financial statements as of and for the three and six months ended June 30, 2023.

•In the fourth quarter of 2023, we identified an incremental $10.4 million understatement of tax expense as well as balance sheet misclassification between income tax accounts included within Other Current Assets, Other Assets, Accruals and Other Liabilities, and Deferred Tax Liabilities. These errors were related to the incorrect applications of tax payments, and the incorrect calculation of deferred tax balances for items mainly associated with interest expense, intangible assets, fixed assets, state tax, basis adjustment for partnership, and the related valuation allowance. We also identified an error in our tax receivable agreement (“TRA”) liability calculation which resulted in a $2.1 million overstatement of other expenses and of Other Liabilities.

As a result of the above, the Company’s consolidated statementspreviously filed first quarter of operations, comprehensive income (loss), or balance sheets.
Use of Estimates. The preparation of2023 interim consolidated financial statements have been revised. See Note 17 of the Notes included herein for additional information. The remaining 2023 interim financial statements will be presented as revised when such financial statements are issued.
10
Table of Contents
Recent Developments
On April 3, 2024, the Company acquired What’s Next Partners (“WNP”), for 4.3 million Euros (“€”) (approximately $5 million) in conformitycash. In connection with U.S. GAAP requires managementthe acquisition, the sellers are entitled to make estimatescontingent consideration up to a maximum value of €8.5 million (approximately $9 million), partially subject to continued employment and assumptions. These estimatesmeeting certain future earnings targets, of which a portion may be settled in shares of the Company's Class A common stock, par value $0.001 per share (the “Class A Common Stock”), at the Company’s discretion.
On April 5, 2024, the Company acquired PROS Agency (“PROS”), for 26.5 million Brazilian reals (“R$”) (approximately $5 million) of which R$21.2 million (approximately $4 million) was paid in cash and assumptions affectR$5.3 million (approximately $1 million) in 182,256 shares of Class A Common Stock, subject to post-closing adjustments. In connection with the reported amountsacquisition, the sellers are entitled to contingent consideration up to a maximum value of assetsR$72.5 million (approximately $14 million), partially subject to continued employment and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, valuation allowances for receivables, deferred tax assets andmeeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates.Company’s discretion.
Fair Value. The Company applies the fair value measurement guidance of
2. New Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (the “FASB”(“FASB”) Accounting Standards Codification (the “ASC”issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU 2023-09”) Topic 820, Fair Value Measurements,, to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about an entity’s effective tax rate reconciliation, as well as information on taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact of the adoption of this guidance on the Company’s financial assetsstatements and liabilities that are requireddisclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to be measured at fair valueSegment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact of the new requirements, effective for non-financial assets and liabilities that are not requiredthe Company’s 2024 Financial Statements, to be measured at fair value on a recurring basis, including goodwill and other identifiable intangible assets. The measurementdetermine the level of fair value requires the usedisclosure of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The inputs create the following fair value hierarchy:segment expenses.
Level 1 - Quoted prices for identical instruments in active markets.
Level3. Acquisitions
2024 Acquisitions
Acquisition of Team Epiphany
On January 2, - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable.
Level 3 - Instruments where significant value drivers are unobservable to third parties.
When available,2024, the Company uses quoted market pricesacquired Team Epiphany, LLC (“Epiphany”), for $15.8 million, of which $10.8 million was paid in cash and $5.0 million in 797,916 shares of Class A Common Stock, subject to determinepost-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $17.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.
The consideration has been allocated to the assets acquired and assumed liabilities of Epiphany based upon fair values. The preliminary purchase price allocation is as follows:
11
Table of Contents
Amount
(dollars in thousands)
Cash and cash equivalents$1,095 
Accounts receivable, net8,677 
Expenditures billable to clients4,823 
Other current assets402 
Right-of-use lease assets2,788 
Fixed assets184 
Identifiable intangible assets4,316 
Accounts payable(1,086)
Accruals and other liabilities(664)
Advance billings(8,808)
Current portion of lease liabilities - operating leases(516)
Long-term lease liabilities - operating leases(2,600)
Net assets assumed8,611 
Goodwill7,237 
Purchase price consideration$15,848
The excess of purchase consideration over the fair value of itsthe net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epiphany. Goodwill of $7.2 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is three years. The following table presents the details of identifiable intangible assets acquired:
Estimated Fair ValueEstimated Useful Life in Years
(dollars in thousands)
Customer relationships$3,767 3
Trade names549 3
Total acquired intangible assets$4,316 
Pro Forma Financial Information
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2023. The pro forma revenue and net income (loss) for the three months ended March 31, 2024 would not be materially different from the actual revenue and net income (loss) reported. The pro forma financial instrumentsinformation is presented for informational purposes only and classifies such items in Level 1. In some cases, quoted market prices are usedis not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
Three Months Ended March 31, 2023
(dollars in thousands)
Revenue$630,838 
Net loss$(2,121)
Revenue and Net income attributable to Epiphany, included within the Unaudited Consolidated Statements of Operations for similar instruments in active marketsthe three months ended March 31, 2024 was $13.4 million and less than $0.1 million, respectively.
The purchase price accounting is not yet final as the Company classifies such itemsmay still make adjustments due to changes in Level 2.post-closing adjustments.
Concentration
12
Table of Credit Risk.Contents
Other 2024 Acquisitions
On March 1, 2024, the Company acquired Sidekick Live Limited (“Sidekick”), for 4.6 million British pounds (“£”) (approximately $6 million) of which £3.6 million (approximately $5 million) was paid in cash, £0.1 million (approximately $0.2 million) was incurred as a certain payable to sellers, and £0.9 million (approximately $1 million) in 195,431 shares of Class A Common Stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of £8.0 million (approximately $10 million), subject to continued employment requirements and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. The excess of purchase consideration over the fair value of the net assets acquired was mainly recorded as goodwill, which is primarily attributable to the assembled workforce of Sidekick and expected growth related to new customer relationships. Goodwill of $2.0 million was assigned to the Communications Network reportable segment. The goodwill is not fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments.
2023 Acquisitions
On November 1, 2023, the Company acquired Movers and Shakers LLC (“Movers and Shakers”), a digital creative company, for $14.7 million, of which $10.2 million was paid in cash and $4.5 million in 1.0 million shares of Class A Common Stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $35.0 million, subject to meeting certain future earnings targets and continued employment, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Movers and Shakers and expected growth related to new customer relationships. Goodwill of $8.2 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments.
On October 2, 2023, the Company acquired Left Field Labs LLC (“LFL”), a digital experience design and strategy company, for $13.2 million, of which $9.4 million was paid in cash and $3.8 million in 825,402 of Class A Common Stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $51.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of LFL and expected growth related to new customer relationships. Goodwill of $8.0 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments.
On July 3, 2023, the Company acquired Tinsel Experiential Design LLC (“Tinsel”), a marketing and design company, for $2.5 million in cash consideration, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration, subject to continued employment, and meeting certain future earnings targets. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Tinsel and expected growth related to new customer relationships. Goodwill of $1.6 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments.
On April 25, 2023, the Company acquired Huskies, Ltd. (“Huskies”), for €5.2 million (approximately $6 million) of cash consideration, of which €0.9 million (approximately $1 million) is deferred, subject to post-closing adjustments. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Huskies and expected growth related to new customer relationships and geographic expansion. Goodwill of $2.6 million was assigned to the Brand Performance Network reportable segment. The goodwill is non-deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments.
2023 Dispositions
On October 31, 2023, the Company sold ConcentricLife (“Concentric”), which was included in Integrated Agencies Network, to a strategic buyer for $245.0 million in cash resulting in a pre-tax gain of $94.5 million. The gain was recognized within Gain on sale of business within the Consolidated Statements of Operations. The divestiture did not represent a strategic shift that would have a major effect on the Company’s consolidated results of operations, and therefore its results of operations were not reported as discontinued operations.
13
Table of Contents
4. Revenue
Disaggregated Revenue Data
The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from Brand 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 Brands. Representation of a client rarely means that Stagwell handles marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified naturefor all Brands or product lines of the client in every geographical location. The Company’s client base,Brands often cooperate with one another through referrals and the Company does not believe that it is exposedsharing of both services and expertise, which enables Stagwell to a concentration of credit risk. No client accounted forservice clients’ varied marketing needs by crafting custom integrated solutions.

more than 10% of the Company’s consolidated accounts receivable at September 30, 2017 and December 31, 2016. No client accounted for 10% of the Company’sThe following table presents revenue disaggregated by our principal capabilities for the three and nine months ended September 30, 2017 orMarch 31, 2024 and 2023. We reclassified certain brands into the Stagwell Marketing Cloud Group (software-as-a-service and data-as-a-service tools for in-house marketers) principal capability in the third quarter of 2023. All prior periods presented have been revised to reflect these changes.
Three Months Ended March 31,
Principal CapabilitiesReportable Segment20242023
(dollars in thousands)
Digital TransformationAll segments$195,763 $185,515 
Creativity and CommunicationsAll segments291,653 263,882 
Performance Media and DataBrand Performance Network77,016 67,974 
Consumer Insights and StrategyIntegrated Agencies Network45,769 49,255 
Stagwell Marketing Cloud GroupAll segments59,858 55,818 
$670,059 $622,444 
Stagwell’s Brands are located in the United States and United Kingdom, and more than 32 other countries around the world. The Company continues to expand its global footprint to support clients in international markets. Historically, 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, 2016.March 31, 2024 and 2023:
Cash
Three Months Ended March 31,
Geographical LocationReportable Segment20242023
(dollars in thousands)
United StatesAll$561,317 $514,828 
United KingdomAll37,761 33,133 
OtherAll70,981 74,483 
$670,059 $622,444 

Contract Assets and Cash Equivalents. The Company’s cash equivalents are primarily comprisedLiabilities
Contract assets consist of investments in overnight interest-bearing deposits, commercial paperfees and money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts.
Cash in Trust. A subsidiary of the Company holds restricted cash in trust accounts related to funds received on behalf of clients.  Such amounts are held in escrow under depositary service agreements and distributed at the direction of the clients.  The funds are presented as a corresponding liability on the balance sheet.
Allowance for Doubtful Accounts.  Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions.
Expenditures Billable to Clients.  Expenditures billable to clients consist principally ofreimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the production process.
Fixed Assets.  Fixedproviding services. In arrangements in which we are acting as principal, contract assets are statedincluded as a component of Accounts receivable on the Unaudited Consolidated Balance Sheet. These assets were $186.6 million and $141.9 million as of March 31, 2024 and December 31, 2023, respectively. In arrangements in which we are acting as agent, contract assets are included on the Unaudited Consolidated Balance Sheet as Expenditures billable to clients. These assets were $111.7 million and $114.1 million as of March 31, 2024 and December 31, 2023, respectively.
14
Table of Contents
Contract liabilities represent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent. Such fees and reimbursements of third-party costs are classified as Advance billings on the Company’s Unaudited Consolidated Balance Sheet. In arrangements in which we are acting as an agent, the recognition related to the contract liability is presented on a net basis within the Unaudited Consolidated Statements of Operations. Advance billings at cost, netMarch 31, 2024 and December 31, 2023 were $302.5 million and $301.7 million, respectively. The increase in Advance billings of accumulated depreciation. Computers, furniture$0.8 million for the three months ended March 31, 2024 was primarily driven by $185.8 million of revenue recognized that was included in the Advance billings balances as of December 31, 2023, the incurrence of third-party costs, offset by cash payments received or due in advance of satisfying our performance obligations.
The Company acquired $5.5 million in contact assets and fixtures$8.8 million in contact liabilities in connection with the acquisition of Epiphany. See Note 3 of the Notes included herein for additional information related to this acquisition.
Changes in the contract asset and liability balances during the three months ended March 31, 2024 were not materially impacted by write offs, impairment losses or any other factors.
Unsatisfied Performance Obligations
The majority of our contracts are depreciatedfor periods of one year or less. For those contracts with a term of more than one year, we had $93.4 million of unsatisfied performance obligations as of March 31, 2024 of which we expect to recognize approximately 76% in 2024, 23% in 2025 and 1% in 2026.
15
Table of Contents
5. Earnings (Loss) Per Share
The following table set forth the computations of basic and diluted loss per common share for the three months ended March 31, 2024 (amounts in thousands, except per share amounts):
Three Months Ended March 31,
2024
Loss Per Share - Basic
Numerator:
Net loss$(713)
Net loss attributable to Class C shareholders1,047 
Net income attributable to other equity interest holders(1,616)
Net income attributable to noncontrolling and redeemable noncontrolling interests(569)
Net loss attributable to Stagwell Inc. common shareholders$       (1,282)
Denominator:
Weighted average number of common shares outstanding112,633 
Loss Per Share - Basic$       (0.01)
Loss Per Share - Diluted
Numerator:
Net loss attributable to Stagwell Inc. common shareholders$(1,282)
Adjustment to net loss:
Fair value adjustment for deferred acquisition obligations (net of income tax expense)(224)
$       (1,506)
Denominator:
Basic - Weighted Average number of common shares outstanding112,633 
Dilutive shares:
Class A Shares to settle deferred acquisition obligations3,772 
Dilutive - Weighted average number of common shares outstanding116,405 
Loss Per Share - Diluted$       (0.01)
Anti-dilutive:
Class C Shares151,649 
Stock Appreciation Rights and Restricted Awards4,531 
Employee Stock Purchase Plan shares49 

16
Table of Contents
The following table sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2023:
Three Months Ended March 31,
2023
Earnings Per Share - Basic(amounts in thousands, except per share amounts)
Numerator:
Net loss$(2,869)
Net loss attributable to Class C shareholders1,963 
Net loss attributable to other equity interest holders2,295 
Net loss attributable to noncontrolling and redeemable noncontrolling interests$4,258 
Net income attributable to Stagwell Inc. common shareholders$       1,389 
Denominator:
Weighted Average number of common shares outstanding125,199 
Earnings Per Share - Basic$       0.01 
Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders$       1,389 
Net loss attributable to Class C shareholders(1,963)
$(574)
Denominator:
Basic - Weighted Average number of common shares outstanding125,199 
Dilutive shares:
Stock appreciation right awards1,929 
Restricted share and restricted unit awards1,769 
Class C Shares160,909 
Dilutive - Weighted average number of common shares outstanding289,806 
Earnings Per Share - Diluted$       — 
Restricted stock awards of 4.6 million and 0.7 million as of March 31, 2024 and 2023, respectively, were excluded from the computation of diluted earnings (loss) per common share because the performance contingencies necessary for vesting were not met as of the reporting date.





17
Table of Contents
6. Deferred Acquisition Consideration
Deferred acquisition consideration on the Unaudited Consolidated Balance Sheet consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Arrangements that are not contingent upon future employment are initially measured at the acquisition date fair value and are remeasured at each reporting period within Office and general expenses on the Unaudited Consolidated Statements of Operations. Arrangements that are contingent upon future employment are expensed as earned over the respective vesting (employment) period within Office and general expenses on the Unaudited Consolidated Statements of Operations.
The following table presents changes in deferred acquisition consideration and a reconciliation to the amounts reported on the Unaudited Consolidated Balance Sheet as of March 31, 2024 and Consolidated Balance Sheet as of December 31, 2023:
March 31,
2024		December 31, 2023
(dollars in thousands)
Beginning balance$101,058 $161,323 
Payments (1)
(1,907)(97,447)
Adjustments to deferred acquisition consideration (2)
1,796 14,303 
Additions (3)
— 22,172 
Currency translation adjustment(142)680 
Other(1)27 
Ending balance (4)
$100,804 $101,058 
(1) Includes deferred acquisition consideration payments settled in shares of Class A Common Stock of $32.8 million for the period ended December 31, 2023.

(2) Adjustments to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments and accretion of expense as awards are earned over the vesting period.
(3) In 2021, the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own. The agreement provided for the purchase of 50% of the interest on October 1, 2021 (paid in October 2023) and 50% on July 31, 2023 (payable in October 2025 with a seller’s right to defer until October 2027). In connection with the purchase, the estimated amount payable in October 2025, was reclassified from redeemable noncontrolling interest to deferred acquisition consideration in 2023.

(4) The contingent and fixed deferred acquisition consideration obligation was $56.8 million and $44.0 million, respectively, as of March 31, 2024 and $57.5 million and $43.6 million, respectively, as of December 31, 2023. The deferred acquisition consideration as of March 31, 2024 and December 31, 2023, includes $30.3 million and $29.3 million, respectively, expected to be settled in shares of Class A Common Stock.

7. Leases
The Company leases office space in North America, Europe, Asia, South America, Africa, 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 2024 through 2034. The Company’s finance leases are immaterial.
Lease costs are recognized in the Unaudited Consolidated Statements of Operations over the lease term on a straight-line basis over periods of three to seven years.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. Repairs
Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and maintenance costsextension options are expensednot included in the lease term as incurred.
Equity Method Investments. The equity method is used to account for investments in entities in which the Company has an ownership interest of less than 50% and has significant influence, or joint control by contractual arrangement, (i) over the operating and financial policies of the affiliate or (ii) has an ownership interest greater than 50%; however, the substantive participating rights of the noncontrolling interest shareholders preclude the Company from exercising unilateral control over the operating and financial policies of the affiliate. The Company’s investmentsis not reasonably certain that were accounted for using the equity method include a 30% undivided interest in a real estate joint venture and various interests in investment funds. The Company’s management periodically evaluates these investments to determine if there has been a decline in value that is other than temporary. These investments are included in investments in non-consolidated affiliates on the balance sheet.it will exercise its option.
Cost Method Investments. From time to time, the Company makes non-material cost based investments in start-up advertising technology companiesenters into sublease arrangements with unrelated third parties. These subleases are classified as operating leases and innovative consumer product companies whereexpire between years 2024 through 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company doessubleases office space in North America and Europe.
As of March 31, 2024, the Company entered into two operating leases for which the commencement date has not exercise significant influence over the operating and financial policiesyet occurred primarily because of the investee. The total net cost basispremises being prepared for occupancy by the landlord. Accordingly, these two leases
18
Table of these investments, which is included in other assets on the balance sheet as of September 30, 2017 and December 31, 2016, was $10,350 and $10,132, respectively. These investments are periodically evaluated to determine whether a significant event or change in circumstances has occurred that may impact the fair value of each investment other than temporary declines below book value. A variety of factors are considered when determining if a decline is other than temporary, including, among others, the financial condition and prospects of the investee, as well as the Company’s investment intent.  In addition, the Company’s partner agencies may receive minority equity interests from start-up companies in lieu of fees.Contents
Goodwill and Indefinite Lived Intangibles. In accordance with the FASB ASC Topic 350, Intangibles - Goodwill and Other, goodwill and indefinite lived intangible assets (trademarks) acquired as a result of a business combination, which are not subject to amortization, are tested for impairment annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For goodwill, impairment is assessed at the reporting unit level. For the nine months ended September 30, 2017 and the year ended December 31, 2016, goodwill was $839,361 and $844,759, respectively. For the three and nine months ended September 30, 2017, there was a reduction in goodwill of $17,593 relating to the sale of certain subsidiaries, which was offset by $12,195 net foreign exchange translation adjustments. As a result of the these transactions, the Company performed interim goodwill testing on two reporting units and determined that there was no impairment charge in respect to the impacted reporting units. For the three and nine months ended September 30, 2016, due to triggering events during the third quarter of 2016, the Company performedrepresent an interim goodwill impairment test and recognized goodwill impairment of $29,631. In addition, in the third quarter of 2016, the Company sold all of its ownership interests in Bryan Mills Iradesso Corporation (“Bryan Mills”) to the noncontrolling shareholders, resulting in a write off of goodwill of $764. See Note 4 for further information on the dispositions.
Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business

are recorded at their acquisition date fair values. The Company’s acquisition model typically provides for an initial payment at closing and for future additional contingent purchase price obligations. Contingent purchase price obligations are recorded as deferred acquisition consideration on the balance sheet at the acquisition date fair value and are remeasured at each reporting period. Changes in such estimated values are recorded in the results of operations. For further information see Notes 4 and 9. For the three and nine months ended September 30, 2017 and 2016, $2,462 of income and $12,152 of expense, respectively, and $11,152 and $17,180 of expense, respectively, related to changes in such estimated values and was recorded in results of operations. The Company expenses acquisition related costs as incurred. For the three and nine months ended September 30, 2017 and 2016, $216 and $693 respectively, and $806 and $2,266, respectively, of acquisition related costs were charged to operations.
For each acquisition, the Company undertakes a detailed review to identify intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. Like most service businesses, a substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. In executing the Company’s overall acquisition strategy, one of the primary drivers in identifying and executing a specific transaction is the existence of, or the ability to expand the existing, client relationships. The expected benefits of the Company’s acquisitions are typically shared across multiple agencies and regions.
Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase, such noncontrolling shareholders’ incremental ownership interests under certain circumstances and the Company has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas as described in Note 12. In the event that an incremental purchase may be requiredobligation of the Company that is not reflected within the amounts are recordedUnaudited Consolidated Balance Sheet as redeemable noncontrolling interests in mezzanine equity on the balance sheet at their acquisition date fair value and adjustedof March 31, 2024. The aggregate future liability related to these leases is $2.9 million.
The discount rate used for changes to their estimated redemption value through additional paid-in capital (but not less than their initial redemption value), exceptleases accounted for foreign currency translation adjustments. 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 and nine months ended September 30, 2017 and 2016, there was no related impact onunder ASC 842 is the Company’s earnings (loss) per share calculation.  Changes in the estimated redemption amounts of the redeemable noncontrolling interests arecollateralized credit adjusted at each reporting period with a corresponding adjustment to equity. These adjustments will not impact the calculation of earnings (loss) per share.borrowing rate.
The following table presents changeslease costs and other quantitative information for the three months ended March 31, 2024 and 2023:
 Three Months Ended March 31,
 20242023
Lease Cost:(dollars in thousands)
Operating lease cost$20,946$19,578
Variable lease cost5,9374,561
Sublease rental income(2,480)(3,052)
Total lease cost$24,403$21,087
Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows$21,660$22,347
Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments (1)
$5,967$2,135
(1) Includes Right-of-use lease assets obtained in redeemable noncontrolling interests:exchange for operating lease liabilities related to acquisitions.
As of March 31, 2024, the weighted average remaining lease term was 6.3 years and the weighted average discount rate was 5.5%.
 Nine Months Ended September 30, 2017 Year Ended December 31, 2016
Beginning Balance$60,180
 $69,471
Redemptions(816) (1,708)
Additions (1)
—
 2,274
Changes in redemption value299
 (9,604)
Currency translation adjustments429
 (253)
Ending Balance$60,092
 $60,180
(1)Additions consist of transfers from noncontrolling interests related to step-up transactions and new acquisitions.
SubsidiaryOperating lease expense is included in Office and Equity Investment Stock Transactions. Transactions involving the purchase, sale or issuance of stock of a subsidiary where control is maintained are recorded as a reductiongeneral expenses in the redeemable noncontrolling interestsUnaudited Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or noncontrolling interests,less is immaterial.
In the three months ended March 31, 2024, the company ceased using certain office space and as applicable. Any difference betweensuch recognized a charge of $1.5 million to reduce the purchase price and noncontrolling interest are recorded to additional paid-in capital. In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of one of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets and related leasehold improvements related to an agency within the investment is remeasuredIntegrated Agencies Network.
With regard to the acquisition date fair value and any gain or loss is recognized in results of operations.
Variable Interest Entity. Effective March 28, 2012,aforementioned impairments, the Company invested in Doner Partners LLC (“Doner”). The Company acquired a 30% voting interestevaluated the facts and convertible preferred interests that allow the Company to increase ordinary voting ownership to 70% at the Company’s option. Effective April 1, 2017, the Company acquired an additional 15% voting and convertible preferred interest that allowed the Company to increase ordinary voting ownership to 85% at the Company’s option. The Company now has a 45% voting interest. The Company has determined that (i) this entity is a variable interest entity, and (ii) the Company is the primary beneficiary because it receives a disproportionate share of profits and losses as compared to its ownership percentage. As such, Doner is consolidated for all periods subsequentcircumstances related to the date of investment.

Doner is a full service integrated creative agency that is included as partuse of the Company’s portfolio in the Global Integrated Agencies segment. The Company’s Credit Agreement (see Note 6) is guaranteed and secured by all of Doner’s assets.
Total assets and total liabilities of Doner included in the Company’s consolidated balance sheet at September 30, 2017 were $100,229 and $53,508, respectively, and at December 31, 2016 were $102,456 and $57,622, respectively.
Guarantees.  Guarantees issued or modified by the Companywhich indicated that they may not be recoverable. Using estimated sublease income to third parties after January 1, 2003 are generally recognized at the inception or modification of the guarantee as a liability for the obligationsdevelop expected future cash flows, it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the eventwas determined that the specified triggering events or conditions occur. The initial measurement of that liability is the fair value of the guarantee.assets were less than their carrying value. The recognitionimpairment charge is included in Impairment and other losses within the Unaudited Consolidated Statements of a liability is required even if it is not probable thatOperations.
The following table presents minimum future rental payments will be required under a guarantee. Thethe Company’s liability associated with guarantees is not significant. See Note 12.
Revenue Recognition. The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topicsleases as of the FASB ASC,March 31, 2024 and accordingly, revenue is recognized when all of the following criteria are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the selling price is fixed or determinable; (iii) services have been performed or upon delivery of the products when ownership and risk of loss has transferredtheir reconciliation to the client;corresponding lease liabilities:
 Maturity Analysis
(dollars in thousands)
2024$57,800 
202569,480 
202658,473 
202752,943 
202849,738 
Thereafter113,932 
Total402,366 
Less: Present value discount(66,947)
Lease liability$335,419 
19
Table of Contents
8. Debt
As of March 31, 2024 and (iv) collectionDecember 31, 2023, the Company’s indebtedness was comprised as follows:
March 31,
2024		December 31,
2023
(dollars in thousands)
Credit Agreement$182,000 $59,000 
5.625% Notes1,100,000 1,100,000 
Debt issuance costs(12,473)(13,172)
5.625% Notes, net of debt issuance costs1,087,527 1,086,828 
Total long-term debt$1,269,527 $1,145,828 
Interest expense related to long-term debt included in Interest expense, net on the Unaudited Consolidated Statements of Operations for the resulting receivable is reasonably assured.three months ended March 31, 2024 and 2023, was $20.4 million and $18.3 million, respectively.
The amortization of debt issuance costs included in Interest expense, net on the Unaudited Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 was $0.7 million and $0.6 million, respectively.
Revolving Credit Agreement
The Company follows the Multiple-Element Arrangement topic of the FASB ASC, which addresses certain aspects of the accounting byis party to a vendor for arrangements under which it will perform multiple revenue-generating activities and how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting.
The Company follows the Principal Agent Consideration topic of the FASB ASC which addresses (i) whether revenue should be recorded at the gross amount billed because it has earned revenue from the sale of goods or services, or recorded at the net amount retained because it has earned a fee or commission, and (ii) that reimbursements received for out-of-pocket expenses incurred should be characterized in the income statement as revenue. Accordingly, the Company has included such reimbursed expenses in revenue.
The Company earns revenue from agency arrangements in the form of retainer fees or commissions; from short-term project arrangements in the form of fixed fees or per diem fees for services; and from incentives or bonuses.
Non-refundable retainer fees are generally recognized on a straight-line basis over the term of the specific customer arrangement. Commission revenue is earned and recognized upon the placement of advertisements in various media when the Company has no further performance obligations. Fixed fees for services are recognized upon completion of the earnings process and acceptance by the client. Per diem fees are recognized upon the performance of the Company’s services. In addition, for a limited number of certain service transactions, which require delivery of a number of service acts, the Company uses the proportional performance model, which generally results in revenue being recognized based on the straight-line method.
For arrangements with customers for which the Company earns a fixed fee for development of customized mobile applications (“Apps”), revenue is recognized in accordance with the accounting guidance contained in ASC 605-35 and is primarily recognized using the proportional performance method of accounting. Performance is generally measured based upon the efforts incurred to date in relation to total estimated efforts to the completion of the contract.
Fees billed to clients in excess of fees recognized as revenue are classified as advanced billings on the Company’s balance sheet.
A small portion of the Company’s contractual arrangements with customers includes performance incentive provisions, which allow the Company to earn additional revenue as a result of its performance relative to both quantitative and qualitative goals. The Company recognizes the incentive portion of revenue under these arrangements when specific quantitative goals are assured, or when the Company’s clients determine performance against qualitative goals has been achieved. In all circumstances, revenue is only recognized when collection is reasonably assured. The Company records revenue net of sales and other taxes due to be collected and remitted to governmental authorities.
Cost of Services Sold.  Cost of services sold do not include depreciation charges for fixed assets.
Interest Expense. Interest expense primarily consists of the cost of borrowing on the Company’s previously outstanding 6.75% Senior Notes due 2020 (the “6.75% Notes”); the Company’s currently outstanding 6.50% senior unsecured notes due 2024 (the “6.50% Notes”); and the Company’s $325 million senior secured revolving credit agreement due 2021facility with a five-year maturity with a syndicate of banks (the “Credit Agreement”). The Company uses the effective interest methodCredit Agreement provides revolving commitments of up to amortize the deferred financing costs on the 6.75% Notes$640.0 million and the 6.50% Notes as well as the original issue premium on the previously outstanding 6.75% Notes.permits restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million.
The Credit Agreement contains a number of financial and nonfinancial covenants and is guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions. The Company also uses the straight-line method to amortize the deferred financing costs onwas in compliance with all covenants as of March 31, 2024.
A portion of the Credit Agreement. ForAgreement in an amount not to exceed $50.0 million is available for the threeissuance of standby letters of credit. As of March 31, 2024 and nine months ended September 30, 2017December 31, 2023, the Company had issued undrawn outstanding letters of credit of $15.8 million and 2016, interest expense included $24 and $77, respectively, and $30 and $181, respectively, relating to present value adjustments for fixed deferred acquisition consideration payments.$16.2 million, respectively.

Senior Notes
The Company redeemed the 6.75% Notes with the net proceeds from the issuance of the 6.50% Notes. For further information see Note 6.
Income Taxes. The Company’s U.S. operating units are generally structured as limited liability companies, which are treated as partnerships for tax purposes. The Company is only taxed on its share of the profits, while noncontrolling holders are responsible for taxes on their share of the profits. Deferred income taxes reflect the tax effects of temporary differences between the carryinghad $1.1 billion aggregate principal amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. The Company currently has a fully reserved valuation allowance on its deferred tax assets related to U.S. net operating losses. Realization of our deferred tax assets is evaluated on a quarterly basis and is based upon all available evidence. It is possible that sufficient positive evidence to support the realization of the Company’s net deferred tax assets will exist in the near future, and the previously provided valuation allowance could be reversed in whole or in part.
During the nine months ended September 30, 2017 and 2016, the Company’s effective tax rate was impacted by losses in certain tax jurisdictions where a valuation allowance was deemed necessary.
During the second quarter of 2017, the Company identified and recorded out-of-period adjustments related to the misapplication of ASC 740 and ASC 850-740 accounting policies as they applied to the calculation of deferred tax liabilities.  The corrections have resulted in a $6,916 increase to the Company’s deferred tax liability on the condensed consolidated balance sheet as of December 31, 2016. The Company has performed a qualitative and quantitative analysis of this misapplication and determined it not to be material to prior periods. The Company has revised prior period information presented on this Form 10-Q as follows: (i) for the three and nine months ended September 30, 2016, income tax expense has been decreased by $1,390 and decreased by $713, respectively, (ii) basic and diluted net loss attributable to MDC Partners Inc. common shareholders for the nine months ended September 30, 2016 increased by $0.01 per share, and (iii) deferred tax liabilities and accumulated deficit increased by $6,916 as of December 31, 2016. The correction had no impact on the Company’s cash flows.
Stock-Based Compensation.  Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period, in this case the award’s vesting period. The Company recognizes forfeitures as they occur. When awards are exercised, share capital is credited by the sum of the consideration paid, together with the related portion previously credited to additional paid-in capital when compensation costs were charged against income or acquisition consideration.
The Company uses its historical volatility derived over the expected term of the award to determine the volatility factor used in determining the fair value of the award.
Stock-based awards that are settled in cash, or may be settled in cash at the option of employees, are recorded as liabilities. The measurement of the liability and compensation cost for these awards is based on the fair value of the award, and is recorded in operating income over the service period, in this case the award’s vesting period. Changes in the Company’s payment obligation prior to the settlement date of a stock-based award are recorded as compensation cost in operating income in the period of the change. The final payment amount for such awards is established on the date of the exercise of the award by the employee.
Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair value on the date of grant and recorded as additional paid-in capital. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing-model and is recorded in operating income over the service period, in this case the award’s vesting period.
It is the Company’s policy for issuing shares upon the exercise and/or vesting of an equity incentive award to verify the amount of shares to be issued, as well as the amount of proceeds to be collected (if any) and to deliver new shares to the exercising party.
The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met.
The Company treats benefits paid by shareholders or equity members to employees as a stock-based compensation charge with a corresponding credit to additional paid-in-capital.
From time to time, certain acquisitions and step-up transactions include an element of compensation related payments. The Company accounts for those payments as stock-based compensation.
In January 2017, the Company issued 327,500 Stock Appreciation Rights5.625% senior notes (“SARS”5.625% Notes”) to its employees. The SARS have an exercise price of $6.60 and will vest on the three year anniversary of the grant date. The Company will be recording a stock-based compensation charge of $770 from the date of the grant through 2020 for these SARS awards.
During the nine months ended September 30, 2017, the Company issued 243,000 shares of restricted stock and restricted stock units (collectively, “RSUs”) to its employees and directors. The RSUs have an aggregate grant date fair value of $1,966 and generally vest on the third anniversary of the date of grant. In addition, during the first quarter of 2017, the Company issued RSUs of which 930,600 awarded shares were outstanding as of September 30, 2017. However, the vesting of these awards is

contingent upon the Company meeting a cumulative three year financial performance targetMarch 31, 2024. The 5.625% Notes are due August 15, 2029 and continued employment through the March 1, 2020 vesting date. These RSU awards do not yet have an established grant date fair value because the financial performance target is not yet established. Once the Company defines the financial performance target, and assuming the achievement of such performance targets is expected, the grant date is established and the Company will record the compensation expense over the vesting period. Additionally, the Company still has outstanding RSUs of 513,321 which are also based on a cumulative financial performance target and will vest on March 1, 2019.
Income (Loss) per Common Share.  Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Share capital to be issued, as reflected in shareholders’ deficit on the balance sheet, are also included if there is no circumstance under which those shares would not be issued. Diluted income (loss) per common share is based on the above, in addition, if dilutive, it also includes common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.
During the first quarter of 2017, the Company issued and sold 95,000 newly authorized Series 4 Convertible Preference Shares (the “Preference Shares”) in a private placement. The two-class method is applied to calculate basic net income (loss) attributable to MDC Partners, Inc. per common share in periods in which shares of convertible preference shares were outstanding, as shares of convertible preference shares are participating securities due to their dividend rights. See Notes 7 and 8. The two-class method is an earnings allocation method under which earnings per share is calculated for common stock considering a participating security’s rights to undistributed earnings as if all such earnings had been distributed during the period. Either the two-class method or the if-converted method is applied to calculate diluted net income per common share, depending on which method results in more dilution. The Company’s participating securities are not included in the computation of net loss per common share in periods of net loss because the convertible preference shareholders have no contractual obligation to participate in losses.
Foreign Currency Translation.  The Company’s financial statements were prepared in accordance with the requirements of FASB ASC Topic 830, Foreign Currency Matters. The functional currency of the Company is the Canadian dollar and it has decided to use U.S. dollars as its reporting currency for consolidated reporting purposes. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly, the currency impacts of the translation of the balance sheets of the Company’s non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulative translation adjustments in accumulated other comprehensive income. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation adjustments are not included in net earnings unless they are actually realized through a sale or upon complete or substantially complete liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in net earnings. The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The income statements of non-U.S. dollar based subsidiaries are translated at average exchange rates for the period.
Gains and losses arising from the Company’s foreign currency transactions are reflected in net earnings. Unrealized gains or losses arising on the translation of certain intercompany foreign currency transactions that are of a long-term nature (that is settlement is not planned or anticipated in the future) are included as cumulative translation adjustments in accumulated other comprehensive loss.

3. 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,
 2017
2016 2017 2016
Numerator 
 
    
Net income (loss) attributable to MDC Partners Inc.$18,493

$(32,140) $19,180
 $(54,937)
Accretion on convertible preference shares(1,948)
—
 (4,365) —
Net income allocated to convertible preference shares(2,408) —
 (1,782) —
Numerator for basic loss per common share - Net income (loss) attributable to MDC Partners Inc. common shareholders14,137

(32,140) 13,033
 (54,937)
Effect of dilutive securities:



 

 

Adjustment to net income allocated to convertible preference shares13
 —
 9
 —
Numerator for diluted income (loss) per common share- Net income (loss) attributable to MDC Partners Inc. common shareholders$14,150

$(32,140) $13,042
 $(54,937)
Denominator



    
Denominator for basic income (loss) per common share - weighted average common shares57,566,707

52,244,819
 53,915,536
 50,861,890
Effect of dilutive securities: 


 

 

Impact of stock options and non-vested stock under employee stock incentive plans376,373
 —
 312,672
 —
Denominator for diluted income (loss) per common share - adjusted weighted shares and assumed conversions57,943,080

52,244,819
 54,228,208
 50,861,890
Basic income (loss) per common share$0.25

$(0.62) $0.24
 $(1.08)
Diluted income (loss) per common share$0.24
 $(0.62)
$0.24
 $(1.08)
As of September 30, 2017, options and other rights to purchase 1,118,085 shares of common stock were outstanding, of which 741,712 and 805,413 shares of non-vested restricted stock and restricted stock units were anti-dilutive during the three and nine months ended September 30, 2017, respectively, and therefore excluded from the computation of diluted income per common share. Additionally, 1,443,921 shares of non-vested restricted stock and restricted stock unit awards, which are contingent upon the Company meeting an undefined cumulative three year earnings target and continued employment, are excluded from the computation of diluted income per common share as the contingency has not been satisfied at September 30, 2017. Lastly, there were 95,000 shares of Preference Shares outstanding which were convertible into 9,936,514 Class A common shares at September 30, 2017. These Preference Shares were anti-dilutive for the three and nine months ended September 30, 2017, and are therefore excluded from the diluted loss per common share calculation for the period.
As of September 30, 2016, options and other rights to purchase 918,260 shares of common stock were outstanding, of which 880,760 shares of non-vested restricted stock and restricted stock units were anti-dilutive during the three and nine months ended September 30, 2016 and therefore excluded from the computation of diluted income per common share. Additionally, 523,321 shares of non-vested restricted stock and restricted stock unit awards, which are contingent upon the Company meeting an undefined cumulative three year earnings target and continued employment, are excluded from the computation of diluted income per common share as the contingency had not been satisfied as of September 30, 2016.

,4. Acquisitions and Dispositions
Valuations of acquired companies are based on a number of factors, including specialized know-how, reputation, competitive position and service offerings. The Company’s acquisition strategy has been focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of its various strategic business platforms to better serve the Company’s clients. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry. The Company’s model of “Perpetual Partnership” often involves acquiring a majority interest rather than a 100% interest and leaving management owners with a significant financial interest in the performance of the acquired entity for a minimum period of time, typically not less than five years. The Company’s acquisition model in this scenario typically provides for (i) an initial payment at the time of closing, (ii) additional contingent purchase price obligations based on the future performance of the acquired entity, and (iii) an option by the Company to purchase (and in some instances a requirement to so purchase) the remainingbear annual interest of the acquired entity under a predetermined formula.

Contingent purchase price obligations. The Company’s contingent purchase price obligations are generally payable within a five year period following the acquisition date, and are based on (i) the achievement of specific thresholds of future earnings, and (ii) in certain cases, the growth rate of those earnings. Contingent purchase price obligations are recorded as deferred acquisition consideration on the balance sheet at the acquisition date fair value and adjusted at each reporting period through operating income or net interest expense, depending on the nature of the arrangement. On occasion, the Company may initiate a renegotiation of previously acquired ownership interests and any resulting change in the estimated amount of consideration5.625% to be paid is adjustedsemiannually on February 15 and August 15 of each year.
The 5.625% Notes are also subject to certain covenants, customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in the reporting period through operating income or net interest expense, depending on the naturecompliance with all covenants as of the arrangement. See Notes 2, 9,March 31, 2024.
9. Noncontrolling and 12 for additional information on the deferred acquisition consideration.Redeemable Noncontrolling Interests
Options to purchase. 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 noncontrollingNoncontrolling interests within Shareholders’ Equity in the equity section of the Company’s balance sheet.Unaudited Consolidated Balance Sheet. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemableRedeemable noncontrolling interests in mezzanine equity in the Unaudited Consolidated Balance Sheet at their estimated acquisition date redemption value and adjusted at each
20
Table of Contents
reporting period for changes to their estimated redemption value through additional paid-in capitalRetained earnings (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 balance sheet amounts. See Note 12 for additional information on redeemable noncontrolling interests.
Employment conditions. From time to time, specifically when the projected success of an acquisition is deemed to be dependent on retention of specific personnel, such acquisition may include deferred payments that are contingent upon employment terms as well as financial performance. The Company accounts for those payments through operatingfollowing table presents Net income as stock-based compensation over the required retention period. For the three and nine months ended September 30, 2017 and 2016, stock-based compensation included $4,064 and $9,792, respectively, and $2,259 and $7,184, respectively, of expense relating to those payments.
Distributions to noncontrolling shareholders. If noncontrolling shareholders have the right to receive distributions based on the profitability of an acquired entity, the amount is recorded as income(loss) attributable to noncontrolling interests.  However, there are circumstances whenand redeemable noncontrolling interests between Class C shareholders and other equity interest holders for the Company acquires a majoritythree months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
(dollars in thousands)
Net loss attributable to Class C shareholders$(1,047)$(1,963)
Net income attributable to other equity interest holders823 248 
Net loss attributable to noncontrolling interests(224)(1,715)
Net income (loss) attributable to redeemable noncontrolling interests793 (2,543)
Net income (loss) attributable to noncontrolling and redeemable noncontrolling interests$569 $(4,258)

The following table presents noncontrolling interests between Class C shareholders and other equity interest holders as of March 31, 2024 and the selling shareholders waive their right to receive distributions with respect to their retained interest for a period of time, typically not less than five years.  Under this model, the right to receive such distributions typically begins concurrently with the purchase option period and, therefore, if such option is exercised at the first available date, the Company may not record any noncontrolling interest over the entire period from the initial acquisition date through the acquisition date of the remaining interests.December 31, 2023:
2017 Acquisitions
March 31,
2024		December 31,
2023
(dollars in thousands)
Noncontrolling interest of Class C shareholders$436,899 $436,215 
Noncontrolling interest of other equity interest holders (1)
22,991 32,362 
Total noncontrolling interests$459,890 $468,577 
(1) In 2017,January 2024, the Company entered into various non-material transactionsan agreement to purchase the remaining ownership interest in connection with certain of its majority-owned entities. As a resultsubsidiary it previously controlled, the consideration for which was a portion of the foregoing,subsidiary that was transferred to the noncontrolling interest owner. The non-cash purchase resulted in a reduction of the subsidiary noncontrolling interest by approximately $10 million.

The following table presents changes in redeemable noncontrolling interests:
March 31,
2024		December 31,
2023
(dollars in thousands)
Beginning balance$10,792 $39,111 
Redemptions (1)
— (22,172)
Distributions(559)(5,800)
Changes in redemption value250 442 
Net income (loss) attributable to redeemable noncontrolling interests793 (634)
Other29 (155)
Ending balance$11,305 $10,792 
(1) Redemptions for the year ended December 31, 2023, is associated with redeemable noncontrolling interest of a certain brand we did not previously own. The amount was reclassified as a deferred acquisition contingent obligation (see Note 6).
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 made total cash closing paymentsto fund the related amounts during 2024 to 2028. It is not determinable, at this time, if or when the owners of $3,858, increased fixed deferred consideration liability by $7,208, reducedthese rights will exercise all or a portion of these rights.
21
Table of Contents
The redeemable noncontrolling interest of $11.3 million as of March 31, 2024, consists of $7.8 million, assuming that the subsidiaries meet certain performance metrics, and $3.5 million upon termination of such owner’s employment with the applicable subsidiary or death.
These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. As such, there is no related impact on the Company’s earnings (loss) per share calculations for the three months ended March 31, 2024 and 2023.
Comprehensive Income (Loss) Attributable to Noncontrolling and Redeemable Noncontrolling Interests
For the three months ended March 31, 2024, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests by $816, reducedwas $3.7 million, which consists of $0.6 million of net income and $4.3 million of other comprehensive loss.
For the three months ended March 31, 2023, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests equitywas $2.0 million, which consists of $4.3 million of net loss and $2.2 million of other comprehensive income.
10. Commitments, Contingencies, and Guarantees
Legal Proceedings. The Company’s operating entities are involved in legal proceedings and regulatory inquiries of various types. While any litigation or investigation 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.
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 $11,965, reduced noncontrolling interest payable by $397,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 increased additional paid-in capital by $2,316. In addition, a stock-based compensation charge of $996no amount has been recognized representingaccrued in the consideration paidaccompanying Unaudited 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 excessthe period when those losses are probable and estimable.
Commitments. At March 31, 2024, the Company had $15.8 million of undrawn letters of credit outstanding. See Note 8 of the fair valueNotes included herein for additional information.
The Company entered into two operating leases for which the commencement date has not yet occurred as of March 31, 2024. See Note 7 of the Notes included herein for additional information.
In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of March 31, 2024, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $5.2 million for the remainder of 2024, and $6.9 million, $4.2 million, $3.0 million, $3.1 million and $3.8 million for 2025, 2026, 2027, 2028, and thereafter, respectively.
The Company has also entered into a certain long-term, non-cancellable contract with a certain vendor for cloud services that requires the Company to commit to minimum spending over the contract term. As of March 31, 2024, the Company estimates its future minimum commitments under this agreement to be: $5.5 million for the remainder of 2024, and $6.9 million, $8.7 million, $10.4 million, $12.7 million and $15.3 million for 2025, 2026, 2027, 2028, and thereafter, respectively.
11. Share Capital
The authorized and outstanding share capital of the Company is below.
Class A Common Stock
There are 1.0 billion shares of Class A Common Stock authorized, of which 114.8 million shares were issued and outstanding as of March 31, 2024. Each share of Class A Common Stock carries one vote and represents an economic interest acquired.in the Company.
2017 Dispositions
22
Table of Contents
Class C Common Stock
There are 250.0 million shares of Class C Common Stock authorized, par value $0.00001 per share (the “Class C Common Stock”) of which 151.6 million shares were issued and outstanding as of March 31, 2024. Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of OpCo (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”). Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).
Class A Common Stock Repurchases
The Company may purchase up to an aggregate of $250.0 million of shares of outstanding Class A Common Stock under its stock repurchase program (the “Repurchase Program”). The Repurchase Program expires on March 1, 2026.
Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our Board of Directors (the “Board”) will review the Repurchase Program periodically and may authorize adjustments of its terms.
During the three months ended September 30, 2017,March 31, 2024, 4.0 million shares of Class A Common Stock were repurchased pursuant to the Company sold allRepurchase Program at an aggregate value, excluding fees, of its ownership interests in three subsidiaries resulting in recognition$24.6 million. These shares were repurchased at an average price of a net loss on$6.11 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $114.0 million as of March 31, 2024.
Employee Stock Purchase Plan
A total of 3.0 million shares of Class A Common Stock are reserved for sale of business of $1,424. The net assets reflectedunder the Employee Stock Purchase Plan (the “ESPP”) to eligible employees as defined in the calculationplan. Under the ESPP, eligible employees can elect to withhold up to 15% of their earnings, subject to certain maximums, to purchase shares of Class A Common Stock on certain plan-defined dates. The purchase price for each offering period is 92.5% of the net loss on sale was inclusive of goodwill of $17,593. Goodwill was allocated to the subsidiaries based on the relative fair market value of shares of Class A Common Stock at the sold subsidiaries compared toend of the offering period. The plan is considered compensatory resulting in the fair value of the respective reporting units. See Note 1 for details. Additionally,discount being expensed over the Company recorded a reduction in noncontrolling interestsservice period.
The total number of $10,657.

2016 Acquisitions
Effective July 1, 2016, the Company acquired 100%shares authorized that remained available to be issued was 2.9 million as of the equity interests of Forsman & Bodenfors AB (“F&B”), an advertising agency based in Sweden, for an estimated aggregate purchase price at acquisition date of $49,837, consisting of a closing payment of 1,900,000 MDC Class A subordinate voting shares with an acquisition date fair value of $34,219, plus additional deferred acquisition payments with an estimated present value at acquisition date of $15,618. The amount of additional payments are based on the financial results of the acquired business for 2015 and 2016 as well as for the value of the Company’s shares from July 1, 2016 up to and including the close of business on November 2, 2016. March 31, 2024. During the three months ended June 30, 2017,March 31, 2024, there were no material expenses incurred by the Company paid cash of $3,055 and issued an additional 2,450,000 MDC Class A subordinate voting shares with a fair value of $20,800 as a settlement of deferred acquisition consideration.
An allocation of excess purchase price consideration of this acquisition to the fair value of the net assets acquired resulted in identifiable intangibles of $36,698, consisting primarily of customer lists, trade names and covenants not to compete, and goodwill

of $24,778, including the value of the assembled workforce. The identified assets have a weighted average useful life of approximately 10.8 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. In addition, the Company has recorded $2,275 as the present value of redeemable noncontrolling interests and $5,514 as the present value of noncontrolling interests both relating to the noncontrolling interest of F&B’s subsidiaries. None of the intangibles and goodwill are tax deductible and the Company recorded a deferred tax liability of $8,074 related to the intangibles. F&B’s results are included in the Global Integrated Agencies segment.
During the six months ended June 30, 2017, F&B earned revenue of $43,535ESPP and incurred a net loss of $4,460, which is included in our consolidated results for the nine months ended September 30, 2017. The net loss was attributable to an increase in the deferred acquisition payment liability related to such acquisition, driven by the decrease in t    he future market performance of the Company’s stock price and the amortization of the intangibles identified in the allocation of the purchase price consideration.
Effective April 1, 2016, the Company acquired the remaining 40% ownership interests of Luntz Global Partners LLC. In 2016, the Company also entered into various non-material transactions in connection with other majority-owned entities. As a result of the foregoing, the Company made total cash closing payments of $1,581, eliminated the contingent deferred acquisition payments of $4,052 and fixed deferred acquisition payments of $467 related to certain initial acquisition of the equity interests, reduced other assets by $428, reduced redeemable noncontrolling interests by $1,005, reduced noncontrolling interests by $19,354, increased accruals and other liabilities by $94, and increased additional paid-in capital by $22,775. Additional deferred payments with an estimated present value at acquisition date of $2,393 that are contingent upon service conditions have been excluded from deferred acquisition consideration and will be expensed as stock-based compensation over the required service period.
2016 Dispositions
Effective September 30, 2016, the Company sold all of its ownership interests in Bryan Millscontributions to the noncontrolling shareholders and recognized a loss of $800. The net assets reflected in the calculation of the loss on sale was inclusive of goodwill of $764.ESPP were nominal.
Noncontrolling Interests
Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the three and nine months ended September 30, 2017 and 2016 were as follows:
Net Income (Loss) Attributable to MDC Partners Inc. and
Transfers (to) from the Noncontrolling Interests
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income (loss) attributable to MDC Partners Inc.$18,493
 $(32,140) $19,180
 $(54,937)
Transfers from the noncontrolling interest:       
(Decrease) increase in MDC Partners Inc. paid-in capital for purchase of equity interests in excess of Redeemable Noncontrolling Interests and Noncontrolling Interests(337) (520) 2,315
 22,498
Net transfers from noncontrolling interests$(337) $(520) $2,315
 $22,498
Change from net income (loss) attributable to MDC Partners Inc. and transfers to noncontrolling interests$18,156
 $(32,660) $21,495
 $(32,439)

5. Accounts Payable, Accruals and Other Liabilities
At September 30, 2017 and December 31, 2016, accruals and other liabilities included accrued media of $169,460 and $201,872, respectively; and included amounts due to noncontrolling interest holders for their share of profits, which will be distributed within the next twelve months of $5,802 and $4,154, respectively.

Changes in amounts due to noncontrolling interest holders included in accrued and other liabilities for the year ended December 31, 2016 and nine months ended September 30, 2017 were as follows:
 Noncontrolling
Interests
Balance, December 31, 2015$5,473
Income attributable to noncontrolling interests5,218
Distributions made(7,772)
Other (1)
1,235
Balance, December 31, 2016$4,154
Income attributable to noncontrolling interests6,588
Distributions made(5,272)
Other (1)
332
Balance, September 30, 2017$5,802
(1)Other consists primarily of business acquisitions, sale of a business, step-up transactions, and cumulative translation adjustments.
At September 30, 2017 and December 31, 2016, accounts payable included $47,430 and $80,193 of outstanding checks, respectively.
6. Debt
The Company’s indebtedness was comprised as follows:

September 30,
2017
December 31, 2016
Revolving credit agreement$48,607
 $54,425
6.50% Notes due 2024900,000
 900,000
Debt issuance costs(18,161) (18,420)
 930,446
 936,005
Obligations under capital leases743
 431
 931,189
 936,436
Less: Current portion of long-term debt300
 228
 $930,889
 $936,208
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 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 at a rate of 6.50% per annum, accruing from March 23, 2016. Interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning November 1, 2016. The 6.50% Notes mature on May 1, 2024, unless earlier redeemed or repurchased. The Company received net proceeds from the offering of the 6.50% Notes equal to approximately $880,000. The Company used the net proceeds to redeem all of its existing 6.75% Notes, together with accrued interest, related premiums, fees and expenses and recorded a charge for the loss on redemption of such notes of $33,298, including write offs of unamortized original issue premium and debt issuance costs. Remaining proceeds were used for general corporate purposes, including funding of deferred acquisition consideration.
The 6.50% Notes are guaranteed on a senior unsecured basis by all of MDC’s existing and future restricted subsidiaries that guarantee, or are co-borrowers under or grant liens to secure, the Credit Agreement. The 6.50% Notes are unsecured and unsubordinated obligations of MDC and rank (i) equally in right of payment with all of MDC’s or any Guarantor’s existing and future senior indebtedness, (ii) senior in right of payment to MDC’s or any Guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to all of MDC’s or any Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of MDC’s subsidiaries that are not Guarantors.

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 (i) at a redemption price of 104.875% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2019, (ii) at a redemption price of 103.250% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2020, (iii) at a redemption price of 101.625% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2021, and (iv) at a redemption price of 100% of the principal amount thereof if redeemed on May 1, 2022 and thereafter.
Prior to May 1, 2019, MDC may, at its option, redeem some or all of the 6.50% Notes at a price equal to 100% of the principal amount of the 6.50% Notes plus a “make whole” premium and accrued and unpaid interest. MDC may also redeem, at its option, prior to May 1, 2019, up to 35% of the 6.50% Notes with the proceeds from one or more equity offerings at a redemption price of 106.50% of the principal amount thereof.
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.
Redemption of 6.75% Notes
On March 23, 2016, the Company redeemed the 6.75% Notes in whole at a redemption price of 103.375% of the principal amount thereof with the proceeds from the issuance of the 6.50% Notes.
Credit Agreement
On March 20, 2013, MDC, Maxxcom Inc. (a subsidiary of MDC) and each of their subsidiaries party thereto entered into an amended and restated, $225,000 senior secured revolving credit agreement due 2018 (the “Credit Agreement”) with Wells Fargo Capital Finance, LLC, as agent, 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. Capitalized terms used in this section and not otherwise defined have the meanings set forth in the Credit Agreement.
Effective October 23, 2014, MDC and its subsidiaries entered into an amendment to its Credit Agreement. The amendment: (i) expanded the commitments under the facility by $100,000, from $225,000 to $325,000; (ii) extended the date by an additional eighteen months to September 30, 2019; (iii) reduced the base borrowing interest rate by 25 basis points (the applicable margin for borrowing is 1.00% in the case of Base Rate Loans and 1.75% in the case of LIBOR Rate Loans); and (iv) modified certain covenants to provide the Company with increased flexibility to fund its continued growth and other general corporate purposes.
Effective May 3, 2016, MDC and its subsidiaries entered into an additional amendment to its Credit Agreement. The amendment: (i) extends the date by an additional nineteen months to May 3, 2021; (ii) reduces the base borrowing interest rate by 25 basis points; (iii) provides the Company the ability to borrow in foreign currencies; and (iv) certain other modifications to provide additional flexibility in operating the Company’s business.
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 1.50% in the case of Base Rate Loans and 1.75% 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 Credit Agreement is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions. The Credit Agreement includes covenants that, among other things, restrict MDC’s ability and the ability of its subsidiaries to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; impose limitations on dividends or other amounts from MDC’s subsidiaries; incur certain liens, sell or otherwise dispose of certain assets; enter into transactions with affiliates; 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 Credit Agreement also contains financial covenants, including a total leverage ratio, a senior leverage ratio, a fixed charge coverage ratio and a minimum earnings level (each as more fully described in the Credit Agreement). The Credit Agreement is also subject to customary events of default.

The Company is currently in compliance with all of the terms and conditions of its Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with the covenants over the next twelve months. At September 30, 2017, there were $48,607 borrowings under the Credit Agreement.
At September 30, 2017, the Company had issued $5,009 of undrawn outstanding letters of credit.

7. Share Capital
The Company’s issued and outstanding share capital is as follows:
Series 4 Convertible Preference Shares
A total of 95,000, non-voting convertible preference shares, all of which were issued and outstanding as of September 30, 2017. See Note 8 for details. There were no such shares issued and outstanding as of December 31, 2016.
Class A Common Shares (“Class A Shares”)
An unlimited number of subordinate voting shares, carrying one vote each, 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 56,310,589 and 52,798,303 Class A Shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively.
Class B Common Shares (“Class B Shares”)
An unlimited number of voting shares, carrying 20 votes each, convertible at any time at the option of the holder into one Class A share for each Class B share. There were 3,755 Class B Shares issued and outstanding as of September 30, 2017 and December 31, 2016.
8. Convertible Preference Shares
On March 7, 2017 (the “Issue Date”), the Company issued 95,000 newly created 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 $90,220, 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, effective March 7, 2017, the Company increased the size of its Board of Directors (the “Board”) to seven members and appointed one nominee designated by the Purchaser. Except as required by law, the Preference Shares do not have voting rights, and are not redeemable at the option of the Purchaser.
The holders of the Preference Shares have the right to convert their Preference Shares in whole at any time and from time to time, and in part at any time and from time to time after the ninetieth day following the original issuance date of the Preference Shares, 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 per share preference of each Preference Share is $1,000. The initial Conversion Price will be $10.00 per 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 Preference Shares’ liquidation preference accretes at 8.0% per annum, compounded quarterly until the five-year anniversary of the Issue Date. During the nine months ended September 30, 2017, the Preference Shares accreted at a monthly rate of approximately $6.84 per Preference Share, for total accretion of $4,365, bringing the aggregate liquidation preference to $99,365 as of September 30, 2017. The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc. common shareholders. See Notes 2 and 3.
Holders of the 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 Preference Shares. The 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 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 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 Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value.
9.12. Fair Value Measurements
Authoritative guidance for fair value establishes a framework for measuring fair value. 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 order to increase consistency and comparability in fair value measurements, the guidance establishes a hierarchy for observable and unobservable inputs used to measure fair value into three broad levels, which 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.
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.
23
Table of Contents
Financial LiabilitiesInstruments that are not Measured at Fair Value on a Recurring Basis
The following tables presenttable presents certain information for theour financial liabilitiesliability that are disclosedis not measured at fair value on a recurring basis at September 30, 2017as of March 31, 2024 and December 31, 2016:2023:
 March 31, 2024December 31, 2023
 Carrying
Amount		Fair ValueCarrying
Amount		Fair Value
(dollars in thousands)
5.625% Notes$1,100,000 $1,002,496 $1,100,000 $1,010,658 
 Level 1
Level 1
 September 30, 2017
December 31, 2016
 Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Liabilities: 

 

 

 
6.50% Notes due 2024$900,000
 $909,000
 $900,000
 $812,250
Long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices.prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.
The following table presents changes in deferred acquisition consideration:Financial Instruments Measured at Fair Value on a Recurring Basis
 Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
 September 30,
December 31,
 2017
2016
Beginning balance of contingent payments$224,754

$306,734
Payments (1)
(73,358)
(105,169)
Additions (2)
—

16,132
Redemption value adjustments (3)
19,233

13,930
Other (4)
(27,118) (6,412)
Foreign translation adjustment1,336

(461)
Ending balance of contingent payments$144,847

$224,754
(1)For the nine months ended September 30, 2017 and the year ended December 31, 2016, payments include $28,727 and $10,458, respectively, of deferred acquisition consideration settled through the issuance of 3,353,939 and 691,559 MDC Class A subordinate voting shares, respectively, in lieu of cash.
(2)Additions are the initial estimated deferred acquisition payments of new acquisitions and step-up transactions completed within that fiscal period.
(3)Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments, including the accretion of present value and stock-based compensation charges relating to acquisition payments that are tied to continued employment.
(4)For the year ended December 31, 2016, other is comprised of (i) $2,360 transferred to shares to be issued related to

100,000 MDC Class A subordinate voting shares to be issued contingent on specific thresholds of future earnings that management expects to be attained; and (ii) $4,052 of contingent payments eliminated through the acquisition of incremental ownership interests, see Note 4.
In addition to the above amounts, there are fixed payments of $3,421 and $4,810 for totalContingent deferred acquisition consideration of $148,268 and $229,564, which reconciles to the consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively.
The Company includes the payments of all deferred acquisition consideration in financing activities in the Company’s consolidated statement of cash flows as the Company believes these payments to be seller-related financing activities, which(Level 3 fair value measurement) is the predominant source of cash flows. The FASB recently issued new guidance regarding the classification of cash flows for contingent consideration that is effective January 1, 2018. See Note 13 for further information.
Level 3 payments relate to payments made for deferred acquisition consideration. Level 3 grants relate to contingent purchase price obligations related to acquisitions and areinitially recorded on the balance sheet at the acquisition date fair value.value and adjusted at each reporting period. The estimated liability is determined in accordance with various contractual valuation formulas that may bemodels of each business’ future performance, including revenue growth and free cash flows. These models are dependent on future events,upon 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, 2024, the discount rate asused to measure these liabilities ranged from 9.1% to 9.9%.
As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Unaudited Consolidated Balance Sheet are subject to material uncertainty.
See Note 6 of the dateNotes included herein for additional information regarding contingent deferred acquisition consideration.
As of payment. Level 3 redemption value adjustments relate to the remeasurement and change in these various contractual valuation formulas as well as adjustments of present value.
At September 30, 2017March 31, 2024 and December 31, 2016,2023, 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. Borrowings under the Credit Agreement approximate fair value due to the debt bearing fluctuating market interest rates. The Company does not disclose the fair value for equity method investments or investments held at cost as it is not practical to estimate fair value since there is no readily available market data.
Non-financial Assets and Liabilities that are Measured at Fair Value on a Non-recurringNonrecurring Basis
On a non-recurring basis, the Company usesCertain non-financial assets are measured at fair value measures when analyzing asset impairment. Long-lived assets and certain identifiableon a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurements) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are reviewednot measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. Measurements based on undiscounted cash flows are considered to be Level 3 inputs. During the fourth quarter of each year, the Company evaluates goodwill and indefinite-lived intangibles for impairment at the reporting unit level. For each acquisition, the Company performed a detailed review to identify intangible assets and a valuation is performed for all such identified assets. The Company used several market participant measurements to determine estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. The amounts allocated to assets acquired and liabilities assumed in the acquisitions were determined using Level 3 inputs. Fair value for property and equipment was based on other observable transactions for similar property and equipment. Accounts receivable represents the best estimate of balances that will ultimately be collected, which is based in part on allowance for doubtful accounts reserve criteria and an evaluationpotential impairment.
See Note 7 of the specific receivable balances.Notes included herein for additional information on right-of-use lease assets.
10. Other Income13. Supplemental Information
Stock Based Awards    
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Other income (expense)$(7) $26
 $271
 $(220)
Loss on sale of business (1)
(1,424) (800) (1,424) (800)
Gain on sale of investments (2)
168
 682
 168
 682
Foreign currency transaction gain (loss)9,912
 (5,916) 18,797
 9,868
 $8,649
 $(6,008) $17,812
 $9,530
(1) DuringStock-based compensation recognized for awards authorized under the Company’s employee stock incentive plans during the three months ended September 30, 2017,March 31, 2024 and 2023 was $12.8 million and $7.4 million, respectively. This was included as a component of stock-based compensation in Office and general expenses and Cost of services within the Unaudited Consolidated Statements of Operations.
Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell their profits interest in the subsidiary to the Company sold allbased on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards was $19.8 million and $20.3 million at March 31, 2024 and December 31, 2023, respectively, and is included as a component of Accruals and other liabilities and Other liabilities on the Unaudited Consolidated Balance Sheet. Stock-based compensation recognized for these awards was $1.7 million and $4.6 million for the three months ended March 31, 2024 and 2023, respectively. This was included as a component of stock-based compensation in Cost of services within the Unaudited Consolidated Statements of Operations.
Transfer of Accounts Receivable
The Company transfers certain of its ownership intereststrade receivable assets to third parties under certain agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
24
Table of Contents
The trade receivables transferred to the third parties were $69.8 million and $56.2 million for the three months ended March 31, 2024 and 2023, respectively. The amount collected and due to the third parties under these arrangements was $3.7 million as of March 31, 2024 and $1.8 million as of December 31, 2023. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $0.9 million and $1.0 million for the three subsidiariesmonths ended March 31, 2024 and 2023, respectively.

14. 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.
The Company had an income tax expense for the three months ended March 31, 2024 of $2.6 million (on a pre-tax income of $1.4 million resulting in recognitionan effective tax rate of 189.5%) compared to income tax expense of $0.2 million (on pre-tax loss of $2.4 million resulting in an effective tax rate of (9.8)%) for the three months ended March 31, 2023.
The difference in the effective tax rate of 189.5% in the three months ended March 31, 2024, as compared to (9.8)% in the three months ended March 31, 2023, is due to the change in the pretax income, a reduction in benefit from the disregarded entity structure, and an increase in non-deductible share-based compensation, offset by uncertain tax positions added in 2023.
The OECD (Organisation for Economic Co-operation and Development) has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, we are still evaluating the potential consequences of Pillar 2 on our longer-term financial position. In 2024, we expect to incur insignificant tax expenses in connection with Pillar 2.
Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our unaudited consolidated financial statements.
Tax Receivables Agreement
In connection with the Tax Receivable Agreement (“TRA”), the Company is required to make cash payments to Stagwell Media LP (“Stagwell Media”) equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (defined in Note 11) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA. The TRA liability is an estimate and actual amounts payable under the TRA could differ from this estimate.
There were no exchanges of Paired Units for shares of Class A Common Stock during 2024. As of March 31, 2024, the Company has recorded a TRA liability of $26.7 million, and an associated deferred tax asset, net of amortization, of $29.0 million, in connection with the exchange of Paired Units and the projected obligations under the TRA.
25
Table of Contents
15. Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. The following table presents significant related party transactions where a related party receives services from the Company:
Total Transaction ValueRevenueDue From
Related Party
Three Months Ended March 31,March 31,
2024		December 31,
2023
Services20242023
(dollars in thousands)
Marketing and advertising services (1)
  $455 and Continuous (6)
$— $694 $— $1,518 
Marketing and advertising services (2)
$3,576 and Continuous (6)
110 106 3,050 4,381 
Marketing and website development services (3)
$1,963 and
Continuous (6)
755 778 146 694 
Polling services (4)
$2,636460 89 644 160 
Polling services (5)
$1,039104 39 88 39 
Total$1,429 $1,706 $3,928 $6,792 
(1) A member of the Company's Board was the President of a client. This person retired from his position, and is no longer an employee of the client effective January 2, 2024
(2) Brands’ partners and executives either hold a key leadership position in or are on the board of directors of the client.
(3) Client has a significant interest in the Company.
(4) A family member of the Company’s Chief Executive Officer holds a key leadership position in the client.
(5) A family member of the Company’s President holds a key leadership position in the client.
(6) Certain of the contractual arrangements within these transactions were entered into for an indefinite term and are invoiced as services are provided, while others have a fixed definitive contract value.

In 2019, a Brand entered into a loan agreement with a related party who holds a minority interest in the Brand. The loan receivable of $0.4 million and $0.8 million due from the third party is included within Other current assets in the Company’s Unaudited Consolidated Balance Sheet as of March 31, 2024 and Consolidated Balance Sheet as of December 31, 2023, respectively. The Company recognized less than $0.1 million and less than $0.1 million for the three months ended March 31, 2024 and 2023, respectively, of interest income within Interest expense, net loss on saleits Unaudited Consolidated Statements of businessOperations. In addition, in 2021, the Brand entered into an arrangement to obtain sales and management services from the same third party. Under the arrangement, the Brand has incurred $0.4 million and $0.2 million of $1,424. See Note 4related party expense for further information.the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, $0.6 million and $0.6 million, respectively, was due to the third party.

In 2018, a Brand entered into an agreement to provide marketing and advertising services to a related party whose partners hold executive leadership positions in the Brand. Under the arrangement, the Brand recognized $0.2 million and $0.3 million of revenue for the three months ended March 31, 2024 and 2023, respectively. No revenue was due from the related party as of March 31, 2024 and December 31, 2023, respectively. In addition, on behalf of the related party, the Brand serves as an agent to transfer funds from one of the related party’s customers to the related party. The Brand does not receive revenue from this arrangement. No funds were due to the related party as of March 31, 2024. As of December 31, 2023, $0.7 million was due to the related party.
Effective September 30, 2016,In 2022, the Company sold allmade loans to three employees of its ownership interestsa subsidiary each in Bryan Millsthe amount of $0.9 million, together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5% per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling shareholdersinterest of 13.3% in TMA Direct. As of March 31, 2024 $2.7 million was due from the related parties and recognized a lossincluded in Other assets in the Unaudited Consolidated Balance Sheet.
26
Table of $800.Contents

(2) During the third quarter of 2017, the Company sold one investment accounted for under the cost method and recognized a gain of $168. During the third quarter of 2016, the Company sold one investment accounted for under the equity method and one investment accounted for under the cost method and recognized a gain of $682.

11.16. Segment Information
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of its operating segments is consistent with the principles detailed in ASC 280.applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with ana qualitative assessment of the qualitative characteristics set forth in ASC Topic 280-10-50.to determine if operating segments have similar operating characteristics.
The fourCODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.
The Company made changes to its internal management and reporting structure in the first quarter of 2024, resulting in a change to its reportable segments that meet(Networks). Specifically, certain agencies previously within the appropriate aggregation criteriaBrand Performance Network are now in the Integrated Agencies Network. Periods presented prior to the first quarter of 2024 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The Company has three reportable segments as follows: “Global Integrated Agencies”; “Domestic Creative Agencies”; “Specialist Communications”;“Integrated Agencies Network,” “Brand Performance Network” and “Media Services.the “Communications Network.” In addition, the Company combines and discloses those operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” This segment also includes the elimination of intercompany revenue. 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 in Note 1 and 2, respectively.throughout the Notes included herein.
•The Global Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment is comprised ofare as follows: Anomaly Alliance (Anomaly), Constellation (72andSunny, Crispin LLC, Colle McVoy, Hunter, Instrument, Redscout, Team Enterprises, Harris Insights, Left Field Labs, Movers and Shakers, and Team Epiphany), the Company’s six global, integrated operating segments with broad marketing communication capabilities, including advertising, branding, digital, social media, designDoner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, and production services, serving multinational clients around the world. The Global Integrated Agencies reportable segment includes 72andSunny, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors,Yamamoto), Code and kbs+. Theory, and National Research Group.
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 may occasionally compete with each other for new business and from time to timeor 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 four 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 and Union. 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, Hunter PR, HL Group Partners, 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 Brand Performance Network (“BPN”) is comprised of a unique single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment knownaim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands provide media solutions such as MDC Media Partners. MDC Media Partners is comprisedaudience analysis, media planning, and buying across a range of the Company’s network of stand-alone agencies with media buyingdigital and planning as their core competency, including the integrated platform Assembly. The agencies within this single operating segment share a Chief Executive Officer and Chief Financial Officer, who have operational oversight of these agencies. These agencies provide other services, including influencer marketing, content, insights & analytics, out-of-home,traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, artificial intelligence,television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Vitro, Forsman & Bodenfors, Goodstuff, Bruce Mau, digital creative & transformation consultancy Gale, B2B specialist Multiview, CX specialists Kenna, and travel media experts Ink.
•The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate barter. MDC Media Partners operates primarily in North America.
communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison brands, SKDK brands, and Targeted Victory brands.
•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 characteristicsdigital innovation group and Stagwell Marketing Cloud Group, including Maru and Epicenter, and products such as those aggregated in the reportable segments. The All Other category includes 6Degrees, Bruce Mau Design, Concentric Partners, Civilian, Gale Partners, Hello Design, Kenna, Kingsdale, Northstar Research Partners, Redscout, Relevent, Source Marketing, Team, Vitro, YamamotoARound, PRophet 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
SmartAssets.

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,
27
Table of Contents
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 March 31,
20242023
(dollars in thousands)
Revenue:
Integrated Agencies Network$352,719 $341,205 
Brand Performance Network213,962 201,928 
Communications Network93,746 66,459 
All Other9,632 12,852 
Total Revenue$670,059 $622,444 
Adjusted EBITDA:
Integrated Agencies Network$60,108 $59,859 
Brand Performance Network27,494 22,948 
Communications Network19,384 4,012 
All Other(3,986)(3,805)
Corporate(12,684)(10,792)
Total Adjusted EBITDA$90,316 $72,222 
Depreciation and amortization$(34,836)$(33,477)
Impairment and other losses(1,500)— 
Stock-based compensation(16,116)(12,004)
Deferred acquisition consideration(154)(4,088)
Other items, net(11,856)(6,420)
Total Operating Income$25,854 $16,233 
Other Income (expenses):
Interest expense, net$(20,965)$(18,189)
Foreign exchange, net(2,258)(670)
Other, net(1,267)220 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates1,364 (2,406)
Income tax expense2,585 236 
Loss before equity in earnings of non-consolidated affiliates(1,221)(2,642)
Equity in income (loss) of non-consolidated affiliates508 (227)
Net loss(713)(2,869)
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests(569)4,258 
Net income (loss) attributable to Stagwell Inc. common shareholders$(1,282)$1,389 

The Company’s long-lived assets (i.e., Right-of-use-lease assets-operating leases and Fixed asset, net) was $318.9 million ($260.4 million in the United States and $58.5 million in all other countries) as of March 31, 2024, and $332.1 million ($268.5 million in the United States and $63.6 million in all other countries) as of December 31, 2023.
28
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Revenue:       
Global Integrated Agencies$193,979
 $177,262
 $576,935
 $489,880
Domestic Creative Agencies24,173
 22,181
 67,473
 66,274
Specialist Communications40,670
 40,309
 125,470
 123,006
Media Services33,027
 34,481
 103,966
 96,681
All Other83,951
 75,021
 237,188
 219,502
Total$375,800
 $349,254
 $1,111,032
 $995,343
        
Segment operating income (loss):       
Global Integrated Agencies$19,819
 $2,873
 $33,765
 $24,316
Domestic Creative Agencies5,716
 4,688
 13,563
 14,779
Specialist Communications4,775
 11,101
 13,410
 17,860
Media Services2,421
 466
 8,618
 3,510
All Other15,213
 (22,828) 31,626
 (5,619)
Corporate(10,724) (7,051) (28,982) (32,982)
Total$37,220
 $(10,751) $72,000
 $21,864
        
Other Income (Expense):       
Other income (expense), net8,649
 (6,008) 17,812
 9,530
Interest expense and finance charges, net(16,258) (16,322) (48,309) (48,690)
Loss on redemption of notes—
 —
 —
 (33,298)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates29,611
 (33,081) 41,503
 (50,594)
Income tax expense (benefit)9,049
 (1,930) 17,659
 1,180
Income (loss) before equity in earnings of non-consolidated affiliates20,562
 (31,151) 23,844
 (51,774)
Equity in earnings of non-consolidated affiliates1,422
 70
 1,924
 9
Net income (loss)21,984
 (31,081) 25,768
 (51,765)
Net income attributable to the noncontrolling interest(3,491) (1,059) (6,588) (3,172)
Net income (loss) attributable to MDC Partners Inc.$18,493
 $(32,140) $19,180
 $(54,937)


Table of Contents
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Depreciation and amortization:       
Global Integrated Agencies$6,359
 $6,111
 $17,889
 $14,986
Domestic Creative Agencies$336
 $353
 $1,062
 $1,263
Specialist Communications$1,220
 $189
 $3,657
 $5,123
Media Services$917
 $2,338
 $2,933
 $4,437
All Other (1)
$2,165
 $31,693
 $6,511
 $36,624
Corporate$255
 $359
 $864
 $1,266
Total$11,252
 $41,043
 $32,916
 $63,699
        
(1) Includes impairment of goodwill charge of $29,631 for the three and nine months ended September 30, 2016.
        
Stock-based compensation:       
Global Integrated Agencies$3,840
 $2,890
 $9,892
 $9,030
Domestic Creative Agencies$177
 $150
 $502
 $487
Specialist Communications$659
 $564
 $2,264
 $1,556
Media Services$150
 $70
 $464
 $187
All Other$1,077
 $949
 $2,149
 $2,124
Corporate$477
 $605
 $1,599
 $2,059
Total$6,380
 $5,228
 $16,870
 $15,443
        
Capital expenditures:       
Global Integrated Agencies$1,950
 $3,003
 $17,639
 $10,703
Domestic Creative Agencies$324
 $222
 $874
 $920
Specialist Communications$206
 $56
 $673
 $2,183
Media Services$2,171
 $2,008
 $3,455
 $2,634
All Other$2,497
 $985
 $5,660
 $3,251
Corporate$1
 $—
 $4
 $32
Total$7,149
 $6,274
 $28,305
 $19,723

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.
ASee Note 4 of the Notes included herein for a summary of the Company’s revenue by geographic area, based onregion for the location in whichthree months ended March 31, 2024 and 2023.

17. Revision of previously issued Unaudited Consolidated Financial Statements for the services originated, is set forth in the following table:
 United
States
Canada
Other
Total
Revenue 

 

 

 
Three Months Ended September 30, 

 

 

 
2017$289,702
 $31,418
 $54,680
 $375,800
2016$274,506
 $30,233
 $44,515
 $349,254
Nine Months Ended September 30, 
  
  
  
2017$868,847
 $88,471
 $153,714
 $1,111,032
2016$799,696
 $92,253
 $103,394
 $995,343


12. Commitments, Contingencies, and Guarantees
Deferred Acquisition Consideration. In addition to the consideration paid by the Company in respectfirst quarter of certain of its acquisitions at closing, additional consideration may be payable, or may be potentially payable based on the achievement of certain threshold levels of earnings. See Notes 2, 4, and 9.
Options to purchase. Noncontrolling shareholders in certain subsidiaries have the right in certain circumstances to require the Company to acquire the remaining ownership interests held by them. 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 the remainder of 2017 to 2023. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.2023
The amount payable byfollowing table presents selected unaudited revised financial information for the Company in the event such rights are exercised is dependent on various valuation formulas and on future events, such as the average earnings of the relevant subsidiary through the date of exercise, the growth rate of the earnings of the relevant subsidiary during that period and, in some cases, the currency exchange rate at the date of payment.
Management estimates, assuming that the subsidiaries owned by the Company at September 30, 2017, perform over the relevant future periods at their trailing twelve-months earnings levels, that these rights, if all exercised, could require the Company, in future periods, to pay an aggregate amount of approximately $15,493 to the owners of such rights to acquire such ownership interests in the relevant subsidiaries. Of this amount, the Company is entitled, at its option, to fund approximately $202 by the issuance of share capital.
In addition, the Company is obligated under similar contractual rights to pay an aggregate amount of approximately $42,268 only upon termination of such owner’s employment with the applicable subsidiary or death.
The amount the Company would be required to pay to the noncontrolling interest holders should the Company acquire the remaining ownership interests is $2,330 less than the initial redemption value recorded in redeemable noncontrolling interests.
Included in redeemable noncontrolling interests at September 30, 2017 was $60,092 of these options to purchase because they are not within the control of the Company. The ultimate amount payable 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.
Natural Disasters. Certain of the Company’s operations are located in regions of the United States which typically are subject to hurricanes. During the ninethree months ended September 30, 2017 and 2016, these operations did not incur any 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.
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. In addition, the Company is involved in class action suits as described below.
Class Action Litigation in Canada. On August 7, 2015, Roberto Paniccia issued a Statement of Claim in the Ontario Superior Court of Justice in the City of Brantford, Ontario seeking to certify a class action suit naming the following as defendants: MDC, former CEO Miles S. Nadal, former CAO Michael C. Sabatino, CFO David Doft and BDO U.S.A. LLP. The Plaintiff alleges violations of section 138.1 of the Ontario Securities Act (and equivalent legislation in other Canadian provinces and territories) as well as common law misrepresentation based on allegedly materially false and misleading statements in the Company’s public statements, as well as omitting to disclose material facts with respect to the SEC investigation. The Company intends to continue to vigorously defend this Canadian suit on the same basis as which the U.S. class action was previously dismissed. A first case management meeting has been held. The plaintiff has served his material for leave to proceed under the Securities Act. MDC and the other defendants have served a motion to limit the scope of the proposed class definition to Canadian residents who purchased and sold shares of MDC stock on the Toronto Stock Exchange. Those motions are returnable in the fourth quarter of 2017.
Antitrust Subpoena. One of the Company’s subsidiaries received a subpoena from the U.S. Department of Justice Antitrust Division concerning the Division’s ongoing investigation of production practices in the advertising industry. The Company and its subsidiary are fully cooperating with this confidential investigation.

Commitments.  At September 30, 2017, the Company had issued $5,009 of undrawn outstanding letters of credit. In addition, the Company has commitments to fund investments in an aggregate amount of $198.

13. New Accounting Pronouncements
In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718.  This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. Amendments in this ASU will be applied prospectively to any award modified on or after the adoption date.  The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, which requires the presentation of the service cost component of the net periodic pension and postretirement benefits costs in the same line item in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of the net periodic pension and postretirement benefits costs are required to be presented as non-operating expenses in the statement of operations. This guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates step two from the two-step goodwill impairment test. Under the new guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. The Company will early adopt this guidance for our impairment test performed during 2017, and does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is intended to reduce diversity in practice regarding the classification of certain transactions in the statement of cash flows. This guidance is effective January 1, 2018 and requires a retrospective transition method. Early adoption is permitted. The Company currently classifies all cash outflows for contingent consideration as a financing activity. Upon adoption the Company is required to classify only the original estimated liability as a financing activity and any changes as an operating activity.
In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases. Topic 842 will require lessees to recognize right-to-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018 and early adoption is permitted. While not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on its total assets and liabilities with a minimal impact on equity.
In January 2016, the FASB issued ASU 2016-01,Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which will require equity investments, except equity method investments, to be measured at fair value and any changes in fair value will be recognized in results of operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is not permitted. Additionally, this guidance provides for the recognition of the cumulative effect of retrospective application of the new standard in the period of initial application. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace all existing revenue guidance under U.S GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to all annual and interim periods beginning after December 15, 2017. ASU 2014-09 provides for one of two methods of transition: (i) retrospective application to each prior period presented (Full Retrospective); or (ii) recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application (Modified Retrospective). The Company plans to apply ASU 2014-09 on the effective date of January 1, 2018, and intends to apply the Modified Retrospective method. Based on the Company’s assessment, the application of the new standard will result in a change in the timing of our revenue recognition within certain of the Company’s arrangements. Performance incentives are currently recognized in revenue when specific quantitative goals are achieved, or when the Company’s performance against qualitative goals is determined by the client. Under the new standard, the Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and recognize

such incentive over the term of the contract. While performance incentives are not material to the Company’s revenue, this will result in an acceleration of revenue recognition for certain contract incentives compared to the current method. Further, based on the Company’s initial assessment, it is expected that an input measure such as cost to cost or labor hours would be an appropriate measure of progress in the majority of situations for which over time revenue recognition is applied.
Furthermore, in certain businesses, the Company records revenue as a principal and includes certain third-party-pass-through and out-of-pocket costs, which are billed to clients31, 2023, in connection with the services provided. Inrevision detailed in Note 1 included herein. There were no changes to previously issued cash flows generated from (used by) operating, investing, or financing activities for any of the impacted periods. The quarterly interim consolidated balance sheet was only impacted by the effects of the balance sheet adjustments discussed in Note 1 of the Notes included herein. For the three months ended March 2016,31, 2023, we have included the FASB issued further guidance on principal versus agent considerations; however, our initial assessments indicateline items that such change is not expected to have a material effectwere impacted by the correction of errors originally adjusted as out-of-period in the 2023 interim financial statements.
The impact of the revision on the Company’s resultspreviously issued unaudited quarterly financial information is as follows:
Unaudited Consolidated Statements of Operations and
Unaudited Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended March 31, 2023
As reportedAdjustmentAs revised
Income tax expense$2,384 $(2,148)$236 
Loss before equity in earnings of non-consolidated affiliates(4,790)2,148 (2,642)
Net loss(5,017)2,148 (2,869)
Net loss attributable to noncontrolling and redeemable noncontrolling interests5,460 (1,202)4,258 
Net income attributable to Stagwell Inc. common shareholders443 946 1,389 
Earnings (Loss) Per Common Share
Basic0.000.010.01
Diluted(0.01)0.010.00
Other comprehensive income - foreign currency translation adjustment4,425 22 4,447 
Other comprehensive income4,425 22 4,447 
Comprehensive income (loss) for the period(592)2,170 1,578 
Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests26,723 (24,687)2,036 
Comprehensive income attributable to Stagwell Inc. common shareholders26,131 (22,517)3,614 

Unaudited Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 2023
As reportedAdjustmentAs revised
Net income attributable to Stagwell Inc. common shareholders$443 $946 $1,389 
Net income (loss) attributable to Noncontrolling Interests(2,917)1,202 (1,715)
Other comprehensive income25,688 (23,463)2,225 
Other comprehensive income (loss) attributable to Noncontrolling Interests(21,263)23,485 2,222 
Total other comprehensive income$4,425 $22 $4,447 

29
Table of operations. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition, and the related disclosure requirements.Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, referencesThe following discussion and analysis are based on and should be read in conjunction with our Unaudited Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-Q. The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-Q. The following discussion and analysis also include a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP measures are below.
In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” or “MDC” mean MDC Partnersrefer to Stagwell Inc. and its subsidiaries,direct and referencesindirect subsidiaries. References to a fiscal year means“fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 20172024 means the period beginning January 1, 2017,2024 and ending December 31, 2017)2024).

Executive Summary
Overview
Stagwell conducts its business through its networks, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s strategy is intended to challenge the industry status quo, realize returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and the non-GAAP financial measures described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by principal capability, (iv) growth from currency changes, and (v) 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 networks. These indicators may include a network’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 network’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
Revision of Previously Issued Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements during 2023, the Company identified errors in the areas of income taxes, noncontrolling interests, and accumulated other comprehensive loss related to its previously filed 2022 financial statements. The Company revised the 2022 annual financial statements in its 2023 Form 10-K. See Notes 1, 21 and 22 of the Notes in the Company’s 2023 Form 10-K for additional information regarding the correction of the errors. See Notes 1 and 17 of the Notes included herein for information regarding the revisions made to the previously issued unaudited financial statements for the first quarter of 2023.
Recent Developments
On April 3, 2024, the Company acquired What’s Next Partners (“WNP”), for 4.3 million Euros (“€”) (approximately $5 million) in cash. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of €8.5 million (approximately $9 million), partially subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of the Company's Class A common stock, par value $0.001 per share (the “Class A Common Stock”), at the Company’s discretion.
On April 5, 2024, the Company acquired PROS Agency (“PROS”), for 26.5 million Brazilian reals (“R$”) (approximately $5 million) of which R$21.2 million (approximately $4 million) was paid in cash and R$5.3 million (approximately $1 million) in 182,256 shares of Class A Common Stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of R$72.5 million (approximately $14 million), partially subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

Significant Factors Affecting our Business and Results of Operations
The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most
30
Table of Contents
significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.
Seasonality
Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year. In addition, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season.
Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted accounting principles (“GAAP”) ofin the United States of America (“U.S. GAAP”). In addition, the Company has included certain non-U.S. GAAPnon-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by U.S. GAAP and should not be construed as an alternative to other titled measures determined in accordance with U.S. GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”
Two such non-U.S. GAAP measures“Net revenue” refers to revenue excluding billable costs. The Company believes billable costs and their fluctuations are “organicnot indicative of the operating performance of its underlying business.
“Organic net revenue growth” or “organicgrowth (decline)” reflects the year-over-year change in the Company’s reported net revenue decline” that referattributable to the positiveCompany’s management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or negative results, respectively,decrease in the Company’s reported net revenue.
The net impact of subtracting bothacquisitions (divestitures) reflects the foreign exchange and acquisition (disposition) components from totalyear-over-year change in the Company’s reported net revenue growth. The acquisition (disposition) component is calculated by aggregatingattributable to the prior period revenue for any acquired businesses, less the prior period revenueimpact of any businessesall individual entities that were disposed ofacquired or divested in the current period. The organic revenue growth (decline) component reflects the constant currencyand prior year. We calculate impact of an acquisition as follows: (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 acquisitionsan entity acquired during the current year, we present the entity’s prior year net revenue effect from such acquisitionfor the same period during which we owned it in the current year as ifimpact of the acquisition had been owned duringin the equivalent periodcurrent year; and (b) for an entity acquired in the prior year, and (ii)we present the entity’s prior year net revenue for acquisitionsthe period during which we did not own the previousentity in the prior year as impact of the acquisition in the current year. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity’s prior year net revenue effect from such acquisitions as if they had been owned during that entire year orfor the same period asduring which we no longer owned it in the current reportable period, taking into account their respective pre-acquisition revenuesyear as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity’s prior year net revenue for the applicable periods and (iii)period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for dispositions,foreign currency exchange fluctuations.

The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company’s reported net revenue effect from such disposition as if they had been disposedattributable to changes in foreign currency exchange rates. We calculate the impact of duringforeign currency exchange fluctuations for the equivalentportion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The Company believes that isolatingimpact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates.

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. Adjusted EBITDA for our reportable segments is reconciled to Operating Income (Loss), as Net Income (Loss) is not a relevant reportable segment financial metric.
“Adjusted Diluted EPS” is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition activityconsideration adjustments, discrete tax items, and foreign currency impacts is an importantother items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and informative componentClass C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. The diluted weighted average shares
31
Table of Contents
outstanding include shares of Class C Common Stock as if converted 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 performanceshares of the Company’s businesses. Specifically, it represents the impact of the Company’s management oversight, investments and resources dedicatedClass A Common Stock 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.calculate Adjusted Diluted EPS.
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 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 nine months ended September 30, 2017 and 2016 and the financial condition of the Company as of September 30, 2017. This analysis should be read in conjunction with the interim condensed consolidated financial statements presented in this interim report and the annual audited consolidated financial statements and Management’s Discussion and Analysis presented in the Annual Report for the year ended December 31, 2016 as reported on the Annual Report on Amendment No. 1 on Form 10-K/A (the "Annual Report on Form 10-K/A"). All amounts are in U.S. 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 in Item 2 herein that are not considered meaningful are presented as “NM.”
Executive SummarySegments
MDC conducts its business through its network of Partner Firms, the “Advertising and Communications Group,” who provide a comprehensive array of marketing and communications services for clients both domestically and globally. The Company’s objective is to create shareholder value by building, growing and acquiring market-leading Partner Firms that deliver innovative, value-added marketing, activation, communications and strategic consulting to their clients. Management believes that shareholder value is maximized withCompany determines an operating philosophysegment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of “Perpetual Partnership”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 proven committed industry leadersa qualitative assessment to determine if operating segments have similar operating characteristics.
The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.
The Company made changes to its internal management and reporting structure in marketing communications.the first quarter of 2024, resulting in a change to its reportable segments (Networks). Specifically, certain agencies previously within the Brand Performance Network are now in the Integrated Agencies Network. Periods presented prior to the first quarter of 2024 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
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 clientsCompany has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the addition of new clients, (iv) growth by primary discipline (v) growth from currency changes, and (vi) growth from acquisitions.“Communications Network.” 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 discussed in Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements, the Company aggregates operating segments that meet the aggregation criteria detailed in ASC 280 into one of the four reportable segments and combines and discloses those operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, 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 Consolidated Financial Statements included herein and in the All Other category.The following discussion provides additional detailed disclosure for eachNote 2 of the Company’s four reportable segments, plusAudited Consolidated Financial Statements included in the All Other category, within the Advertising and Communications Group.
The four reportable segments are as follows:
Global Integrated Agencies - This 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.
Domestic Creative Agencies - This segment is comprised of four operating segments that are national advertising agencies leveraging creative capabilities at their core.
Specialist Communications Agencies - This segment is comprised of seven operating segments that are each communications agencies with core service offerings in public relations and related communications services.
Media Services - This segment is comprised of a unique single operating segment with media buying and planning as its core competency.
The All Other category consists of the Company’s remaining operating segments that provide a range of diverse marketing communication services, but are not eligible for aggregation with the reportable segments in accordance with ASC 280.2023 Form 10-K.
In addition, MDCStagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the operating segments,networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the operating segementsnetworks 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 following discussion focuses on the operating segments are allocated toperformance of the appropriate reportable segmentCompany for the three months ended March 31, 2024 and 2023 and the All Other category.
Certain Factors Affecting Our Business
Overall Factors Affecting our Business and Results of Operations.  The most significant factors include national, regional and local economic conditions, our clients’ business trends and profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the creative product that our Partner Firms offer. A client may choose to change marketing communication firms for a number of reasons, such as a change in top management and the new management wants to retain an agency that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Further, global clients are trending to consolidate the use of numerous marketing communication firms to just one or two. Another factor in a client changing firms is the agency’s campaign or work product is not providing results and client’s feel a change is in order to generate additional revenues.
Clients will generally reduce or increase their spending or outsourcing needs based on their current business trends and profitability.

Acquisitions and Dispositions. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with world class expertise and strong reputations in the industry. The Company’s corporate group provides post-acquisition support to Partner Firms in order to help accelerate growth, including in areas such as business and client development (including cross-selling), corporate communications, corporate development, talent recruitment and training, procurement, legal services, human resources, financial management and reporting, and real estate utilization, among other areas. As mostcondition of the Company’s acquisitions remainCompany as stand-alone entities post acquisition, integration is typically implemented promptly, and new Partner Firms can begin to tap into the full range of MDC’s resources immediately. Often the acquired businesses may begin to tap into certain MDC resources in the pre-acquisition period, such as talent recruitment or real estate. The Company engaged in a numberMarch 31, 2024.
32
Table of acquisition and disposition transactions during the 2009 to 2016 period, which affected revenues, expenses, operating income and net income. Additional information regarding acquisitions is provided in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements.Contents
Foreign Exchange Fluctuations. Our financial results and competitive position are affected by fluctuations in the exchange rate between the U.S. dollar and non-U.S. dollars, primarily the Canadian dollar. See also “Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange.”
Seasonality. Historically, with some exceptions, the Company generates the lowest quarterly revenue and lowest volume of media placements during the first quarter while the Company generates the highest quarterly revenues and highest volume of media placements during the fourth quarter ever year.

Results of Operations:

Three Months Ended March 31,
20242023
(dollars in thousands)
Revenue:
Integrated Agencies Network$352,719 $341,205 
Brand Performance Network213,962 201,928 
Communications Network93,746 66,459 
All Other9,632 12,852 
Total Revenue$670,059 $622,444 
Operating Income$25,854 $16,233 
Other Income (Expenses):
Interest expense, net$(20,965)$(18,189)
Foreign exchange, net(2,258)(670)
Other, net(1,267)220 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates1,364 (2,406)
Income tax expense2,585 236 
Loss before equity in earnings of non-consolidated affiliates(1,221)(2,642)
Equity in income (loss) of non-consolidated affiliates508 (227)
Net loss(713)(2,869)
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests(569)4,258 
Net income (loss) attributable to Stagwell Inc. common shareholders$(1,282)$1,389 
Reconciliation to Adjusted EBITDA:
Net income (loss) attributable to Stagwell Inc. common shareholders$(1,282)$1,389 
Non-operating items (1)
27,136 14,844 
Operating income25,854 16,233 
Depreciation and amortization34,836 33,477 
Impairment and other losses1,500 — 
Stock-based compensation16,116 12,004 
Deferred acquisition consideration154 4,088 
Other items, net11,856 6,420 
Adjusted EBITDA$90,316 $72,222 
(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income (loss) attributable to Stagwell Inc. common shareholders.
33
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Revenue:       
Global Integrated Agencies$193,979
 $177,262
 $576,935
 $489,880
Domestic Creative Agencies24,173
 22,181
 67,473
 66,274
Specialist Communications40,670
 40,309
 125,470
 123,006
Media Services33,027
 34,481
 103,966
 96,681
All Other83,951
 75,021
 237,188
 219,502
Total$375,800
 $349,254
 $1,111,032
 $995,343
        
Segment operating income (loss):       
Global Integrated Agencies$19,819
 $2,873
 $33,765
 $24,316
Domestic Creative Agencies5,716
 4,688
 13,563
 14,779
Specialist Communications4,775
 11,101
 13,410
 17,860
Media Services2,421
 466
 8,618
 3,510
All Other15,213
 (22,828) 31,626
 (5,619)
Corporate(10,724) (7,051) (28,982) (32,982)
Total$37,220
 $(10,751) $72,000
 $21,864
        
Other Income (Expense):       
Other income (expense), net8,649
 (6,008) 17,812
 9,530
Interest expense and finance charges, net(16,258) (16,322) (48,309) (48,690)
Loss on redemption of notes—
 —
 —
 (33,298)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates29,611
 (33,081) 41,503
 (50,594)
Income tax expense (benefit)9,049
 (1,930) 17,659
 1,180
Income (loss) before equity in earnings of non-consolidated affiliates20,562
 (31,151) 23,844
 (51,774)
Equity in earnings of non-consolidated affiliates1,422
 70
 1,924
 9
Net income (loss)21,984
 (31,081) 25,768
 (51,765)
Net income attributable to the noncontrolling interest(3,491) (1,059) (6,588) (3,172)
Net income (loss) attributable to MDC Partners Inc.$18,493
 (32,140) 19,180
 (54,937)


 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Depreciation and amortization:       
Global Integrated Agencies$6,359
 $6,111
 $17,889
 $14,986
Domestic Creative Agencies336
 353
 1,062
 1,263
Specialist Communications1,220
 189
 3,657
 5,123
Media Services917
 2,338
 2,933
 4,437
All Other (1)
2,165
 31,693
 6,511
 36,624
Corporate255
 359
 864
 1,266
Total$11,252
 $41,043
 $32,916
 $63,699
        
(1) Includes impairment of goodwill charge of $29,631 for the three and nine months ended September 30, 2016.
        
Stock-based compensation:       
Global Integrated Agencies$3,840
 $2,890
 $9,892
 $9,030
Domestic Creative Agencies177
 150
 502
 487
Specialist Communications659
 564
 2,264
 1,556
Media Services150
 70
 464
 187
All Other1,077
 949
 2,149
 2,124
Corporate477
 605
 1,599
 2,059
Total$6,380
 $5,228
 $16,870
 $15,443
        
Capital expenditures:       
Global Integrated Agencies$1,950
 $3,003
 $17,639
 $10,703
Domestic Creative Agencies324
 222
 874
 920
Specialist Communications206
 56
 673
 2,183
Media Services2,171
 2,008
 3,455
 2,634
All Other2,497
 985
 5,660
 3,251
Corporate1
 —
 4
 32
Total$7,149
 $6,274
 $28,305
 $19,723
THREE MONTHS ENDED MARCH 31, 2024 COMPARED TO THREE MONTHS ENDED MARCH 31, 2023

Consolidated Results of Operations

The components of operating results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Revenue$670,059 $622,444 $47,615 7.6 %
Operating Expenses
Cost of services444,526 413,898 30,628 7.4 %
Office and general expenses163,343 158,836 4,507 2.8 %
Depreciation and amortization34,836 33,477 1,359 4.1 %
Impairment and other losses1,500 — 1,500 100.0 %
$644,205 $606,211 $37,994 6.3 %
Operating Income$25,854 $16,233 $9,621 59.3 %
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Net Revenue$532,454 $521,662 $10,792 2.1 %
Billable costs137,605 100,782 36,823 36.5 %
Revenue670,059622,44447,615 7.6 %
Billable costs137,605 100,782 36,823 36.5 %
Staff costs342,157 349,613 (7,456)(2.1)%
Administrative costs67,163 68,240 (1,077)(1.6)%
Unbillable and other costs, net32,818 31,587 1,231 3.9 %
Adjusted EBITDA90,316 72,222 18,094 25.1 %
Stock-based compensation16,116 12,004 4,112 34.3 %
Depreciation and amortization34,836 33,477 1,359 4.1 %
Deferred acquisition consideration154 4,088 (3,934)(96.2)%
Impairment and other losses1,500 — 1,500 100.0 %
Other items, net11,856 6,420 5,436 84.7 %
Operating Income (1)
$25,854 $16,233 $9,621 59.3 %
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the three months ended March 31, 2024 was $375.8$670.1 million, compared to $622.4 million for the three months ended September 30, 2017, compared toMarch 31, 2023, an increase of $47.6 million.
34
Net Revenue
The components of the fluctuations in net revenue of $349.3 million for the three months ended September 30, 2016, representing an increase of $26.5 million, or 7.6%. The change in revenue was driven by revenue growth from existing Partner Firms of $27.1 million, or 7.8% and a positive foreign exchange impact of $2.6 million, or 0.8%, partially offset by a negative impact from dispositions of $3.2 million, or 0.9%.
Operating profit forMarch 31, 2024 compared to the three months ended September 30, 2017 was $37.2 million compared to an operating loss of $10.8 million forMarch 31, 2023 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended March 31, 2023Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended March 31, 2024OrganicTotal
(dollars in thousands)
Integrated Agencies Network$304,187$369$(357)$(11,429)$(11,417)$292,770(3.8)%(3.8)%
Brand Performance Network151,6521,7081,7087,49610,912162,5644.9%7.2%
Communications Network52,971(49)27314,29214,51667,48727.0%27.4%
All Other12,852(202)(1,691)(1,326)(3,219)9,633(10.3)%(25.0)%
$521,662$1,826$(67)$9,033$10,792$532,4541.7%2.1%
Component % change0.4%—%1.7%2.1%

For the three months ended September 30, 2016, representing an increase of $48.0 million. The increase in operating profit was primarily driven by an increase in operating profit in the Advertising and Communications Group of $51.6March 31, 2024, organic net revenue increased $9.0 million, partially offset by an increase in Corporate operating expenses of $3.7 million.
Net income was $22.0 million for the three months ended September 30, 2017 compared to a net loss of $31.1 million for the three months ended September 30, 2016, representing a net income increase of $53.1 million.or 1.7%. The increase was primarily attributable to an increase in operating profitpublic affairs spend with 2024 being a political campaign year and new wins in 2024, partially offset by a decrease in client spending due to budget cuts in the technology, retail, and financial sectors. The decrease in net acquisitions (divestitures) was primarily driven by the acquisitions of $48.0Team Epiphany, LLC (“Epiphany”), Movers and Shakers LLC (“Movers and Shakers”), Huskies, Ltd. (“Huskies”) and Left Field Labs LLC (“Left Field Labs”), offset by the sale of ConcentricLife (“Concentric”) in the fourth quarter of 2023.

The geographic mix in net revenues for the three months ended March 31, 2024 and 2023 was as follows:
Three Months Ended March 31,
 20242023
(dollars in thousands)
United States$432,271 $424,318 
United Kingdom37,153 32,490 
Other63,030 64,854 
Total$532,454 $521,662 
Operating Income
Operating income for the three months ended March 31, 2024 was $25.9 million, andcompared to $16.2 million for the three months ended March 31, 2023, representing an increase of $9.6 million. The change in foreign exchange gain of $15.8 million,Operating Income was primarily attributable to the increase in Revenue partially offset by an increase in income tax expenseCost of $11.0 million.
Advertisingservices, Impairment and Communications Groupother losses and Office and general expenses.
The following discussion provides additional detailed disclosure for eachincrease in Cost of services was primarily attributable to higher billable costs, commensurate with the increase in revenues, the inclusion of costs from acquired entities, partially offset by the elimination of costs of Concentric which was sold in the fourth quarter of 2023.
The increase in Office and general expenses was primarily attributable to increases in stock-based compensation and occupancy-related expenses, partially offset by a decrease in deferred acquisition consideration. Occupancy-related expenses increased primarily due to the acceleration of lease expense due to the cease-use of property associated with the Company’s four (4) reportable segments, plus “All Other,”real estate consolidation initiative.
Deferred acquisition consideration decreased $3.9 million, primarily as a result of a reduction in the fair value of certain obligations in the first quarter of 2024 versus the same period last year.
Stock-based compensation increased $4.1 million primarily attributable to an increase in the number of shares being expensed and a higher weighted average grant date fair value in the first quarter of 2024 as compared to the first quarter of 2023.
35
Impairment and other losses for the three months ended March 31, 2024 was $1.5 million. This was attributable to a charge to reduce the carrying value of a right-of-use lease asset and related leasehold improvements. The right-of-use lease asset and related leasehold improvements were related to an agency within the Advertising and Communications Group.Integrated Agencies Network.
Revenue inInterest Expense, Net
Interest expense, net for the Advertising and Communications Groupthree months ended March 31, 2024 was $375.8$21.0 million compared to $18.2 million for the three months ended September 30, 2017March 31, 2023, an increase of $2.8 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 8 of the Notes to the Unaudited Consolidated Financial Statements included herein), and a higher interest rate on amounts outstanding under the Credit Agreement.
Foreign Exchange, Net
The foreign exchange loss for the three months ended March 31, 2024 was $2.3 million, compared to revenuea loss of $349.3$0.7 million for the three months ended September 30, 2016, representing an increase of $26.5 million, or 7.6%. The change in revenue was driven by revenue growth from existing Partner Firms of $27.1 million, or 7.8%, and a positive foreign exchange impact of $2.6 million, or 0.8%, partially offset by a negative impact from dispositions of $3.2 million, or 0.9%. Revenue growth wasMarch 31, 2023, primarily attributable to net new client wins, increased spending as well as expanded scopes of services by existing clients,a loan funding originating in British Pounds and higher pass-through costs. The performance by client sector was led by growthpayable in communications, financials, food & beverage, partially offset by a decline in technology, retail, and automotive.
Revenue growth in the Advertising and Communications Group was driven by the Company’s business in the United States with growth of $15.2 million, or 5.5%, due to new business wins, increased spending as well as expanded scopes of services by existing clients, and higher pass-through costs. In Canada, revenue increased by $1.2 million, or 3.9% mostly due to a positive foreign exchange impact. Outside of the North American region, revenue growth was $10.2 million, or 22.8%, primarily driven by new client wins, increased spend from existing clients, and higher pass-through costs as we continue to extend our capabilities into new markets throughout Europe, Asia, and to a lesser degree, South America.Dollars.
The Company also utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined in Item 2. For the three months ended September 30, 2017 organic revenue growth was $27.1 million, or 7.8%, all of which pertained to Partner Firms which the Company has owned throughout each of the comparable periods presented. The other components of non-GAAP activity include a negative non-GAAP acquisition (disposition), net adjustment of $3.2 million, or 0.9%, and a positive foreign exchange impact of $2.6 million, or 0.8%.Other, Net
The components of the change in revenues for the three months ended September 30, 2017 are as follows:
    2017 Non-GAAP Activity   Change
Advertising and Communications
Group		 2016 Revenue Foreign
Exchange		 Non-GAAP Acquisitions
(Dispositions), net		 Organic
Revenue
Growth
(Decline)		 2017 Revenue Foreign
Exchange		 Non-GAAP Acquisitions
(Dispositions), net		 Organic
Revenue
Growth
(Decline)		 Total
Revenue
  (Dollars in Millions)        
United States $274.5
 $—
 $(1.2) $16.4
 $289.7
 —% (0.5)% 6.0% 5.5%
Canada 30.2
 1.3
 (0.1) —
 31.4
 4.2% (0.5)% 0.2% 3.9%
Other 44.5
 1.3
 (1.8) 10.6
 54.7
 3.0% (3.9)% 23.8% 22.8%
Total $349.3
 $2.6
 $(3.2) $27.1
 $375.8
 0.8% (0.9)% 7.8% 7.6%

The table below provides a reconciliation between the revenue in the Advertising and Communications Group from acquired businesses in the statement of operations to non-GAAP acquisitions (dispositions),Other, net for the three months ended September 30, 2017:
 Global Integrated Agencies Media Services All Other Total
 (Dollars in Millions)
GAAP revenue from 2016 acquisitions (1)$—
 $—
 $—
 $—
Foreign exchange impact—
 —
 —
 —
Contribution to non-GAAP organic revenue (growth) decline (2)
—
 —
 —
 —
Prior year revenue from dispositions(1.8) (1.2) (0.1) (3.2)
Non-GAAP acquisitions (dispositions), net$(1.8) $(1.2) $(0.1) $(3.2)
(1)Operating segments not impacted by revenue from acquired Partner Firms in the current and prior period were excluded. In addition, no acquisitions were completed during 2017. Refer to Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included herein for further information pertaining to the current year dispositions.
(2)Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company’s organic revenue growth (decline) calculation.
The geographic mix in revenues for the three months ended September 30, 2017 and 2016 is as follows:
 2017 2016
United States77.1% 78.6%
Canada8.4% 8.7%
Other14.5% 12.7%
Organic revenue growth in the Advertising and Communications GroupMarch 31, 2024 was driven by the Company’s business in the United States with growth$1.3 million of $16.4 million, or 6.0%, due to net new client wins, increased spending by existing clients, and higher pass-through costs. In Canada, organic revenue increased slightly as increased client spending was mostly offset by a decrease in pass-through costs. Organic revenue growth from outside of North America was $10.6 million, or 23.8% driven by new client wins and increased spend from existing clients as we continue to extend our capabilities into new markets throughout Europe, Asia, and to a lesser degree, South America.
The positive foreign exchange impact of $2.6 million, or 0.8%, was primarily due to the strengthening of the Canadian dollar and the Swedish Króna against the U.S. dollar.
The change in expenses as a percentage of revenue in the Advertising and Communications Group for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $375.8
   $349.3
   $26.5
 7.6 %
Operating expenses            
Cost of services sold 249.4
 66.4% 235.7
 67.5 % 13.8
 5.8 %
Office and general expenses 67.4
 17.9% 76.6
 21.9 % (9.2) (12.0)%
Depreciation and amortization 11.0
 2.9% 11.1
 3.2 % (0.1) (0.5)%
Goodwill impairment —
 —% 29.6
 8.5 % (29.6) (100.0)%
  $327.9
 87.2% $353.0
 101.1 % $(25.1) (7.1)%
Operating profit (loss) $47.9
 12.8% $(3.7) (1.1)% $51.6
 (1,395.1)%
Operating profit in the Advertising and Communications Group for the three months ended September 30, 2017 was $47.9 millionloss, compared to an operating lossincome of $3.7$0.2 million for the three months ended September 30, 2016, representing an increase

of $51.6 million. Operating margins improved from a loss margin of 1.1% in 2016 to a profit margin of 12.8% in 2017.March 31, 2023. The increase in operating profit and marginexpense was largely due toprimarily driven by a goodwill impairment of $29.6 million recognized in 2016, income attributable to deferred acquisition consideration, and decreased staff costs as a percentage of revenue, partially offset by increased direct costs as a percentage of revenue.loss on investments.
Income Tax Expense
The change in the categories of expenses as a percentage of revenue in the Advertising and Communications GroupCompany had an income tax expense for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $62.9
 16.7 % $53.4
 15.3% $9.5
 17.8 %
Staff costs (2)
 204.2
 54.3 % 198.0
 56.7% 6.2
 3.1 %
Administrative 46.3
 12.3 % 45.1
 12.9% 1.2
 2.7 %
Deferred acquisition consideration (2.5) (0.7)% 11.2
 3.2% (13.6) (122.1)%
Stock-based compensation 5.9
 1.6 % 4.6
 1.3% 1.3
 27.7 %
Depreciation and amortization 11.0
 2.9 % 11.1
 3.2% (0.1) (0.5)%
Goodwill impairment —
 — % 29.6
 8.5% (29.6) (100.0)%
Total operating expenses $327.9
 87.2 % $353.0
 101.1% $(25.1) (7.1)%
(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.
Direct costsMarch 31, 2024 of $2.6 million (on a pre-tax income of $1.4 million resulting in the Advertising and Communications Groupan effective tax rate of 189.5%) compared to income tax expense of $0.2 million (on pre-tax loss of $2.4 million resulting in an effective tax rate of (9.8)%) for the three months ended September 30, 2017 were $62.9March 31, 2023.
The difference in the effective tax rate of 189.5% in the three months ended March 31, 2024 as compared to (9.8)% in the three months ended March 31, 2023 is due to the change in pre-tax income, a reduction in benefit from the disregarded entity structure, and an increase in non-deductible share-based compensation, offset by a reduction in uncertain tax positions.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the three months ended March 31, 2024 was income of $0.6 million compared to $53.4a loss of $4.3 million for the three months ended September 30, 2016, representing an increaseMarch 31, 2023. The amounts are driven by the mix of $9.5 million, or 17.8%. income and losses derived from entities not entirely owned by the Company.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a percentageresult of revenue, direct costs increased from 15.3% in 2016the foregoing, net loss attributable to 16.7% in 2017. The increase in direct costs and as a percentage of revenue was primarily due to an increase in costs incurred on the client’s behalf from some of our Partner Firms acting as principal.
Staff costs in the Advertising and Communications GroupStagwell Inc. common shareholders for the three months ended September 30, 2017 were $204.2March 31, 2024 was $1.3 million compared to $198.0net income of $1.4 million for the three months ended September 30, 2016, representing an increaseMarch 31, 2023.
36
Goodwill impairment in the AdvertisingEarnings (Loss) Per Share
Diluted EPS and Communications GroupAdjusted Diluted EPS for the three months ended September 30, 2016 was $29.6 million, which was comprisedMarch 31, 2024 were as follows:
GAAP
Adjustments(1)
Non-GAAP
(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders$(1,506)$19,480 $17,974 
Net income attributable to Class C shareholders— 24,554 24,554 
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income$(1,506)$44,034 $42,528 
Weighted average number of common shares outstanding116,405 4,534 120,939 
Weighted average number of common Class C shares outstanding— 151,649 151,649 
Weighted average number of shares outstanding116,405 156,183 272,588 
Diluted EPS and Adjusted Diluted EPS$(0.01)$0.16 
Adjustments to Net Income (loss) (1)
Amortization$28,203 
Impairment and other losses1,500 
Stock-based compensation16,116 
Deferred acquisition consideration154 
Other items, net11,856 

57,829 
Adjusted tax expense(12,748)

45,081 
Net loss attributable to Class C shareholders(1,047)
$44,034 
Allocation of adjustments to net income (loss) 1
Net income attributable to Stagwell Inc. common shareholders$19,480 
Net income attributable to Class C shareholders25,601 
Net loss attributable to Class C shareholders(1,047)
24,554 
$44,034 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of a partial impairmentthe Executive Summary.
37
Diluted EPS and a partial impairment of goodwill of $1.7 million relating to a non-material reporting unit, all of which is reported in the All Other category. No such goodwill impairment was recognized during the three months ended September 30, 2017.
Deferred acquisition consideration in the Advertising and Communications GroupAdjusted Diluted EPS for the three months ended September 30, 2017March 31, 2023 were as follows:
GAAP
Adjustments(1)
Non-GAAP
(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders$1,389 $18,055 $19,444 
Net income (loss) attributable to Class C shareholders(1,963)22,399 20,436 
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income$(574)$40,454 $39,880 
Weighted average number of common shares outstanding128,897 — 128,897 
Weighted average number of common Class C shares outstanding160,909 — 160,909 
Weighted average number of shares outstanding289,806 — 289,806 
Diluted EPS and Adjusted Diluted EPS$— $0.14 
Adjustments to Net income (loss) (1)
Amortization$26,732 
Impairment and other losses—
Stock-based compensation12,004 
Deferred acquisition consideration4,088 
Other items, net6,420 

49,244 
Adjusted tax expense(8,790)

$40,454 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Adjusted EBITDA
Adjusted EBITDA for the three months ended March 31, 2024 was income of $2.5$90.3 million, compared to an expense of $11.2$72.2 million for the three months ended September 30, 2016,March 31, 2023, representing a changean increase of $13.6 million. $18.1 million, primarily driven by an increase in Operating Income, as discussed above.
Integrated Agencies Network
The change incomponents of operating results for the deferred acquisition consideration adjustment was primarily duethree months ended March 31, 2024 compared to the increased estimated liabilitythree months ended March 31, 2023 were as follows:
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Revenue$352,719 $341,205 $11,514 3.4 %
Operating Expenses
Cost of services240,481 227,398 13,083 5.8 %
Office and general expenses69,007 71,319 (2,312)(3.2)%
Depreciation and amortization19,381 18,950 431 2.3 %
Impairment and other losses1,500 — 1,500 100.0 %
$330,369 $317,667 $12,702 4.0 %
Operating Income$22,350 $23,538 $(1,188)(5.0)%

38
Three Months Ended March 31,

20242023Change
(dollars in thousands)
$%
Net Revenue$292,772 $304,187 $(11,415)(3.8)%
Billable costs59,947 37,018 22,929 61.9 %
Revenue352,719 341,205 11,514 3.4 %
Billable costs59,947 37,018 22,929 61.9 %
Staff costs186,534 196,165 (9,631)(4.9)%
Administrative costs30,602 31,381 (779)(2.5)%
Unbillable and other costs, net15,528 16,782 (1,254)(7.5)%
Adjusted EBITDA60,108 59,859 249 0.4 %
Stock-based compensation9,321 8,288 1,033 12.5 %
Depreciation and amortization19,381 18,950 431 2.3 %
Deferred acquisition consideration2,045 5,991 (3,946)(65.9)%
Impairment and other losses1,500 — 1,500 100.0 %
Other items, net5,511 3,092 2,419 78.2 %
Operating Income$22,350 $23,538 $(1,188)(5.0)%
Revenue
Revenue for the three months ended March 31, 2024 was $352.7 million compared to $341.2 million for the three months ended March 31, 2023, an increase of $11.5 million.
Net Revenue
The components of the fluctuations in the prior period driven by the decrease in the Company’s estimated future stock price, pertaining to an equity funded acquisition.
Stock-based compensation in the Advertising and Communications Group remained consistent at approximately 1.4% ofnet revenue for the three months ended September 30, 2016 and 2017.March 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Depreciation and amortization expense
Net Revenue - Components of ChangeChange
Three Months Ended March 31, 2023Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended March 31, 2024OrganicTotal
(dollars in thousands)
Integrated Agencies Network$304,187$369$(357)$(11,429)$(11,417)$292,770(3.8)%(3.8)%
Component % change0.1%(0.1)%(3.8)%(3.8)%
The decrease in organic net revenue was primarily attributable to lower spending due to budget cuts by large clients in the Advertisingtechnology and Communications Group remained consistent at approximately $11.0financial services sectors, and client losses during the later part of 2023 in the retail and healthcare sectors. The decrease in net acquisitions (divestitures) was primarily driven by the sale of Concentric in the fourth quarter of 2023, partially offset by the acquisitions of Epiphany, Movers and Shakers and Left Field Labs.
Operating Income
Operating income for the three months ended March 31, 2024 was $22.4 million, compared to $23.5 million for the three months ended September 30, 2016March 31, 2023, representing a decrease of $1.2 million. The change in Operating income was primarily attributable to an increase in Revenue, Cost of services, and 2017.Impairment and other losses, partially offset by a decrease in Office and general expenses.

The increase in Cost of services was primarily attributable to higher billable costs, commensurate with higher revenue, partially offset by a decrease in staff costs primarily due to the sale of Concentric in the fourth quarter of 2023 and a decrease in stock-based compensation.

The decrease in Office and general expenses was primarily attributable to a decrease in deferred acquisition consideration, and staff costs (as discussed above), partially offset by an increase in stock-based compensation.

39

Deferred acquisition consideration decreased $3.9 million, primarily as a result of a reduction in the fair value of certain obligations in the first quarter of 2024 versus the same period last year.

Stock-based compensation increased $1.0 million primarily attributable to an increase in the number of shares being expensed and weighted average grant date fair value in the first quarter of 2024 as compared to the first quarter of 2023.

Impairment and other losses for the three months ended March 31, 2024 was $1.5 million. This was attributable to a charge to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.
Global Integrated AgenciesAdjusted EBITDA increased $0.2 million, primarily driven by a decrease in Operating Income, partially offset by an increase in Other items, net, due to an increase in severance-related expenses.
Brand Performance Network
The components of operating results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Revenue$213,962 $201,928 $12,034 6.0 %
Operating Expenses
Cost of services139,787 132,048 7,739 5.9 %
Office and general expenses52,966 48,245 4,721 9.8 %
Depreciation and amortization7,514 7,937 (423)(5.3)%
$200,267 $188,230 $12,037 6.4 %
Operating Income$13,695 $13,698 $(3)— %
Three Months Ended March 31,

20242023Change
(dollars in thousands)
$%
Net Revenue$162,562 $151,652 $10,910 7.2 %
Billable costs51,400 50,276 1,124 2.2 %
Revenue213,962 201,928 12,034 6.0 %
Billable costs51,400 50,276 1,124 2.2 %
Staff costs98,431 96,060 2,371 2.5 %
Administrative costs22,071 20,931 1,140 5.4 %
Unbillable and other costs, net14,566 11,713 2,853 24.4 %
Adjusted EBITDA27,494 22,948 4,546 19.8 %
Stock-based compensation2,043 567 1,476 NM
Depreciation and amortization7,514 7,937 (423)(5.3)%
Deferred acquisition consideration(777)(1,179)402 (34.1)%
Other items, net5,019 1,925 3,094 NM
Operating Income$13,695 $13,698 $(3)— %
Revenue
Revenue infor the Global Integrated Agencies reportable segmentthree months ended March 31, 2024 was $194.0$214.0 million, compared to $201.9 million for the three months ended September 30, 2017 compared toMarch 31, 2023, an increase of $12.0 million.
40
Net Revenue
The components of the fluctuations in net revenue of $177.3 million for the three months ended September 30, 2016, representing anMarch 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended March 31, 2023Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended March 31, 2024OrganicTotal
(dollars in thousands)
Brand Performance Network$151,652$1,708$1,708$7,496$10,912$162,5644.9%7.2%
Component % change1.1%1.1%4.9%7.2%
The increase of $16.7 million, or 9.4%. The change in organic net revenue was driven by revenue growth from existing Partner Firms of $16.8 million, or 9.5%, and a positive foreign exchange impact of $1.6 million, or 0.9%, partially offset by a negative impact from dispositions of $1.8 million, or 1.0%. Revenue growth was primarily dueattributable to new business wins,clients and increased spending as well as expanded scopes of services by existing clients specifically in communications, consumer products, food and higher pass-through costs.beverage, and transportation sectors. The increase in net acquisitions was primarily driven by the acquisition of Huskies.
The change in expenses as a percentage of revenue in the Global Integrated Agencies reportable segmentOperating Income
Operating Income for the three months ended September 30, 2017 and 2016March 31, 2024 was as follows:
  2017 2016 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Revenue $194.0
   $177.3
   $16.7
 9.4 %
Operating expenses            
Cost of services sold 128.8
 66.4% 119.0
 67.1% 9.8
 8.2 %
Office and general expenses 39.0
 20.1% 49.3
 27.8% (10.3) (20.9)%
Depreciation and amortization 6.4
 3.3% 6.1
 3.4% 0.2
 4.0 %
  $174.2
 89.8% $174.4
 98.4% $(0.2) (0.1)%
Operating profit $19.8
 10.2% $2.9
 1.6% $17.0
 591.8 %
Operating profit in the Global Integrated Agencies reportable segment for the three months ended September 30, 2017 was $19.8 million compared to $2.9 million for the three months ended September 30, 2016, representing an increase of $17.0 million, or 591.8%. Operating margins improved by 860 basis points from 1.6% for 2016 to 10.2% for 2017. The increase in operating profit and margin was due to increased revenue growth, a decline in deferred acquisition consideration adjustments, and improvements in staff costs as a percentage of revenue, partially offset by increased direct costs.
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, 2017 and 2016 was as follows:
  2017 2016 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $24.5
 12.7% $15.6
 8.8% $9.0
 57.8 %
Staff costs (2)
 111.3
 57.4% 111.6
 63.0% (0.3) (0.3)%
Administrative 26.2
 13.5% 22.4
 12.6% 3.8
 17.1 %
Deferred acquisition consideration 1.9
 1.0% 15.9
 8.9% (14.0) (88.0)%
Stock-based compensation 3.8
 2.0% 2.9
 1.6% 1.0
 32.9 %
Depreciation and amortization 6.4
 3.3% 6.1
 3.4% 0.2
 4.0 %
Total operating expenses $174.2
 89.8% $174.4
 98.4% $(0.2) (0.1)%
(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.
Direct costs in the Global Integrated Agencies reportable segment for the three months ended September 30, 2017 were $24.5 million compared to $15.6 million for the three months ended September 30, 2016, representing an increase of $9.0 million, or 57.8%. As a percentage of revenue, direct costs increased from 8.8% in 2016 to 12.7% in 2017. The increase in direct costs and as a percentage of revenue was primarily due to an increase in costs incurred on certain clients’ behalf from some of our existing Partner Firms acting as principal.

Staff costs in the Global Integrated Agencies reportable segment for the three months ended September 30, 2017 were $111.3 million compared to $111.6 million for the three months ended September 30, 2016, representing a decrease of $0.3 million, or 0.3%. As a percentage of revenue, staff costs decreased from 63.0% in 2016 to 57.4% in 2017. The decrease in staff costs and as a percentage of revenue was primarily driven by revenue growth as well as savings pertaining to headcount action taken in prior periods.
Deferred acquisition consideration expense in the Global Integrated Agencies reportable segment for the three months ended September 30, 2017 was $1.9 million compared to $15.9 million for the three months ended September 30, 2016, representing a decrease of $14.0 million, or 88.0%. The decrease in expense was primarily due to the increased estimated liability in the prior period driven by the decrease in the Company’s estimated future stock price, pertaining to an equity funded acquisition.
Domestic Creative Agencies
Revenue in the Domestic Creative Agencies reportable segment was $24.2 million for the three months ended September 30, 2017 compared to revenue of $22.2 million for the three months ended September 30, 2016, representing an increase of $2.0 million, or 9.0%. The change in revenue is due to revenue growth from existing Partner Firms of $1.9 million, or 8.6% and a positive foreign exchange impact of $0.1 million, or 0.4%.
The change in expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $24.2
   $22.2
   $2.0
 9.0 %
Operating expenses            
Cost of services sold 13.4
 55.4% 12.5
 56.2% 0.9
 7.4 %
Office and general expenses 4.7
 19.5% 4.7
 21.0% 0.1
 1.2 %
Depreciation and amortization 0.3
 1.4% 0.4
 1.6% —
 (4.3)%
  $18.5
 76.4% $17.5
 78.9% $1.0
 5.5 %
Operating profit $5.7
 23.6% $4.7
 21.1% $1.0
 21.9 %
Operating profit in the Domestic Creative Agencies reportable segment for the three months ended September 30, 2017 was $5.7 million compared to $4.7 million for the three months ended September 30, 2016, representing an increase of $1.0 million, or 21.9%. Operating margins improved by 250 basis points from 21.1% in 2016 to 23.6% in 2017. The increase in operating profit and margin was due to increased revenue growth as well as improved staff cost as a percentage of revenue.
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, 2017 and 2016 was as follows:
  2017 2016 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $0.6
 2.4% $0.5
 2.4 % $—
 7.7 %
Staff costs (2)
 14.7
 60.7% 13.7
 61.9 % 0.9
 6.8 %
Administrative 2.7
 11.1% 3.0
 13.4 % (0.3) (9.5)%
Deferred acquisition consideration —
 —% (0.3) (1.2)% 0.3
 (100.0)%
Stock-based compensation 0.2
 0.7% 0.2
 0.7 % —
 18.0 %
Depreciation and amortization 0.3
 1.4% 0.4
 1.6 % —
 (4.3)%
Total operating expenses $18.5
 76.4% $17.5
 78.9 % $1.0
 5.5 %
(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.

Staff costs in the Domestic Creative Agencies reportable segment for the three months ended September 30, 2017 were $14.7$13.7 million, compared to $13.7 million for the three months ended September 30, 2016,March 31, 2023 representing no change, primarily attributable to an increase in Revenue, offset by an increase in Cost of $0.9 million, or 6.8%. As a percentageservices and Office and general expenses.
The increase in Cost of revenue,services was primarily attributable to higher billable and unbillable costs, commensurate with the increase in revenues and an increase in staff costs decreased from 61.9% in 2016 to 60.7% in 2017. As a percentage of revenue, staff costs decreased due to better leveragecost saving initiatives in 2023.
The increase in Office and general expenses was primarily attributable to an increase in occupancy-related expenses related to the acceleration of headcountlease expense due to the cease-use of property associated with the Company’s real estate consolidation initiative.
Adjusted EBITDA increased $4.5 million, primarily driven by an increase in supportOther Items, net due to the increase in occupancy-related expenses discussed above, and an increase in stock-based compensation. Stock-based compensation increased primarily due to an increase in the number of revenue growth.shares being expensed and weighted average grant date fair value in the first quarter of 2024 as compared to the first quarter of 2023.
Specialist
Communications Network
The components of operating results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Revenue$93,746 $66,459 $27,287 41.1 %
Operating Expenses
Cost of services58,504 46,881 11,623 24.8 %
Office and general expenses16,075 17,217 (1,142)(6.6)%
Depreciation and amortization2,894 2,713 181 6.7 %
$77,473 $66,811 $10,662 16.0 %
Operating Income (Loss)$16,273 $(352)$16,625 NM
41

Three Months Ended March 31,

20242023Change
(dollars in thousands)
$%
Net Revenue$67,488 $52,971 $14,517 27.4 %
Billable costs26,258 13,488 12,770 94.7 %
Revenue93,746 66,459 27,287 41.1 %
Billable costs26,258 13,488 12,770 94.7 %
Staff costs39,264 40,077 (813)(2.0)%
Administrative costs8,704 8,756 (52)(0.6)%
Unbillable and other costs, net136 126 10 7.9 %
Adjusted EBITDA19,384 4,012 15,372 NM
Stock-based compensation1,049 507 542 NM
Depreciation and amortization2,894 2,713 181 6.7 %
Deferred acquisition consideration(1,114)539 (1,653)NM
Other items, net282 605 (323)(53.4)%
Operating Income (Loss)$16,273 $(352)$16,625 NM
Revenue
Revenue infor the Specialist Communications reportable segmentthree months ended March 31, 2024 was $40.7$93.7 million, compared to $66.5 million for the three months ended September 30, 2017March 31, 2023, an increase of $27.3 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended March 31, 2023Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended March 31, 2024OrganicTotal
(dollars in thousands)
Communications Network$52,971$(49)$273$14,292$14,516$67,48727.0%27.4%
Component % change(0.1)%0.5%27.0%27.4%
The increase in organic net revenue of $40.3was primarily attributable to new clients in the healthcare and consumer products sectors, and increased spending by existing clients in the public affairs sector as 2024 is a political campaign year.
Operating Income (Loss)
Operating income (loss) for the three months ended March 31, 2024 was $16.3 million compared to $0.4 million for the three months ended September 30, 2016,March 31, 2023, representing an increase of $0.4 million, or 0.9%.$16.6 million. The change in revenue is dueOperating income (loss) was primarily attributable to revenue growth from Partner Firmsan increase in Revenue and Cost of $0.3 million, or 0.6%services, and a positive foreign exchange impact of $0.1 million, or 0.3%.decrease in Office and general expenses.
The changeincrease in Cost of services was primarily attributable to an increase in billable costs, commensurate with higher revenue, partially offset by a decrease in staff costs primarily attributable to restructuring costs.
The decrease in Office and general expenses aswas primarily attributable to deferred acquisition consideration.
Deferred acquisition consideration decreased $1.7 million, primarily attributable to a percentage of revenuereduction in the Specialist Communications reportable segmentfair value of the deferred acquisition consideration liability associated with a certain Brand.
Adjusted EBITDA increased $15.4 million, primarily driven by an increase in Operating Income.
42
All Other
The components of operating results for the three months ended September 30, 2017 and 2016 wasMarch 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Revenue$9,632 $12,852 $(3,220)(25.1)%
Operating Expenses
Cost of services5,754 7,680 (1,926)(25.1)%
Office and general expenses8,136 7,746 390 5.0 %
Depreciation and amortization2,421 1,948 473 24.3 %
$16,311 $17,374 $(1,063)(6.1)%
Operating Loss$(6,679)$(4,522)$(2,157)47.7 %
  2017 2016 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $40.7
   $40.3
   $0.4
 0.9 %
Operating expenses            
Cost of services sold 26.6
 65.4% 27.6
 68.4% (1.0) (3.6)%
Office and general expenses 8.1
 19.9% 1.4
 3.6% 6.7
 464.7 %
Depreciation and amortization 1.2
 3.0% 0.2
 0.5% 1.0
 549.5 %
  $35.9
 88.3% $29.2
 72.5% $6.7
 22.9 %
Operating profit $4.8
 11.7% $11.1
 27.5% $(6.3) (57.0)%

Operating profit in the Specialist Communications reportable segment
Three Months Ended March 31,
20242023Change
(dollars in thousands)
$%
Net Revenue$9,632 $12,852 $(3,220)(25.1)%
Revenue (1)
9,632 12,852 (3,220)(25.1)%
Staff costs7,821 10,487 (2,666)(25.4)%
Administrative costs (1)
3,209 3,195 14 0.4 %
Unbillable and other costs, net2,588 2,975 (387)(13.0)%
Adjusted EBITDA(3,986)(3,805)(181)4.8 %
Stock-based compensation98 32 66 NM
Depreciation and amortization2,421 1,948 473 24.3 %
Deferred acquisition consideration— (1,263)1,263 (100.0)%
Other items, net174 — 174 100.0 %
Operating Loss$(6,679)$(4,522)$(2,157)47.7 %
(1)All Other Revenue and Administrative costs include approximately $6.0 million of eliminations of intercompany services.
Revenue
Revenue for the three months ended September 30, 2017March 31, 2024 was $4.8$9.6 million, compared to $11.1$12.9 million for the three months ended September 30, 2016, representingMarch 31, 2023, a decrease of $6.3 million, or 57.0%. Operating margins declined from 27.5% in 2016 to 11.7% in 2017. The decrease in operating profit and margin was primarily due to the change in the deferred acquisition consideration adjustment.$3.2 million.

43
Net Revenue
The changecomponents of the fluctuations in the categories of expenses as a percentage ofnet revenue in the Specialist Communications reportable segment for the three months ended September 30, 2017 and 2016 wasMarch 31, 2024 compared to the three months ended March 31, 2023 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended March 31, 2023Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended March 31, 2024OrganicTotal
(dollars in thousands)
All Other$12,852$(202)$(1,691)$(1,326)$(3,219)$9,633(10.3)%(25.0)%
Component % change(1.6)%(13.2)%(10.3)%(25.0)%
  2017 2016 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $8.9
 21.9% $9.5
 23.6 % $(0.6) (6.1)%
Staff costs (2)
 19.7
 48.3% 19.3
 47.9 % 0.4
 1.9 %
Administrative 5.3
 13.0% 5.5
 13.8 % (0.3) (4.6)%
Deferred acquisition consideration 0.1
 0.3% (5.9) (14.6)% 6.0
 (102.3)%
Stock-based compensation 0.7
 1.6% 0.6
 1.4 % 0.1
 16.6 %
Depreciation and amortization 1.2
 3.0% 0.2
 0.5 % 1.0
 549.5 %
Total operating expenses $35.9
 88.3% $29.2
 72.5 % $6.7
 22.9 %
(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.
Deferred acquisition considerationThe decrease in organic net revenue was primarily attributable to budget cuts and client losses from clients in the Specialist Communications reportable segmentfood and beverage, travel and transportation, and technology sectors.
Operating Loss
Operating Loss for the three months ended September 30, 2017March 31, 2024 was an expense of $0.1$6.7 million compared to income of $5.9$4.5 million for the three months ended September 30, 2016,March 31, 2023, representing a changean increase of $6.0 million, or 102.3%.$2.2 million. The change in the deferred acquisition consideration adjustmentOperating Loss was dueprimarily attributable to a decrease in Revenue, partially offset by a decrease in Cost of services.
The decrease in Cost of Services was primarily attributable to the aggregate under-performancederecognition of certain Partner Firmsnoncontrolling interest in 2016the first quarter of 2024.
Adjusted EBITDA decreased $0.2 million, primarily driven by an increase in Operating Loss, as discussed above.
Corporate
The components of operating results for the three months ended March 31, 2024 compared to forecasted expectations.the three months ended March 31, 2023 were as follows:

Three Months Ended March 31,

20242023Change
(dollars in thousands)
$%
Staff costs$10,107 $6,824 $3,283 48.1 %
Administrative costs2,577 3,977 (1,400)(35.2)%
Unbillable and other costs, net— (9)9 (100.0)%
Adjusted EBITDA(12,684)(10,792)(1,892)17.5 %
Stock-based compensation3,605 2,610 995 38.1 %
Depreciation and amortization2,626 1,929 697 36.1 %
Other items, net870 798 72 9.0 %
Operating Loss$(19,785)$(16,129)$(3,656)22.7 %
Media Services
Revenue inOperating Loss for the Media Services reportable segmentthree months ended March 31, 2024 was $33.0$19.8 million compared to $16.1 million for the three months ended September 30, 2017 compared to revenue of $34.5 million for the three months ended September 30, 2016, representing a decrease of $1.5 million, or 4.2%. The change in revenue was due to a negative impact from disposition of $1.2 million, or 3.6%, as well as revenue decline from our existing Partner Firms of $0.3 million, or 0.7%.
The change in expenses as a percentage of revenue in the Media Services reportable segment for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $33.0
   $34.5
   $(1.5) (4.2)%
Operating expenses            
Cost of services sold 21.7
 65.6% 24.8
 72.0% (3.2) (12.7)%
Office and general expenses 8.0
 24.3% 6.9
 19.9% 1.2
 17.0 %
Depreciation and amortization 0.9
 2.8% 2.3
 6.8% (1.4) (60.8)%
  $30.6
 92.7% $34.0
 98.6% $(3.4) (10.0)%
Operating profit $2.4
 7.3% $0.5
 1.4% $2.0
 418.6 %
Operating profit in the Media Services reportable segment for the three months ended September 30, 2017 was $2.4 million compared to $0.5 million for the three months ended September 30, 2016,March 31, 2023, representing an increase of $2.0 million, or 418.6%. Operating margins improved by 590 basis points from 1.4% in 2016 to 7.3% in 2017.$3.7 million. The increase in operating profit and marginOperating Loss was dueprimarily attributable to decreased administrativean increase in staff costs, and depreciation and amortization, partially offset by a decline in revenue.
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, 2017 and 2016 was as follows:
  2017 2016 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $8.3
 25.1% $7.9
 22.9% $0.4
 5.1 %
Staff costs (2)
 16.8
 50.9% 17.2
 50.0% (0.4) (2.4)%
Administrative 4.3
 13.0% 6.3
 18.3% (2.0) (31.8)%
Deferred acquisition consideration 0.1
 0.3% 0.2
 0.5% (0.1) (31.5)%
Stock-based compensation 0.2
 0.5% 0.1
 0.2% 0.1
 111.3 %
Depreciation and amortization 0.9
 2.8% 2.3
 6.8% (1.4) (60.8)%
Total operating expenses $30.6
 92.7% $34.0
 98.6% $(3.4) (10.0)%
(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.
Administrative costs in the Media Services reportable segment for the three months ended September 30, 2017 were $4.3 million compared to $6.3 million for the three months ended September 30, 2016, representing a decrease of $2.0 million, or 31.8%. The decrease in administrative costs.
Staff costs was dueincreased by $3.3 million primarily as a result of a health insurance benefit recognized in the first quarter of 2023.
Administrative costs decreased by $1.4 million primarily attributable to a decreasereduction in outside professional, servicesconsulting and legal fees as well as occupancy cost savings realized from real estate consolidation initiatives.
Depreciation and amortization expense in the Media Services reportable segment for the three months ended September 30, 2017 was $0.9 million compared to $2.3 million for the three months ended September 30, 2016, representing a decrease of $1.4 million, or 60.8%. The decrease was primarily due to lower amortization from intangibles related to prior period acquisitions.


All Other
Revenue in the All Other category was $84.0 million for the three months ended September 30, 2017 compared to revenue of $75.0 million for the three months ended September 30, 2016, representing an increase of $8.9 million, or 11.9%. The change in revenue is due to revenue growth from existing Partner Firms of $8.2 million, or 11.1%, and a positive foreign exchange impact of $0.8 million, or 1.1%, partially offset by a negative impact from dispositions of $0.1 million, or 0.2%.
The change in expenses as a percentage of revenue in the All Other category for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $84.0
   $75.0
   $8.9
 11.9 %
Operating expenses            
Cost of services sold 59.0
 70.2% 51.8
 69.0 % 7.2
 13.8 %
Office and general expenses 7.6
 9.1% 14.4
 19.1 % (6.8) (47.0)%
Depreciation and amortization 2.2
 2.6% 2.1
 2.7 % 0.1
 5.1 %
Goodwill impairment —
 —% 29.6
 39.5 % (29.6) (100.0)%
  $68.7
 81.9% $97.8
 130.4 % $(29.1) (29.7)%
Operating profit (loss) $15.2
 18.1% $(22.8) (30.4)% $38.0
 (166.6)%
Operating profit in the All Other category for the three months ended September 30, 2017 was $15.2 million compared to a loss of $22.8 million for the three months ended September 30, 2016, representing an increase of $38.0 million. Operating margins improved from a loss margin of 30.4% in 2016 to a profit margin of 18.1% in 2017. The increase in operating profit and margin was largely due to a goodwill impairment recognized in 2016 and a change in the deferred acquisition consideration adjustment, partially offset by an increase in staff costs.occupancy related expenses.
The change in the categories ofOccupancy-related expenses as a percentage of revenue in the All Other category for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Thousands)
Direct costs (1)
 $20.5
 24.5 % $19.9
 26.5% $0.7
 3.4 %
Staff costs (2)
 41.7
 49.7 % 36.1
 48.2% 5.6
 15.4 %
Administrative 7.9
 9.4 % 7.9
 10.5% (0.1) (0.7)%
Deferred acquisition consideration (4.6) (5.5)% 1.3
 1.7% (5.9) (459.1)%
Stock-based compensation 1.1
 1.3 % 1.0
 1.3% 0.1
 13.5 %
Depreciation and amortization 2.2
 2.6 % 2.1
 2.7% 0.1
 5.1 %
Goodwill impairment —
 — % 29.6
 39.5% (29.6) (100.0)%
Total operating expenses $68.7
 81.9 % $97.8
 130.4% $(29.1) (29.7)%
(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.
Goodwill impairment in the All Other category for the three months ended September 30, 2016 was $29.6 million, which was comprised of a partial impairment of goodwill of $27.9 million relating to an experiential reporting unit and a partial impairment of goodwill of $1.7 million relating to a non-material reporting unit. No such goodwill impairment was recognized during the three months ended September 30, 2017.
Deferred acquisition consideration in the All Other category for the three months ended September 30, 2017 was income of $4.6 million compared to an expense of $1.3 million for the three months ended September 30, 2016, representing a change of

$5.9 million. The change was primarily due to aggregate under performance of certain Partner Firms as compared to forecasted expectations in the current period.
Staff costs in the All Other category for the three months ended September 30, 2017 were $41.7 million compared to $36.1 million for the three months ended September 30, 2016, representing an increase of $5.6 million, or 15.4%. As a percentage of revenue, staff costs increased from 48.2% in 2016 to 49.7% in 2017. The increase in staff costs was primarily due to higher headcount at certain Partner Firms to support growth of their business.
Corporate
The change in operating expenses for Corporate for the three months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Variance
Corporate $ $ $ %
  (Dollars in Millions)
Staff costs (1)
 $5.4
 $6.0
 $(0.6) (9.2)%
Administrative 4.6
 0.1
 4.5
 4,016.2 %
Stock-based compensation 0.5
 0.6
 (0.1) (21.0)%
Depreciation and amortization 0.3
 0.4
 (0.1) (29.0)%
Total operating expenses $10.7
 $7.1
 $3.7
 52.1 %
(1)Excludes stock-based compensation.
Total operating expenses for Corporate for the three months ended September 30, 2017 were $10.7 million compared to $7.1 million for the three months ended September 30, 2016, representing an increase of $3.7 million, or 52.1%.
Staff costs for Corporate for the three months ended September 30, 2017 were $5.4 million compared to $6.0 million for the three months ended September 30, 2016, representing a decrease of $0.6 million, or 9.2%.
Administrative costs for Corporate for the three months ended September 30, 2017 were $4.6 million compared to $0.1 million for the three months ended September 30, 2016, representing an increase of $4.5 million. This increase was primarily related to insurance proceeds of $3.2 million received by the Company in the prior period relating to the class action litigation and the completed SEC investigation, and an increase in professional fees of $1.3 million, inclusive of fees related to the implementation of ASC 606, Revenue from Contracts with Customers, which is effective January 1, 2018. These incremental items were offset by a reduction in current staff and administrative costs.
Other, Net
Other, net, for the three months ended September 30, 2017 was income of $8.6 million compared to an expense of $6.0 million for the three months ended September 30, 2016, representing an increase in income of $14.6 million. The increase was primarily related to an unrealized foreign exchange gain of $9.9 million in 2017 compared to an unrealized foreign exchange loss of $5.9 million in 2016. The foreign exchange gain in 2017 primarily relates to U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company and was driven by the depreciation of the U.S. dollar against the Canadian dollar in the period.
Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the three months ended September 30, 2017 was $16.3 million compared to $16.3 million for the three months ended September 30, 2016, representing a decrease of $0.1 million. The decrease was primarily due to lower incremental borrowings under the Company’s revolving Credit Agreement in comparison to the prior period. See Note 6 for additional information on the Wells Fargo Credit Agreement.
Income Tax Expense (Benefit)
Income tax expense for the three months ended September 30, 2017 was $9.0 million compared to a benefit of $1.9 million for the three months ended September 30, 2016, representing an expense increase of $10.9 million. This increase in expense was attributable to the tax exposure of certain jurisdictions as the Company’s businesses were in a profitable position in comparison to the prior period. In addition, for both periods the Company’s effective tax rate was impacted by losses in certain tax jurisdictions where a valuation allowance was deemed necessary.
Equity in Earnings of Non-Consolidated Affiliates
Equity in earnings of non-consolidated affiliates represents the income attributable to equity-accounted affiliate operations. The Company recorded income of $1.4 million for the three months ended September 30, 2017 compared to income of $0.1 million for the three months ended September 30, 2016, representing an increase of $1.3 million.

Noncontrolling Interests
The effect of noncontrolling interests for the three months ended September 30, 2017 was $3.5 million compared to $1.1 million for the three months ended September 30, 2016, representing an increase of $2.4 million. This increase was attributable to the noncontrolling interests of certain Partner Firms that attained the right to distribution of earnings in the current period.

Net Income (Loss) Attributable to MDC Partners Inc. Common Shareholders
As a result of the foregoing, net income attributable to MDC Partners Inc. common shareholders for the three months ended September 30, 2017 was $16.5 million, or $0.24 per diluted share, compared to net loss attributable to MDC Partners Inc. common shareholders of $32.1 million, or $0.62 per diluted share, for the three months ended September 30, 2016.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Revenue was $1.1 billion for the nine months ended September 30, 2017 compared to revenue of $1.0 billion for the nine months ended September 30, 2016, representing an increase of $115.7 million, or 11.6%. The change in revenue was driven by revenue growth from existing Partner Firms of $78.7 million, or 7.9%, partially offset by a negative foreign exchange impact of $2.0 million, or 0.2%. Revenue from acquired Partner Firms was $43.5 million, or 4.4%, partially offset by a negative impact from dispositions of $4.5 million, or 0.5%.
Operating profit for the nine months ended September 30, 2017 was $72.0 million compared to operating profit of $21.9 million for the nine months ended September 30, 2016, representing an increase of $50.1 million. The increase in operating profit was primarily driven by an increase in operating profit in the Advertising and Communications Group of $46.1 million as well as a decrease of Corporate operating expenses of $4.0 million.
Net income was $25.8 million for the nine months ended September 30, 2017 compared to a net loss of $51.8 million for the nine months ended September 30, 2016. The increase in net income of $77.5 million was primarily due to an increase in operating profit of $50.1 million, a loss on redemption of notes of $33.3 million recognized in 2016, and an increase in foreign exchange gain of $8.9 million, partially offset by an increase in tax expense of $16.5 million.
Advertising and Communications Group
The following discussion provides additional detailed disclosure for each of the Company’s four (4) reportable segments, plus “All Other,” within the Advertising and Communications Group.
Revenue in the Advertising and Communications Group was $1.1 billion for the nine months ended September 30, 2017 compared to revenue of $1.0 billion for the nine months ended September 30, 2016, representing an increase of $115.7 million, or 11.6%. The change in revenue was driven by revenue growth from existing Partner Firms of $78.7 million, or 7.9%, partially offset by a negative foreign exchange impact of $2.0 million, or 0.2%. Revenue from acquired Partner Firms was $43.5 million, or 4.4%, partially offset by a negative impact from dispositions of $4.5 million, or 0.5%. Revenue growth was attributable to net new client wins, increased spending as well as expanded scopes of services by existing clients, and increased pass-through costs. There was broad based growth by client sector, with particular strength in communications, food & beverage, financials, and consumer products, partially offset by a decline in technology.
Revenue growth was driven by the Company’s business in the United States with growth of $69.2 million, or 8.6% due to new business wins, increased spending as well as expanded scopes of services by existing clients, and increased pass-through costs. In Canada, revenue declined $3.8 million, or 4.1%, mostly due to lower pass-through costs. Outside of the North American region, revenue growth was $50.3 million, or 48.7%, primarily consisting of contributions from acquired Partner Firms of $43.5 million, or 42.1%, partially offset by a negative impact from dispositions of $1.8 million, or 1.7%. Revenue contributions from existing Partner Firms consisted of revenue growth of $11.2 million, or 10.8%, due to new business wins, increased spending, and higher pass-through costs, partially offset by a negative impact from foreign exchange of $2.6 million, or 2.5%.
The Company also utilizes non-GAAP metrics called organic revenue growth (decline) and non-GAAP acquisitions (dispositions), net, as defined in Item 2. For the nine months ended September 30, 2017, organic revenue growth was $83.6 million, or 8.4%, of which $78.6 million pertained to Partner Firms which the Company has held throughout each of the comparable periods presented, with the remaining $4.9 million generated through acquired Partner Firms. The other components of non-GAAP activity include non-GAAP acquisition (disposition), net adjustments of $36.5 million, or 3.7%, and a negative foreign exchange impact of $4.4 million, or 0.4%.
The components of the change in revenues by geography in the Advertising and Communications Group for the nine months ended September 30, 2017 are as follows:
    2017 Non-GAAP Activity   Change
Advertising and Communications
Group
 2016 Revenue 
Foreign
Exchange
 Non-GAAP Acquisitions (Dispositions), net 
Organic
Revenue
Growth
(Decline)
 2017 Revenue 
Foreign
Exchange
 Non-GAAP Acquisitions (Dispositions), net 
Organic
Revenue
Growth
(Decline)
 
Total
Revenue
  (Dollars in Millions)        
United States $799.7
 $—
 $(1.2) $70.4
 $868.8
 — % (0.2)% 8.8 % 8.6 %
Canada 92.3
 0.7
 (1.5) (2.9) 88.5
 0.7 % (1.6)% (3.2)% (4.1)%
Other 103.4
 (5.0) 39.2
 16.1
 153.7
 (4.9)% 37.9 % 15.6 % 48.7 %
Total $995.3
 $(4.4) $36.5
 $83.6
 $1,111.0
 (0.4)% 3.7 % 8.4 % 11.6 %

The below is a reconciliation between the Acquisitions (Dispositions), net to revenue from acquired businesses in the statement of operations for the nine months ended September 30, 2017:
 Global Integrated Agencies Media Services All Other Total
 (Dollars in Millions)
GAAP revenue from 2016 acquisitions (1)$43.5
 $—
 $—
 $43.5
Foreign exchange impact2.4
 —
 —
 2.4
Contribution to organic revenue (growth) decline (2)(4.9) —
 —
 (4.9)
Prior year revenue from dispositions(1.8) (1.2) (1.5) (4.5)
Non-GAAP acquisitions (dispositions), net$39.2
 $(1.2) $(1.5) $36.5
(1)Operating segments not impacted by revenue from acquired Partner Firms in the current and prior period were excluded. In addition, no acquisitions were completed during 2017. Refer to Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included herein for further information pertaining to the current year dispositions.
(2)Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company’s organic revenue growth (decline) calculation.
The geographic mix in revenues in the Advertising and Communications Group for the nine months ended September 30, 2017 and 2016 are as follows:
 2017 2016
United States78.2% 80.3%
Canada8.0% 9.3%
Other13.8% 10.4%
Organic revenue growth in the Advertising and Communications Group was driven by the Company’s business in the United States with growth of $70.4 million, or 8.8%, due to new business wins, increased spending as well as expanded scopes of services by existing clients, and higher pass-through costs. In Canada, organic revenue declined $2.9 million, or 3.2%, due to a decrease in pass-through costs. Organic revenue growth from outside of North America was $16.1 million, or 15.6%, consisting of $4.9 million from acquired Partner Firms in addition to contributions from positive net new business from existing Partner Firms.
The adverse foreign exchange impact of $4.4 million, or 0.4%, was primarily due to the weakeningcommencement of the British Pound and the Swedish Króna against the U.S. dollar.
The change in expenses as a percentage of revenue in the Advertising and Communications Group for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Advertising and Communications Group $ 
% of
Revenue
 $ 
% of
Revenue
 $ %
  (Dollars in Millions)
Revenue $1,111.0
   $995.3
   $115.7
 11.6 %
Operating Expenses            
Cost of services sold 754.8
 67.9% 675.9
 67.9% 78.9
 11.7 %
Office and general expenses 223.2
 20.1% 202.1
 20.3% 21.1
 10.4 %
Depreciation and amortization 32.1
 2.9% 32.8
 3.3% (0.8) (2.3)%
Goodwill impairment —
 —% 29.6
 3.0% (29.6) (100.0)%
  $1,010.0
 90.9% $940.5
 94.5% $69.6
 7.4 %
Operating profit $101.0
 9.1% $54.8
 5.5% $46.1
 84.1 %
Operating profit in the Advertising and Communications Group for the nine months ended September 30, 2017 was $101.0 million compared to $54.8 million for the nine months ended September 30, 2016, representing an increase of $46.1 million, or 84.1%. Operating margins improved by 360 basis points from 5.5% in 2016 to 9.1% in 2017. The increase in operating profit and

margin was largely due to a goodwill impairment of $29.6 million recognized in 2016, a decrease in staff costs as a percentage of revenue, and a reduction deferred acquisition consideration, partially offset by an increase in direct costs.
The change in the categories of expenses as a percentage of revenue in the Advertising and Communications Group for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Advertising and Communications Group $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $192.8
 17.3% $146.2
 14.7% $46.5
 31.8 %
Staff costs (2)
 615.8
 55.4% 572.0
 57.5% 43.8
 7.7 %
Administrative 140.9
 12.7% 129.3
 13.0% 11.6
 9.0 %
Deferred acquisition consideration 13.3
 1.2% 17.2
 1.7% (3.9) (22.7)%
Stock-based compensation 15.3
 1.4% 13.4
 1.3% 1.9
 14.1 %
Depreciation and amortization 32.1
 2.9% 32.8
 3.3% (0.8) (2.3)%
Goodwill impairment —
 —% 29.6
 3.0% (29.6) (100.0)%
Total operating expenses $1,010.0
 90.9% $940.5
 94.5% $69.6
 7.4 %
(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 in the Advertising and Communications Group for the nine months ended September 30, 2017 were $192.8 million compared to $146.2 million for the nine months ended September 30, 2016, representing an increase of $46.5 million, or 31.8%. As a percentage of revenue, direct costs increased from 14.7% in 2016 to 17.3% in 2017. The increase in direct costs and as a percentage of revenue was primarily due to contributions from an acquired Partner Firm which has a higher direct cost to revenue ratio in addition to an increase in costs incurred on the client’s behalf from some of our existing Partner Firms acting as principal.
Staff costs in the Advertising and Communications Group for the nine months ended September 30, 2017 were $615.8 million compared to $572.0 million for the nine months ended September 30, 2016, representing an increase of $43.8 million, or 7.7%. The increase in staff costs was due to increased headcount driven by certain Partner Firms to support the growth of their businesses as well as additional contributions from acquired Parter Firms. As a percentage of revenue, staff costs decreased from 57.5% in 2016 to 55.4% in 2017. The decrease in staff costs was primarily driven by revenue growth as well as savings pertaining to headcount action taken in prior periods.
Administrative costs in the Advertising and Communications Group for the nine months ended September 30, 2017 were $140.9 million compared to $129.3 million, representing an increase of $11.6 million, or 9.0%. The increase was primarily due to increases in occupancy costs incurred to support the growth and expansion of certain Partner Firms and contributions from acquired Partner Firms, partially offset by occupancy cost savings realized from real estate consolidation initiatives at other Partner Firms. As a percentage of revenue, administrative costs were 13.0% in 2016 compared to 12.7% in 2017.
Goodwill impairment in the Advertising and Communications Group for the nine months ended September 30, 2016 was $29.6 million, which was comprised of a partial impairment of goodwill of $27.9 million relating to an experiential reporting unit and a partial impairment of goodwill of $1.7 million relating to a non-material reporting unit. No such goodwill impairment was recognized during the nine months ended September 30, 2017.
Deferred acquisition consideration in the Advertising and Communications Group was an expense of $13.3 million for the nine months ended September 30, 2017 compared to expense of $17.2 million for the nine months ended September 30, 2016, representing a decrease of $3.9 million, or 22.7%. The decrease in the deferred acquisition consideration expense pertained to the increased estimated liability in the prior period driven by the decrease in the Company’s stock price pertaining to an acquired Partner Firm in which the Company used its equity as purchase consideration, partially offset by the finalization of future payments pertaining to an acquisition completed in 2016 and increased expenses pertaining to amendments to purchase agreements of previously acquired incremental ownership interest entered into during 2017.
Stock-based compensation in the Advertising and Communications Group was $15.3 million for the nine months ended September 30, 2017 compared to $13.4 million for the nine months ended September 30, 2016, representing an increase of $1.9 million, or 14.1%. As a percentage of revenue, stock-based compensation remained consistent at approximately 1.4%.

Depreciation and amortization expense in the Advertising and Communications Group for the nine months ended September 30, 2017 was $32.1 million compared to $32.8 million for the nine months ended September 30, 2016, representing a decrease of $0.8 million, or 2.3%. The decrease was primarily due to lower amortization from intangibles related to prior period acquisitions.
Global Integrated Agencies
Revenue in the Global Integrated Agencies reportable segment was $576.9 million for the nine months ended September 30, 2017 compared to revenue of $489.9 million for the nine months ended September 30, 2016, representing an increase of $87.1 million, or 17.8%. The change in revenue included revenue from acquired Partner Firms of $43.5 million, or 8.9%, partially offset by a negative impact from dispositions of $1.7 million, or 0.4%. Revenue contributions from existing Partner Firms consisted of revenue growth of $46.8 million, or 9.6%, partially offset by a negative foreign exchange impact of $1.5 million, or 0.3%. Revenue growth was primarily due totwo new business wins, increased spending as well as expanded scopes of services by existing clients, and increased pass-through costs.
The change in expenses as a percentage of revenue in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $576.9
   $489.9
   $87.1
 17.8%
Operating Expenses            
Cost of services sold 403.2
 69.9% 335.8
 68.5% 67.4
 20.1%
Office and general expenses 122.1
 21.2% 114.8
 23.4% 7.3
 6.4%
Depreciation and amortization 17.9
 3.1% 15.0
 3.1% 2.9
 19.4%
  $543.2
 94.1% $465.6
 95.0% $77.6
 16.7%
Operating profit $33.8
 5.9% $24.3
 5.0% $9.4
 38.9%
Operating profit in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2017 was $33.8 million compared to $24.3 million for the nine months ended September 30, 2016, representing an increase of $9.4 million, or 38.9%. Operating margins improved by 90 basis points from 5.0% in 2016 to 5.9% in 2017. The increase in operating profit and margin was largely due a smaller deferred acquisition consideration adjustment and improved staff costs as a percentage of revenue, partially offset by increased direct costs.
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, 2017 and 2016 was as follows:
  2017 2016 Change
Global Integrated Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $82.9
 14.4% $39.9
 8.1% $43.0
 107.9 %
Staff costs (2)
 342.3
 59.3% 315.6
 64.4% 26.7
 8.5 %
Administrative 77.8
 13.5% 65.9
 13.5% 11.8
 18.0 %
Deferred acquisition consideration 12.4
 2.1% 20.1
 4.1% (7.7) (38.5)%
Stock-based compensation 9.9
 1.7% 9.0
 1.8% 0.9
 9.6 %
Depreciation and amortization 17.9
 3.1% 15.0
 3.1% 2.9
 19.4 %
Total operating expenses $543.2
 94.1% $465.6
 95.0% $77.6
 16.7 %
(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 in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2017 were $82.9 million compared to $39.9 million for the nine months ended September 30, 2016, representing an increase of $43.0 million, or 107.9%. As a percentage of revenue, direct costs increased from 8.1% in 2016 to 14.4% in 2017. The increase in direct costs and

as a percentage of revenue was primarily due to contributions from an acquired Partner Firm which has a higher direct cost to revenue ratio, in addition to an increase in costs incurred on certain clients’ behalf from some of our existing Partner Firms acting as principal.
Staff costs in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2017 were $342.3 million compared to $315.6 million for the nine months ended September 30, 2016, representing an increase of $26.7 million, or 8.5%. The increase in staff costs was due to increased headcount driven by certain Partner Firms to support the growth of their businesses as well as additional contributions from acquired Partner Firms. As a percentage of revenue, staff costs decreased from 64.4% in 2016 to 59.3% in 2017. The decrease in staff costs as a percentage of revenue was primarily driven by revenue growth as well as savings pertaining to headcount action taken in prior periods.
Deferred acquisition consideration in the Global Integrated Agencies reportable segment for the nine months ended September 30, 2017 was an expense of $12.4 million for the nine months ended September 30, 2017 compared to an expense of $20.1 million for the nine months ended September 30, 2016, representing a decrease of $7.7 million, or 38.5%. The decrease in the deferred acquisition consideration expense pertained to the increased estimated liability in the prior period driven by the decrease in the Company’s stock price pertaining to an acquired Partner Firm in which the Company used its equity as purchase consideration, partially offset by the finalization of future payments pertaining to an acquisition completed in 2016 and increased expenses pertaining to amendments to purchase agreements of previously acquired incremental ownership interest entered into during 2017.
Domestic Creative Agencies
Revenue in the Domestic Creative Agencies reportable segment was $67.5 million for the nine months ended September 30, 2017 compared to revenue of $66.3 million for the nine months ended September 30, 2016, representing an increase of $1.2 million, or 1.8%. The change in revenue was due to revenue growth from Partner Firms of $1.1 million, or 1.7% and a positive foreign exchange impact of $0.1 million, or 0.1%.
The change in expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $67.5
   $66.3
   $1.2
 1.8 %
Operating Expenses            
Cost of services sold 38.0
 56.3% 36.3
 54.7% 1.7
 4.7 %
Office and general expenses 14.9
 22.0% 14.0
 21.1% 0.9
 6.5 %
Depreciation and amortization 1.1
 1.6% 1.3
 1.9% (0.2) (15.9)%
  $53.9
 79.9% $51.5
 77.7% $2.4
 4.7 %
Operating profit $13.6
 20.1% $14.8
 22.3% $(1.2) (8.2)%
Operating profit in the Domestic Creative Agencies reportable segment for the nine months ended September 30, 2017 was $13.6 million compared to $14.8 million for the nine months ended September 30, 2016, representing a decrease of $1.2 million, or 8.2%. Operating margins declined by 220 basis points from 22.3% in 2016 to 20.1% in 2017. The decrease in operating profit and margin was largely due to increased staff costs as a percentage of 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, 2017 and 2016 was as follows:

  2017 2016 Change
Domestic Creative Agencies $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1) $1.6
 2.4% $1.5
 2.3 % $0.1
 7.1 %
Staff costs (2) 42.2
 62.6% 40.2
 60.7 % 2.0
 5.1 %
Administrative 8.1
 12.0% 8.2
 12.4 % (0.1) (1.4)%
Deferred acquisition consideration 0.4
 0.5% (0.2) (0.3)% 0.6
 (275.1)%
Stock-based compensation 0.5
 0.7% 0.5
 0.7 % —
 3.1 %
Depreciation and amortization 1.1
 1.6% 1.3
 1.9 % (0.2) (15.9)%
Total operating expenses $53.9
 79.9% $51.5
 77.7 % $2.4
 4.7 %
(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.
Staff costs in the Domestic Creative Agencies reportable segment for the nine months ended September 30, 2017 were $42.2 million compared to $40.2 million for the nine months ended September 30, 2016, representing an increase of $2.0 million, or 5.1%. As a percentage of revenue, staff costs increased from 60.7% in 2016 to 62.6% in 2017.The increase in staff costs and as a percentage of revenue was primarily due to increases in workforces at certain Partner Firms to support revenue growth and new business wins.
Specialist Communications
Revenue in the Specialist Communications reportable segment was $125.5 million for the nine months ended September 30, 2017 compared to revenue of $123.0 million for the nine months ended September 30, 2016, representing an increase of $2.5 million, or 2.0%, The change in revenue was due to revenue growth from Partner Firms of $2.8 million, or 2.2%, partially offset by a negative foreign exchange impact of $0.3 million, or 0.2%.
The change in expenses as a percentage of revenue in the Specialist Communications reportable segment for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $125.5
   $123.0
   $2.5
 2.0 %
Operating Expenses            
Cost of services sold 85.4
 68.0% 84.2
 68.5% 1.1
 1.3 %
Office and general expenses 23.0
 18.4% 15.8
 12.8% 7.3
 46.1 %
Depreciation and amortization 3.7
 2.9% 5.1
 4.2% (1.5) (28.6)%
  $112.1
 89.3% $105.1
 85.5% $6.9
 6.6 %
Operating profit $13.4
 10.7% $17.9
 14.5% $(4.5) (24.9)%
Operating profit in the Specialist Communications reportable segment for the nine months ended September 30, 2017 was $13.4 million compared to $17.9 million for the nine months ended September 30, 2016, representing a decrease of $4.5 million, or 24.9%. Operating margins declined by 380 basis points from 14.5% in 2016 to 10.7% in 2017. The increase in operating profit and margin was largely due to the change in the deferred acquisition consideration adjustment.
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, 2017 and 2016 was as follows:

  2017 2016 Change
Specialist Communications $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $29.7
 23.7% $28.7
 23.4 % $1.0
 3.3 %
Staff costs (2)
 59.8
 47.7% 59.6
 48.5 % 0.1
 0.2 %
Administrative 16.0
 12.8% 16.0
 13.0 % —
 0.2 %
Deferred acquisition consideration 0.6
 0.5% (5.9) (4.8)% 6.5
 (110.2)%
Stock-based compensation 2.3
 1.8% 1.6
 1.3 % 0.7
 45.5 %
Depreciation and amortization 3.7
 2.9% 5.1
 4.2 % (1.5) (28.6)%
Total operating expenses $112.1
 89.3% $105.1
 85.5 % $6.9
 6.6 %
(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.
Deferred acquisition consideration in the Specialist Communications reportable segment for the nine months ended September 30, 2017 was an expense of $0.6 million for the nine months ended September 30, 2017 compared to income of $5.9 million for the nine months ended September 30, 2016, representing an increase expense of $6.5 million, or 110.2%. The change in the deferred acquisition consideration adjustment was due to the aggregate under-performance of certain Partner Firms in 2016 as compared to forecasted expectations.
Media Services
Revenue in the Media Services reportable segment was $104.0 million for the nine months ended September 30, 2017 compared to revenue of $96.7 million for the nine months ended September 30, 2016, representing an increase of $7.3 million, or 7.5%. The change in revenue was due to revenue growth of $8.5 million, or 8.8% from existing Partner Firms primarily due to new business wins and expanded scopes of services by existing clients, partially offset by a negative disposition impact of $1.2 million, or 1.3%.
The change in expenses as a percentage of revenue in the Media Services reportable segment for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $104.0
   $96.7
   $7.3
 7.5 %
Operating Expenses            
Cost of services sold 66.0
 63.5% 70.9
 73.4% (4.9) (7.0)%
Office and general expenses 26.4
 25.4% 17.8
 18.4% 8.6
 48.3 %
Depreciation and amortization 2.9
 2.8% 4.4
 4.6% (1.5) (33.9)%
  $95.3
 91.7% $93.2
 96.4% $2.2
 2.3 %
Operating profit $8.6
 8.3% $3.5
 3.6% $5.1
 145.5 %
Operating profit in the Media Services reportable segment for the nine months ended September 30, 2017 was $8.6 million compared to $3.5 million for the nine months ended September 30, 2016, representing an increase of $5.1 million, or 145.5%. Operating margins improved by 470 basis points from 3.6% in 2016 to 8.3% in 2017. The increase in operating profit and margin was largely due to revenue growth as well as a decrease in direct cost as a percentage of revenue, partially offset by an increase in staff costs.
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, 2017 and 2016 was as follows:

  2017 2016 Change
Media Services $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $24.2
 23.3% $23.7
 24.5% $0.5
 2.2 %
Staff costs (2)
 52.3
 50.3% 48.1
 49.7% 4.2
 8.8 %
Administrative 15.0
 14.5% 15.9
 16.4% (0.9) (5.4)%
Deferred acquisition consideration 0.4
 0.4% 0.9
 0.9% (0.5) (52.3)%
Stock-based compensation 0.5
 0.4% 0.2
 0.2% 0.3
 148.1 %
Depreciation and amortization 2.9
 2.8% 4.4
 4.6% (1.5) (33.9)%
Total operating expenses $95.3
 91.7% $93.2
 96.4% $2.2
 2.3 %
(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.
Staff costs in the Media Services reportable segment for the nine months ended September 30, 2017 were $52.3 million compared to $48.1 million for the nine months ended September 30, 2016, representing an increase of $4.2 million, or 8.8%. As a percentage of revenue, staff costs increased from 49.7% in 2016 to 50.3% in 2017. The increase in staff costs and as a percentage of revenue was due to higher headcount at certain Partner Firms to support the growth of their businesses.
All Other
Revenue in the All Other category was $237.2 million for the nine months ended September 30, 2017 compared to revenue of $219.5 million for the nine months ended September 30, 2016, representing an increase of $17.7 million, or 8.1%. The change in revenue is due to revenue growth from existing Partner Firms of $19.4 million, or 8.8%, partially offset by a foreign exchange impact of $0.2 million, or 0.1% and a negative impact from dispositions of $1.5 million, or 0.7%.
The change in expenses as a percentage of revenue in the All Other category for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Revenue $237.2
   $219.5
   $17.7
 8.1 %
Operating Expenses            
Cost of services sold 162.3
 68.4% 148.7
 67.7 % 13.6
 9.1 %
Office and general expenses 36.8
 15.5% 39.8
 18.1 % (3.0) (7.6)%
Depreciation and amortization 6.5
 2.7% 7.0
 3.2 % (0.5) (6.9)%
Goodwill impairment —
 —% 29.6
 13.5 % (29.6) (100.0)%
  $205.6
 86.7% $225.1
 102.6 % $(19.6) (8.7)%
Operating profit $31.6
 13.3% $(5.6) (2.6)% $37.2
 (662.8)%
Operating profit in the All Other category for the nine months ended September 30, 2017 was $31.6 million compared to a loss of $5.6 million for the nine months ended September 30, 2016, representing an increase of $37.2 million. Operating margin improved from a loss margin of 2.6% in 2016 to a profit margin of 13.3% in 2017. The increase in operating profit and margin was largely due to a goodwill impairment recognized in 2016, partially offset by increased staff costs.
The change in the categories of expenses as a percentage of revenue in the All Other category for the nine months ended September 30, 2017 and 2016 was as follows:

  2017 2016 Change
All Other $ % of
Revenue		 $ % of
Revenue		 $ %
  (Dollars in Millions)
Direct costs (1)
 $54.3
 22.9 % $52.4
 23.9% $1.9
 3.6 %
Staff costs (2)
 119.2
 50.2 % 108.4
 49.4% 10.7
 9.9 %
Administrative 23.9
 10.1 % 23.2
 10.6% 0.7
 3.1 %
Deferred acquisition consideration (0.5) (0.2)% 2.3
 1.1% (2.8) (121.1)%
Stock-based compensation 2.1
 0.9 % 2.1
 1.0% —
 1.2 %
Depreciation and amortization 6.5
 2.7 % 7.0
 3.2% (0.5) (6.9)%
Goodwill impairment —
 — % 29.6
 13.5% (29.6) (100.0)%
Total operating expenses $205.6
 86.7 % $225.1
 102.6% $(19.6) (8.7)%
(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.
Goodwill impairment in the All Other category for the nine months ended September 30, 2016 was $29.6 million, which was comprised of a partial impairment of goodwill of $27.9 million relating to an experiential reporting unit and a partial impairment of goodwill of $1.7 million relating to a non-material reporting unit. No such goodwill impairment was recognized during the nine months ended September 30, 2017.
Staff costs in the All Other category for the nine months ended September 30, 2017 were $119.2 million compared to $108.4 million for the nine months ended September 30, 2016, representing an increase of $10.7 million, or 9.9%. The increase in staff costs was primarily due to higher headcount at certain Partner Firms to support growth of the business. As a percentage of revenue, staff costs increased from 49.4% in 2016 to 50.2% in 2017.
Corporate
The change in operating expenses for Corporate for the nine months ended September 30, 2017 and 2016 was as follows:
  2017 2016 Variance
Corporate $ $ $ %
  (Dollars in Millions)
Staff costs (1)
 $15.0
 $20.9
 $(5.9) (28.3)%
Administrative 11.6
 8.8
 2.8
 31.6 %
Stock-based compensation 1.6
 2.1
 (0.5) (22.3)%
Depreciation and amortization 0.9
 1.3
 (0.4) (31.8)%
Total operating expenses $29.0
 $33.0
 $(4.0) (12.1)%
(1)Excludes stock-based compensation.
Total operating expenses for Corporate for the nine months ended September 30, 2017 were $29.0 million compared to $33.0 million for the nine months ended September 30, 2016, representing a decrease of $4.0 million, or 12.1%.
Staff costs for Corporate for the nine months ended September 30, 2017 were $15.0 million compared to $20.9 million for the nine months ended September 30, 2016, representing a decrease of $5.9 million, or 28.3%. This decrease was due to lower executive compensation expense in 2017.
Administrative costs for Corporate for the nine months ended September 30, 2017 were $11.6 million compared to $8.8 million for the nine months ended September 30, 2016, representing an increase of $2.8 million, or 31.6%. This increase was primarily related to reductions in insurance proceeds of $3.6 million received by the Company in the prior period compared to the current period relating to the class action litigation and the completed SEC investigation, and an increase in professional fees of $1.7 million primarily related to the implementation of ASC 606, Revenue from Contracts with Customers, which is effective January 1, 2018. This was offset partially by reductions in legal fees related to the class action litigation and the completed SEC investigation of $2.5 million.

Other, Net
Other, net, for the nine months ended September 30, 2017 was income of $17.8 million compared to income of $9.5 million for the nine months ended September 30, 2016, representing an increase of $8.3 million. The increase was primarily related to an unrealized foreign exchange gain of $18.8 million in 2017 compared to an unrealized foreign exchange gain of $9.9 million in 2016. The foreign exchange gains in both 2017 and 2016 primarily related to U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company and was driven by the depreciation of the U.S. dollar against the Canadian dollar in the period.
Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the nine months ended September 30, 2017 was $48.3 million compared to $48.7 million for the nine months ended September 30, 2016, representing a decrease of $0.4 million, or 0.8%.
Loss on Redemption of Notes
Loss on redemption of notes decreased by $33.3 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 due to the loss on redemption of the 6.75% Notesoffices in the first quarter of 2016.
Income Tax Expense
Income tax expense for2024 and the nine months ended September 30, 2017 was $17.7 million compared to $1.2 million for the nine months ended September 30, 2016, representingassumption of an increase of $16.5 million. This increase in expense was attributable to the tax exposure of certain jurisdictionsoffice, as the Company’s businesses were in a profitable position in comparison to the prior period. In addition, for both periods the Company’s effective tax rate was impacted by losses in certain tax jurisdictions where a valuation allowance was deemed necessary.
Equity in Earnings of Non-Consolidated Affiliates
Equity in earnings of non-consolidated affiliates represents the income attributable to equity-accounted affiliate operations. For the nine months ended September 30, 2017, the Company recorded income of $1.9 million compared to nil for the nine months ended September 30, 2016.
Noncontrolling Interests
The effects of noncontrolling interests was $6.6 million for the nine months ended September 30, 2017 compared to $3.2 million during the nine months ended September 30, 2016, representing an increase of $3.4 million. This increase was attributable to the noncontrolling interests of certain Partner Firms that attained the right to distribution of earnings in the current period.
Net Income (Loss) Attributable to MDC Partners Inc. Common Shareholders
As a resultpart of the foregoing, net income attributable to MDC Partners Inc. common shareholders for the nine months ended September 30, 2017sale of Concentric, that was $14.8 million. or $0.24 per diluted share, compared to a net losspreviously included under Integrated Agencies Network.
44

Liquidity and Capital Resources:
Liquidity
The following table provides summary information about the Company’s liquidity position:
Three Months Ended March 31,
20242023
(dollars in thousands)
Net cash used in operating activities$(53,121)$(85,113)
Net cash used in investing activities(26,124)(10,815)
Net cash provided by financing activities91,086 12,923 
(amounts in $ millions)As of and for the nine months ended September 30, 2017
As of and for the nine months ended September 30, 2016
As of and for the year ended December 31, 2016
Cash and cash equivalents$18.9

$21.7

$27.9
Working capital deficit$(220.3)
$(319.2)
$(313.2)
Cash provided by (used in) operating activities$22.1
 $(41.4)
$5.4
Cash used in investing activities$(19.5) $(14.7)
$(25.2)
Cash provided by (used in) financing activities$(11.7) $15.1

$(15.9)
Long-term debt to total equity ratio(2.39)
(1.83)
(1.84)
Ratio of earnings to fixed charges1.65
 N/A
 N/A
Fixed charge deficiency N/A
 $50.5
 $49.6
AsThe Company had cash and cash equivalents of September 30, 2017$129.8 million and 2016$119.7 million as of March 31, 2024 and December 31, 2016, $5.2 million, $5.3 million, and $5.3 million, respectively, of the Company’s consolidated cash position was held by subsidiaries. This amount does not represent cash that is distributable as earnings to MDC for use to reduce its indebtedness. It is the Company’s intent through its cash management system to reduce any outstanding borrowings under the Credit Agreement by using available cash.
2023, respectively. The Company intendsexpects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months.
months and subsequent periods. The Company has historically been able to maintainmaintained and expandexpanded its business using cash generated from operating activities, funds available under its credit agreement,the Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing. The Credit Agreement provides revolving commitments of up to $640.0 million and permits restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million. As of March 31, 2024, the Company had $182.0 million of borrowings outstanding and $15.8 million of issued and undrawn letters of credit resulting in $442.2 million unused amount under the Credit Agreement.
The Company transfers certain of its trade receivable assets to third parties under certain agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
The trade receivables transferred to the third parties were $69.8 million and $56.2 million for the three months ended March 31, 2024 and 2023, respectively. The amount collected and due to the third parties under these arrangements was $3.7 million as of March 31, 2024 and $1.8 million as of December 31, 2023. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $0.9 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively.
The Company may purchase up to an aggregate of $250.0 million of shares of outstanding Class A Common Stock under its stock repurchase program (the “Repurchase Program”). The Repurchase Program expires on March 1, 2026.
During the three months ended March 31, 2024, 4.0 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $24.6 million. These shares were repurchased at an average price of $6.11 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $114.0 million as of March 31, 2024. The Company's Board of Directors (the “Board”) will review the Repurchase Program periodically and may authorize adjustments of its terms. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the credit agreementCompany’s 5.625% Notes (as defined in Note 8 of the Notes included herein) and Credit Agreement. The Company expects to make estimated cash payments in the Company’s 6.50% Seniorfuture to satisfy obligations under our Tax Receivables Agreement with Stagwell Media LP and OpCo (“TRA”) (see Note 14 of the Notes due 2024.
included herein for additional details). The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 11 of the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA. 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,Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the foreseeable future.next twelve months and subsequent periods. 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 (i) Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q and (ii) the Company’s 2016 Annual Report on Form 10-K/A under the caption “Risk Factors,” and in the Company’s other SEC filings.
Working Capital Deficit
At September 30, 2017, the Company had a working capital deficit of $220.3 million compared to a deficit of $313.2 million at December 31, 2016. Working capital deficit decreased by $92.9 millionprimarily due to the net proceeds from the issuance of the convertible preference shares and timing of media payments, offset by the net repayments under the credit agreement and payments of deferred acquisition consideration. During the nine months ended September 30, 2016, the Company’s working capital was negatively impacted by increased volatility caused by a shift in seasonality relating to the changing client base in our media business. 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. At September 30, 2017, the Company had $48.6 million of borrowings outstanding under its Credit Agreement. The Company includes amounts due to noncontrolling interest holders, for their share of profits, in accrued and other liabilities. At September 30, 2017, $5.8 million remained outstanding to be distributed to noncontrolling interest holders over the next twelve months.
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 provided byused in operating activities including changes in non-cash working capital, for the ninethree months ended September 30, 2017 was $22.1 million. This was attributable to net income of $25.8 million, an increase in depreciation,

amortization of intangibles, and stock compensation of $49.8 million, a decrease in advanced billings of $32.0 million, adjustments to deferred acquisition consideration of $13.4 million, a decrease in deferred income taxes of $8.1 million, a decrease in prepaid expenses and other current assets of $6.4 million and amortization of deferred finance charges of $2.0 million, and loss on sale of assets of $1.2 million. This was partially offset by an increase in accounts receivable of $54.7 million, an increase in accounts payable, accruals, and other liabilities of $31.1March 31, 2024, were $53.1 million, primarily driven by an increase in accrued media andearnings, partially offset by unfavorable working capital requirements, including the timing of payments to suppliers, expenditures billable to clientsmedia supplier payments.
45
Cash flows used in operating activities including changes in non-cash working capital, for the ninethree months ended September 30, 2016 was $41.4 million. This was attributable to a net loss of $51.8 million, a decrease in accounts payable, accruals, and other liabilities of $77.4March 31, 2023, were $85.1 million, primarily driven by a decrease in accrued mediaearnings and theunfavorable working capital requirements timing of payments to suppliers, an increase in accounts receivable of $47.8 million, an increase in prepaid expenses and other current assets of $16.9 million, foreign exchange of $12.8 million, and deferred income taxes of $0.6 million. This was partially offset by depreciation, amortization of intangibles, and stock compensation of $49.5 million, goodwill impairment of $29.6 million, a loss on the redemption of the 6.75% Notes of $26.9 million, a decrease in advanced billings of $25.8 million, adjustments to deferred acquisition consideration of $17.4 million, amortization of deferred finance charges and debt discount of $8.7 million, a decrease in expenditures billable to clients of $5.6 million, a net decrease in other non-current assets and liabilities of $1.9 million, and a loss on sale of assets of $0.4 million.media supplier payments.
Investing Activities
During the nine months ended September 30, 2017, cashCash flows used in investing activities was $19.5were $26.1 million and consisted of capital expenditures related primarily to computer equipment, furniture and fixtures, and leasehold improvements of $28.3 million, of which $17.6 million was incurred by the Global Integrated Agencies segment, $1.5 million for deposits, and $1.5 million for other investments. These outflows were partially offset by net proceeds from the sale of three subsidiaries during the three months ended September 30, 2017March 31, 2024, primarily driven by $8.8 million in capitalized software spend, $5.4 million in capital expenditures, and $11.7 million for acquisitions, net of $11.1 million, and $0.7 million of profit distributions from affiliates.cash acquired.
During the nine months ended September 30, 2016, cashCash flows used in investing activities was $14.7were $10.8 million and consisted offor the three months ended March 31, 2023, primarily driven by $6.7 million in capitalized software spend, $3.4 million in capital expenditures, related primarily to computer equipment, furniture and fixtures, and leasehold improvements of $19.7 million, of which $10.7 million was incurred by the Global Integrated Agencies segment, and $2.6 million for other investments. These outflows were partially offset by $4.9 million of profit distributions from affiliates, $0.2 million in acquisitions, net of net cash acquired through acquisitions, and $2.5 million of proceeds from the sale of assets.acquired.
Financing Activities
During the ninethree months ended September 30, 2017, cash flows used in financing activities was $11.7 million, and consisted of $95.0 million in proceeds from the issuance of convertible preference shares. This inflow was partially offset by $5.8 million in net repayments under the credit agreement, $89.1 million of acquisition related payments, distributions to noncontrolling partners of $5.3 million, $4.6 million of issuance costs paid in connection with the issuance of the convertible preference shares, repayments of long-term debt of $0.3 million, and the purchase of treasury shares for income tax withholding requirements of $1.2 million.
During the nine months ended September 30, 2016,March 31, 2024, cash flows provided by financing activities was $15.1were $91.1 million, and consisted of $900.0 million in proceeds from the issuance of the 6.50% Notes and $70.5primarily driven by $123.0 million in net borrowings under the credit agreement. These inflows were partially offset by the redemptionCredit Agreement, shares repurchased and cancelled of the 6.75% Notes$29.7 million, payments of $735.0deferred consideration of $1.7 million, a premium paid in connection with such redemption of $26.9 million including accrued interest through the settlement date, $21.6 million of debt issuance costs paid in connection with the issuance of the 6.50% Notes, $129.6 million of acquisition related payments, payment of dividends of $32.6 million,and distributions to noncontrolling partnersinterests of $6.5$0.6 million.
During the three months ended March 31, 2023, cash flows provided by financing activities were $12.9 million, the purchase of treasury shares for income tax withholding requirements of $2.8primarily driven by $50.0 million and repayments of long-term debt of $0.4 million.
Total Debt
6.50% Notes
On March 23, 2016, MDC entered into an indenture (the “Indenture”) among MDC, its existing and future restricted subsidiaries that guarantee, or 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 its $900 million aggregate principal amount of 6.50% senior unsecured notes due 2024. The 6.50% Notes were sold in a private placement in reliance on exceptions from registration under the ’33 Act. The 6.50% Notes bear interest at a rate of 6.50% per annum, accruing from March 23, 2016. Interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning November 1, 2016. The 6.50% Notes mature on May 1, 2024, unless earlier redeemed or repurchased. The Company received net proceeds from the offering of the 6.50% Notes equal to approximately $880,000. The Company used the net proceeds to redeem all of its existing 6.75% Notes, together with accrued interest, related premiums, fees and expenses and recorded a charge for the loss on redemption of such notes of $33,298, including write offs of unamortized original issue premium and debt issuance costs. Remaining proceeds were used for general corporate purposes, including funding of deferred acquisition consideration.

The 6.50% Notes are guaranteed on a senior unsecured basis by all of MDC’s existing and future restricted subsidiaries that guarantee, or are co-borrowers under or grant liens to secure, the Credit Agreement. The 6.50% Notes are unsecured and unsubordinated obligations of MDC and rank (i) equally in right of payment with all of MDC’s or any Guarantor’s existing and future senior indebtedness, (ii) senior in right of payment to MDC’s or any Guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to all of MDC’s or any Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of MDC’s subsidiaries that are not Guarantors.
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 (i) at a redemption price of 104.875% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2019, (ii) at a redemption price of 103.250% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2020, (iii) at a redemption price of 101.625% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2021, and (iv) at a redemption price of 100% of the principal amount thereof if redeemed on May 1, 2022 and thereafter.
Prior to May 1, 2019, MDC may, at its option, redeem some or all of the 6.50% Notes at a price equal to 100% of the principal amount of the 6.50% Notes plus a “make whole” premium and accrued and unpaid interest. MDC may also redeem, at its option, prior to May 1, 2019, up to 35% of the 6.50% Notes with the proceeds from one or more equity offerings at a redemption price of 106.50% of the principal amount thereof.
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.
Redemption of 6.75% Notes
On March 23, 2016, the Company redeemed the 6.75% Notes in whole at a redemption price of 103.375% of the principal amount thereof with the proceeds from the issuance of the 6.50% Notes.
Revolving Credit Agreement
On March 20, 2013, MDC, Maxxcom Inc. (a subsidiary of MDC) and each of their subsidiaries entered into an amended and restated, $225 million senior secured revolving credit agreement due 2018 (the “Credit Agreement”) with Wells Fargo Capital Finance, LLC, as agent, and the lenders from time to time party thereto. Advancesborrowings under the Credit Agreement, will be used for working capital$10.9 million of distributions to noncontrolling interests and general corporate purposes,$26.1 million in each case pursuant to the terms of the Credit Agreement. Capitalized terms used in this sectionshares repurchased and not otherwise defined have the meanings set forth in the Credit Agreement.cancelled.
Effective October 23, 2014, MDC, Maxxcom Inc. and each of their subsidiaries entered into an amendment of its Credit Agreement. The amendment: (i) expanded the commitments under the facility by $100 million, from $225 million to $325 million; (ii) extended the date by an additional eighteen months to September 30, 2019; (iii) reduced the base borrowing interest rate by 25 basis points (the applicable margin for borrowing is 1.00% in the case of Base Rate Loans and 1.75% in the case of LIBOR Rate Loans) ; and (iv) modified certain covenants to provide the Company with increased flexibility to fund its continued growth and other general corporate purposes.
Effective May 3, 2016, MDC and its subsidiaries entered into an additional amendment to its Credit Agreement. The amendment: (i) extends the date by an additional nineteen months to May 3, 2021; (ii) reduces the base borrowing interest rate by 25 basis points; (iii) provides the Company the ability to borrow in foreign currencies; and (iv) certain other modifications to provide additional flexibility in operating the Company’s business.
Advances under the Credit Agreement bear interest as follows: (a)(i) Non-Prime Rate Loans bear interest at the Non-Prime Rate and (ii) all other Obligations bear interest at the Prime Rate, plus (b) an applicable margin. The applicable margin for borrowing is 1.50% in the case of Non-Prime Rate Loans and Prime Rate Loans that are European Advances, and 1.75% on all other Obligations. In addition to paying interest on outstanding principal under the Credit Agreement, MDC is required to pay an unused revolver fee of 0.25% to lenders under the Credit Agreement in respect of unused commitments thereunder.

The Credit Agreement is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions. The Credit Agreement includes covenants that, among other things, restrict MDC’s ability and the ability of its subsidiaries to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; impose limitations on dividends or other amounts from MDC’s subsidiaries; incur certain liens, sell or otherwise dispose of certain assets; enter into transactions with affiliates; 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 Credit Agreement also contains financial covenants, including a total leverage ratio, a senior leverage ratio, a fixed charge coverage ratio and a minimum earnings level (each as more fully described in the Credit Agreement). The Credit Agreement is also subject to customary events of default.
The foregoing descriptions of the Indenture and the Credit Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements.Total Debt
Debt, net of debt issuance costs, as of September 30, 2017March 31, 2024, was $931.2$1,269.5 million a decrease of $5.2 million,as compared with $936.4to $1,145.8 million outstanding at December 31, 2016.  This decrease in debt was primarily a result of2023. See Note 8 to the Unaudited Consolidated Financial Statements included herein for information regarding the Company’s net repayments of the Credit Agreement. At September 30, 2017, approximately $271.4 million of commitments under5.625% Notes, and the Credit Agreement, were undrawn.which provides for a $640.0 million senior secured revolving credit facility maturing on August 3, 2026.
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,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 specificallymaintain a Total Leverage Ratio (as defined in the Credit Agreement.Agreement) below an established threshold. For the period ended September 30, 2017,March 31, 2024, the Company’s calculation of each of these covenants,this ratio, and the specific requirementsmaximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
 September 30, 2017
Total Senior Leverage Ratio0.2
Maximum per covenant2.0
  
Total Leverage Ratio4.8
Maximum per covenant5.5
  
Fixed Charges Ratio2.2
Minimum per covenant1.0
  
Earnings before interest, taxes, depreciation and amortization$197,686
Minimum per covenant$105,000
March 31, 2024
Total Leverage Ratio3.21
Maximum per covenant4.25
These ratios and measures are not based on generally accepted accounting principlesGAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Deferred Acquisition Consideration and Other Balance Sheet CommitmentsMaterial Cash Requirements
The Company’s agenciesBrands enter into contractual commitments with media providers and agreements with production companies on behalf of ourits clients at levels that exceed the revenue from services. Some of our agenciesBrands purchase media for clients and act as an agent for a disclosed principal. These commitments are included in accountsAccounts payable and Accrued media when the media services are delivered by the media providers. MDCStagwell takes precautions against default on payment for these services including the procurement of credit insurance and has historically had a very low

incidence of default. MDCStagwell is still
46
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.
AcquisitionsDeferred acquisition consideration on the balance sheet consists of a business, or a majority interestdeferred obligations related to contingent and fixed purchase price payments. See Note 6 of a business, bythe Notes included herein for additional information regarding contingent deferred acquisition consideration.
When acquiring less than 100% ownership of an entity, the Company may include future additional contingent purchase price obligations payable to the seller, which are recorded as deferred acquisition consideration liabilities on the Company’s balance sheet at the estimated acquisition date fair value and are remeasured at each reporting period. These contingent purchase obligations are generally payable within a one to five-year period following the acquisition date, and are based on achievement of certain thresholds of future earnings and, in certain cases, the rate of growth of those earnings. The actual amountenter into agreements that give the Company pays in connection with such contingent purchase obligations may differ materially from this estimate.
In connection with such contingent purchase obligations, the Company may have thean option or, in some cases, the requirement, to purchase, or require the remaining interest. Generally, the Company’s option or requirementCompany to purchase, the incremental ownership interest coincides withinterests under certain circumstances. Where the final paymentincremental purchase may be required of the purchase price obligation related toCompany, the Company’s initial majority acquisition. If the Company subsequently acquires the remaining incremental ownership interest, the acquisition fair value of the purchase price, net of any cash paid at closing, isamounts are recorded as a liability, any noncontrolling interests are removed and any difference between the purchase price and noncontrolling interest is recorded to additional paid-in capital.
The deferred acquisition consideration and redeemable noncontrolling interests are impacted by (i) present value adjustments to accrete the acquisition date fair valuein mezzanine equity. See Note 9 of the obligation to the estimated future payment amount at the reporting date, (ii) changes in the estimated future payment obligation resulting from the underlying subsidiary’s financial performance, and (iii) amendments to purchase agreements of previously acquired incremental ownership interests. As it relates to the acquisition of Forsman & Bodenfors AB completed in 2016, the deferred acquisition was impacted by the market performance of the Company’s stock price. RedeemableNotes included herein for additional information regarding noncontrolling interests are not adjusted below the related initial redemption value. Significant changes in actual results and metrics, such as profit margins and growth rates among others, relative to expectations would result in a higher or lower redemption value adjustment. In addition, the deferred acquisition consideration and redeemable noncontrolling interests could be materially impacted by future acquisition activity, if any, and the particular structure of such acquisitions.
As a result, and due to the factors noted above, the Company does not have a view of the future trajectory and quantification of potential changes in the deferred acquisition consideration and redeemable noncontrolling interests.
The following table presentsCertain of the changesCompany’s subsidiaries grant awards to their employees providing them with an equity interest in the deferred acquisition consideration by segment forrespective subsidiary (the “profits interests awards”). The awards generally provide the nine months ended September 30, 2017:
 September 30, 2017
(amounts in $ millions)Global Integrated Agencies Domestic Creative Agencies Specialist Communication Agencies Media Services All Other Total
Beginning Balance of contingent payments$148.8
 $0.8
 $15.0
 $7.1
 $53.1
 $224.8
Payments (1)
(72.3) (1.1) (9.1) (2.6) (15.4) (100.5)
Additions (2)
—
 —
 —
 —
 —
 —
Redemption value adjustments (3)
16.3
 0.4
 1.3
 0.4
 0.8
 19.2
Foreign translation adjustment0.7
 —
 —
 —
 0.7
 1.3
Ending Balance of contingent payments93.4
 —
 7.3
 5.0
 39.2
 144.8
Fixed payments2.3
 —
 0.3
 —
 0.8
 3.4
 $95.7
 $—
 $7.6
 $5.0
 $40.0
 $148.3

The following table presentsemployee the changesright, but not the obligation, to sell its interest in the deferred acquisition consideration by segment for the year ended December 31, 2016:
 December 31, 2016
(amounts in $ millions)Global Integrated Agencies Domestic Creative Agencies Specialist Communication Agencies Media Services All Other Total
Beginning Balance of contingent payments$157.4
 $4.2
 $42.5
 $7.9
 $94.6
 $306.7
Payments (1)
(36.3) (3.2) (20.5) (1.4) (43.8) (105.2)
Additions (2)
15.6
 —
 0.5
 —
 —
 16.1
Redemption value adjustments (3)
16.2
 (0.3) (3.5) 0.6
 0.9
 13.9
Other (4)
(2.4) —
 (4.1) —
 —
 (6.4)
Foreign translation adjustment(1.9) —
 —
 —
 1.4
 (0.5)
Ending Balance of contingent payments148.8
 0.8
 15.0
 7.1
 53.1
 224.8
Fixed payments2.9
 —
 0.6
 0.3
 1.0
 4.8
 $151.7
 $0.8
 $15.5
 $7.5
 $54.1
 $229.6

(1)For the nine months ended September 30, 2017 and the year ended December 31, 2016, payments include $28.7 million and $10.5 million, respectively, of deferred acquisition consideration settled through the issuance of 3,353,939 and 691,559, respectively, MDC Class A subordinate voting shares in lieu of cash.
(2)Additions are the initial estimated deferred acquisition payments of new acquisitions and step-up transactions completed within that fiscal period.
(3)Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments, including the accretion of present value and stock-based compensation charges relatingsubsidiary to acquisition payments that are tied to continued employment.
(4)For the year ended December 31, 2016, other is comprised of (i) $2.4 million transfered to shares to be issued related to 100,000 MDC Class A subordinate voting shares to be issued contingent on specific thresholds of future earnings that management expects to be attained; and (ii) $4.1 million of contingent payments eliminated through the acquisition of incremental ownership interests.
Deferred acquisition consideration excludes future payments with an estimated fair value of $30.7 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 $0.3 million will be paid in the current year, $10.4 million will be paid in one to three years, $16.7 million will be paid in three to five years,based on a performance-based formula and, $3.3 million will be paid after five years.
Put Rights of Subsidiaries’ Noncontrolling Shareholders
As noted above, noncontrolling shareholders in certain subsidiaries have the right in certain circumstances to require the Company to acquire the remaining ownership interests held by them. 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 2017 to 2023. It is not determinable, at this time, if or when the owners of these rights will exercise all orcases, receive a portion of these rights.
The amount payable by the Company in the event such contractual rights are exercised is dependent on various valuation formulas and on future events, such as the average earnings of the relevant subsidiary through that date of exercise, the growth rate of the earnings of the relevant subsidiary during that period, and, in some cases, the currency exchange rate at the date of payment.
Management estimates, assuming that the subsidiaries owned by the Company at September 30, 2017, perform over the relevant future periods at their trailing twelve-month earnings level, that these rights, if all are exercised, could require the Company to pay an aggregate amount of approximately $15.5 million to the owners of such rights in future periods to acquire such ownership

interests in the relevant subsidiaries. Of this amount, the Company is entitled, at its option, to fund approximately $0.2 million by the issuance ofprofit share capital.
In addition, the Company is obligated under similar put option rights to pay an aggregate amount of approximately $42.3 million only upon termination of such owner’s employment with the applicable subsidiary or death.
The amount the Company would be required to pay to the holders should the Company acquire the remaining ownership interests is $2.3 million less than the initial redemption value recorded in redeemable noncontrolling interests.distribution.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Credit Agreement (and(or any 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. Approximately $3.3 million of the estimated $15.5 million that the Company would be required to pay subsidiaries noncontrolling shareholders upon the exercise of outstanding contractual rights relates to rights exercisable within the next twelve months. Upon the settlement of the total amount of such options to purchase, the Company estimates that it would receive incremental operating income before depreciation and amortization of $4.1 million.
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)
 2017 2018 2019 2020 
2021 &
Thereafter
 Total 
  (Dollars in Millions) 
Cash $3.3
 $2.8
 $2.6
 $3.5
 $3.1
 $15.3
 
Shares —
 —
 0.1
 0.1
 —
 0.2
 
  $3.3
 $2.8
 $2.7
 $3.6
 $3.1
 $15.5
(1) 
Operating income before depreciation and amortization to be received (2)
 $2.7
 $0.9
 $—
 $0.5
 $—
 $4.1
 
Cumulative operating income before depreciation and amortization (3)
 $2.7
 $3.6
 $3.6
 $4.1
 $4.1
  
(5) 
(1)This amount is in addition to (i) the $42.3 million of options to purchase only exercisable upon termination not within the control of the Company, or death, and (ii) the $2.3 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 PoliciesEstimates
The following summary of accounting policies has been prepared to assist in better understanding the Company’s consolidated financial statements and the related management discussion and analysis. Readers are encouraged to consider this information together with the Company’s consolidated financial statements and the related Notes to Unaudited Condensed Consolidated Financial Statements as included herein for a more complete understanding of accounting policies discussed below.
Estimates.  The preparation of the Company’s financial statements in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities (including goodwill, intangible assets, redeemable noncontrolling interests and deferred acquisition consideration), valuation allowances for receivables, deferred income tax assets and stock-based compensation, as well as the reported amounts of revenue and expenses during the reporting period. The statements are evaluated on an ongoing basis and estimates are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. Actual results can differ from those estimates, and it is possible that the differences could be material.

Revenue Recognition.  The Company’s revenue recognition policies are as required by the Revenue Recognition topics of the FASB Accounting Standards Codification. The Company earns revenue from agency arrangements in the form of retainer fees or commissions; from short-term project arrangements in the form of fixed fees or per diem fees for services; and from incentives or bonuses. A small portion of the Company’s contractual arrangements with clients includes performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. The Company records revenue net of sales and other taxes, when persuasive evidence of an arrangement exists, services are provided or upon delivery of the products when ownership and risk of loss has transferred to the customer, the selling price is fixed or determinable and collection of the resulting receivable is reasonably assured.
The Company recognizes the incentive portion of revenue under these arrangements when specific quantitative goals are assured, or when the Company’s clients determine performance against qualitative goals has been achieved. In all circumstances, revenue is only recognized when collection is reasonably assured. The Company records revenue net of sales and other taxes due to be collected and remitted to governmental authorities. In the majority of the Company’s businesses, the Company acts as an agent and records revenue equal to the net amount retained, when the fee or commission is earned. In certain arrangements, the Company acts as principal and contracts directly with suppliers for third party media and production costs. In these arrangements, revenue is recorded at the gross amount billed. Additional information about our revenue recognition policy appears inSee Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements included herein.
Business Combinations.  The Company has historically made, and expects to continue to make, selective acquisitions of marketing communications businesses. In making acquisitions, the price paid is determined by various factors, including service offerings, competitive position, reputation and geographic coverage, as well as prior experience and judgment. Due to the nature of advertising, marketing and corporate communications services companies; the companies acquired frequently have significant identifiable intangible assets, which primarily consist of customer relationships. The Company has determined that certain intangibles (trademarks) have an indefinite life, as there are no legal, regulatory, contractual, or economic factors that limit the useful life.
Valuations of acquired companies are based on a number of factors, including specialized know-how, reputation, competitive position and service offerings. Our acquisition strategy has been to focus on acquiring the expertise of an assembled workforce in order to continue building upon the core capabilities of our various strategic business platforms to better serve our clients. Consistent with our acquisition strategy and past practice of acquiring a majority ownership position, most acquisitions include an initial payment at the time of closing and provideCompany’s 2023 Form 10-K for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions are recorded as a liability and are derived from the performance of the acquired entity and are based on predetermined formulas. These various contractual valuation formulas may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period, and, in some cases, the currency exchange rate on the date of payment. The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. In addition, changes in various contractual valuation formulas as well as adjustments to present value impact quarterly adjustments. These adjustments are recorded in results of operations. In addition, certain acquisitions also include options to purchase additional equity ownership interests. The estimated value of these interests are recorded as redeemable noncontrolling interests.
For each ofregarding the Company’s acquisitions, a detailed review is undertaken to identify other intangible assets and a valuation is performed for all such identified assets. The Company’s uses several market participant measurements to determine estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. Like most service businesses, a substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets that the Company acquires is derived from customer relationships, including the related customer contracts, as well as trade names. In executing our acquisition strategy, one of the primary drivers in identifying and executing a specific transaction is the existence of, or the ability to, expand our existing client relationships. The expected benefits of our acquisitions are typically shared across multiple agencies and regions.critical accounting estimates.
Acquisitions, Goodwill and Other Intangibles.  The Company reviews goodwill and other indefinite live intangible assets for impairment annually at the beginning of the fourth quarter and whenever events or circumstances indicate that the carrying amount may not be recoverable. For goodwill, impairment is assessed at the reporting unit level.
The Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying value of its reporting units exceeds their respective fair value or proceeding directly to the two-step impairment test. If the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment is deemed necessary. Otherwise, goodwill must be tested for impairment by comparing the fair value of a reporting unit with its carrying amount. This process must be applied for any reporting units not included in the qualitative assessment. The Company determines the fair value of a reporting unit using a discounted cash flow

(“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows and appropriate discount rates.
The expected cash flows used in the DCF analysis are based on the Company’s most recent budget and forecasted growth rates. Assumptions used in the DCF analysis, including the discount rate, are assessed annually based on the reporting units’ current results and forecast, as well as macroeconomic and industry specific factors.
If the estimated fair value of a reporting unit exceeds its carrying value, then the goodwill of the reporting unit is not impaired. Otherwise, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit.
Redeemable Noncontrolling Interests.  The minority interest shareholders of certain subsidiaries have the right to require the Company to acquire their ownership interest under certain circumstances pursuant to a contractual arrangement and the Company has similar call options under the same contractual terms. The amount of consideration under the put and call rights is not a fixed amount, but rather is dependent upon various valuation formulas and on future events, such as the average earnings of the relevant subsidiary through the date of exercise and the growth rate of the earnings of the relevant subsidiary through the date of exercise.
Allowance for Doubtful Accounts.  Trade receivables are stated less allowance for doubtful accounts. The allowance represents estimated uncollectible receivables usually due to customers’ potential insolvency. The allowance includes amounts for certain customers where risk of default has been specifically identified.
Deferred Taxes.  The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for the temporary difference between the financial reporting basis and tax basis of the Company’s assets and liabilities. Deferred tax benefits result principally from certain tax carryover benefits and from recording certain expenses in the financial statements that are not currently deductible for tax purposes and from differences between the tax and book basis of assets and liabilities recorded in connection with acquisitions. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect of changes in tax rates is recognized in the period the rate change is enacted.
Income Tax Valuation Allowance.  The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management considers factors such as the reversal of deferred income tax liabilities, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. A change to any of these factors could impact the estimated valuation allowance and income tax expense.The Company currently has a fully reserved valuation allowance on its deferred tax assets related to U.S. net operating losses. Realization of the deferred tax assets is evaluated on a quarterly basis and is based upon all available evidence. It is possible that sufficient positive evidence to support the realization of the Company’s net deferred tax assets will exist in the near future, and the previously provided valuation allowance could be reversed in whole or in part.
Interest Expense.  Interest expense primarily consists of the cost of borrowing on the 6.75% Notes, the 6.50% Notes and the revolving Credit Agreement. The Company uses the effective interest method to amortize the original issue discount and original issue premium on the 6.75% Notes. The Company amortizes deferred financing costs using the effective interest method over the lives of the 6.75% Notes and 6.50% Notes and straight line over the life of the Credit Agreement.
Stock-based Compensation.  The fair value method is applied to all awards granted, modified or settled. Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period that is the award’s vesting period. When awards are exercised, share capital is credited by the sum of the consideration paid together with the related portion previously credited to additional paid-in capital when compensation costs were charged against income or acquisition consideration. Stock-based awards that are settled in cash or may be settled in cash at the option of employees are recorded as liabilities. The measurement of the liability and compensation cost for these awards is based on the fair value of the award, and is recorded into operating income over the service period, that is the vesting period of the award. Changes in the Company’s payment obligation are revalued each period and recorded as compensation cost over the service period in operating income.
The Company treats amounts paid by shareholders to employees as a stock-based compensation charge with a corresponding credit to additional paid-in capital.
From time to time, certain acquisitions and step-up transactions include an element of compensation related payments. The Company accounts for those payments as stock-based compensation.
New Accounting Pronouncements
In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718.  This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. Amendments in this ASU will be applied

prospectively to any award modified on or after the adoption date.  The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, which requires the presentation of the service cost component of the net periodic pension and postretirement benefits costs in the same line item in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of the net periodic pension and postretirement benefits costs are required to be presented as non-operating expenses in the statement of operations. This guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates step two from the two-step goodwill impairment test. Under the new guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. The Company will early adopt this guidance for our impairment test performed during 2017, and does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is intended to reduce diversity in practice regarding the classification of certain transactions in the statement of cash flows. This guidance is effective January 1, 2018 and requires a retrospective transition method. Early adoption is permitted. The Company currently classifies all cash outflows for contingent consideration as a financing activity. Upon adoption the Company is required to classify only the original estimated liability as a financing activity and any changes as an operating activity.
In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases. Topic 842 will require lessees to recognize right-to-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018 and early adoption is permitted. While not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on its total assets and liabilities with a minimal impact on equity.
In January 2016, the FASB issued ASU 2016-01,Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which will require equity investments, except equity method investments, to be measured at fair value and any changes in fair value will be recognized in results of operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is not permitted. Additionally, this guidance provides for the recognition of the cumulative effect of retrospective application of the new standard in the period of initial application. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace all existing revenue guidance under U.S GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to all annual and interim periods beginning after December 15, 2017. ASU 2014-09 provides for one of two methods of transition: (i) retrospective application to each prior period presented (Full Retrospective); or (ii) recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application (Modified Retrospective). The Company plans to apply ASU 2014-09 on the effective date of January 1, 2018, and intends to apply the Modified Retrospective method. Based on the Company’s assessment, the application of the new standard will result in a change in the timing of our revenue recognition within certain of the Company’s arrangements. Performance incentives are currently recognized in revenue when specific quantitative goals are achieved, or when the Company’s performance against qualitative goals is determined by the client. Under the new standard, the Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and recognize such incentive over the term of the contract. While performance incentives are not material to the Company’s revenue, this will result in an acceleration of revenue recognition for certain contract incentives compared to the current method. Further, based on the Company’s initial assessment, it is expected that an input measure such as cost to cost or labor hours would be an appropriate measure of progress in the majority of situations for which over time revenue recognition is applied.
Furthermore, in certain businesses, the Company records revenue as a principal and includes certain third-party-pass-through and out-of-pocket costs, which are billed to clients in connection with the services provided. In March 2016, the FASB issued further guidance on principal versus agent considerations; however, our initial assessments indicate that such change is not expected to have a material effect on the Company’s results of operations. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition, and the related disclosure requirements.

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 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. 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;
foreign currency fluctuations; and
risks associated with the ongoing Canadian class litigation claim.
The Company’s business strategy includes ongoing efforts to engage in acquisitions of ownership interests in entities in the marketing communications services industry. The Company intends to finance these acquisitions by using available cash from operations, from borrowings under the Credit Agreement and through the incurrence of bridge or other debt financing, any of which may increase the Company’s leverage ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate ownership. At any given time, the Company may be engaged in a number of discussions that may result in one or more acquisitions. These opportunities require confidentiality and may involve negotiations that require quick responses by the Company. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of the Company’s securities.
Investors should carefully consider these risk factors, and the risk factors outlined in more detail in (i) Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q and (ii) the Company’s 2016 Annual Report on Form 10-K/A under the caption “Risk Factors,” and in the Company’s other SEC filings.
Website Access to Company Reports and Information
Stagwell Inc. is the successor SEC registrant to MDC Partners Inc. Stagwell Inc.’s internetInternet website address is www.mdc-partners.com.www.stagwellglobal.com. The Company’s Annual Reports on Form 10-K, quarterly reportsQuarterly Reports on Form 10-Q and current reportsCurrent Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of 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 SecuritiesSEC. The Company announces material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, and Exchange Commission.its website. The Company uses these channels, as well as social media, including its Twitter account (@stagwell) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, its products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information foundthe Company makes public in these locations, as such information could be deemed to be material information. Information on or otherwise accessiblethat can be accessed through the Company’s websitewebsites or these social media channels is not incorporated into, and does not form a part of this quarterly report on Form 10-Q. From time to time,10-Q, and the Company may use itsinclusion of the Company’s website as a channel of distribution of material company information.addresses and social media channels are inactive textual references only.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
TheIn the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and foreign currencies.impairment risk.
Debt Instruments: At September 30, 2017,March 31, 2024, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the 6.50%5.625% Notes. The 6.50%5.625% Notes bear a fixed 6.50%5.625% interest rate. The Credit Agreement bears interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the Eurodollar rate, U.S. bank prime rate and U.S. base rate, atduration of the Company’s option.borrowing product. 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 $48.6 million borrowings under the Credit Agreement, as of September 30, 2017,
With regard to our variable rate debt, a 1.0%10% increase or decrease in the weighted average interest rate, which was 3.60% at September 30, 2017,rates would have anchange our annual interest impact of $0.5expense by $2.0 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 Notes to Unaudited CondensedCompany’s Audited Consolidated Financial Statements.Statements included in the 2023 Form 10-K. For the most part, revenues and expenses incurred that related to the non-U.S. operations are denominated in their functional currency. This minimizesreduces the impact that fluctuations in exchange rates will have on profit margins. Intercompany debt which is not intended to be repaid is included in cumulative translation adjustments. Translation of intercompany debt, which is not
47
intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net earnings. Theincome (loss). From time to time, the Company generally does notmay enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
TheImpairment Risk: For the three months ended March 31, 2024, the Company is exposedrecorded an impairment charge of $1.5 million to foreign currency fluctuations relating toreduce the carrying value of one of its intercompany balances betweenright-of-use lease assets and related leasehold improvements. See Note 7 of the U.S. and foreign entities. For every one cent changeNotes included herein for additional information.
See the Significant Accounting Policies section in the exchange rate between“Notes to Audited Consolidated Financial Statements” of the U.S.Company’s 2023 Form 10-K for information related to impairment testing for Goodwill, Right-of-use lease assets and foreign currencies,long-lived assets and the Company will incur a $3.5 million impactrisk of potential impairment charges in future periods. See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2023 Form 10-K for information related to its financial statements.the risk of potential impairment charges in future periods.

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 includeddisclosed in our SEC reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the applicable time periods specified byin 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 only provide 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)13a-15(b) and 15(d)-15(e)15d- 15(b) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in our internal control over financial reporting as disclosed in our Form 10-K for the fiscal year ended December 31, 2023, our CEO and CFO concluded that, as of September 30, 2017,March 31, 2024, our disclosure controls and procedures were not effective.

Material Weakness Remediation Plan and Status

The Company, under the leadership of our CFO, has continued to improve our internal control over financial reporting and we believe these actions will be effective in the remediation of the material weaknesses, however these activities currently remain ongoing.

•We continued our enhanced communications with the Audit Committee of the Board of Directors for increased oversight. The Company also formally reports quarterly to the Audit Committee regarding progress against the remediation plan.
•In the prior year, we designed and implemented controls over our risk assessment process that included detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks. We are effectivefurther enhancing our risk assessment process to ensure that decisions can be made timely with respectidentify potential risks related to required disclosures,the ongoing performance of controls. The risk assessment is regularly updated for new entities and changes in risk profile.
•We are improving existing controls across all business processes covering all significant accounts, focusing on controls over the review of journal entries, account reconciliations and segregation of duties as well as ensuring thatassessing the recording, processing, summarizationsufficiency of resources with an appropriate level of accounting knowledge, experience, and reportingtraining in the finance and accounting functions.
•We are enhancing our management review controls to improve monitoring of information requiredinternal control over financial reporting.

We will consider the above material weaknesses to be included infully remediated once the applicable controls operate for a sufficient period and our Quarterly Report on Form 10-Q formanagement has concluded, through testing, that these controls are operating effectively. In addition, as we continue to monitor the quarter ended September 30, 2017 is appropriate.effectiveness of our internal control over financial reporting, we may perform additional internal control changes as necessary.
Evaluation

48
Changes in Internal Control Over Financial Reporting
As disclosed in the Company’s prior filings on Form 10-K/A for the year ended December 31, 2016, Form 10-Q/A for the quarterly period ended March 31, 2017 and Form 10-Q for the quarterly period ended June 30, 2017, we have recast our single reportable segment and identified four (4) new reportable segments for our Partner Firms. The recasting of prior period segment information does not affect our consolidated financial condition or results of operations for the three months ended March 31, 2017 and 2016, our balance sheets as of March 31, 2017 and December 31, 2016, our cash flows for the three months ended March 31, 2017 and 2016, or goodwill for any period presented.
During the third quarter of fiscal 2017, our management, including our CEO and CFO, concluded that the previously disclosed deficiency in internal controls that led to the determination to recast the Company’s reportable segments reflected a material weakness in our internal controls over segment reporting aggregation and related disclosure controls as of December 31, 2016 and March 31, 2017. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in internal controls over financial reporting arose from an undetected error in management’s judgment and management’s misapplication of ASC 280, specifically the weighting used in the analysis regarding aggregation of operating segments with respect to future and past economic performance. Although our internal “Segment Reporting Policy” included an analysis for segment aggregation criteria, management subsequently identified a design gap in that the analysis failed to contain sufficient detail on the weighting to future and past economic performance, as required by ASC 280 and related guidance. 
In response to the identified material weakness, the Company implemented remediation steps to ensure that its prospective determination of reportable segments is appropriate. The Company promptly updated its aggregation analysis and revised its disclosure of its four (4) reportable segments. Additionally, management enhanced and expanded its internal “Segment

Reporting Policy” to include further detail on how the application of aggregation criteria related to economic characteristics should be applied.This additional detail includes reference to quantitative and qualitative factors, types of metrics being considered and the acceptable level of differences in those metrics between the segments being evaluated for aggregation. Under the Company’s revised approach, this analysis will be performed and documented annually. The Company’s management will continue to evaluate the impact of events (e.g., a change in operating segments, reorganization, change in management approach, etc.) that may arise and impact the Company’s reportable segment structure and document that assessment and related conclusions as necessary.  The Company has enhanced its review controls to ensure proper weighting to future and past economic performance, as required by ASC 280.  Testing of both the design and operating effectiveness of the Company’s enhanced controls was completed, and management concluded that the material weaknesses described above had been fully remediated as of September 30, 2017.
Other than the foregoing actions relating to the recast of the Company’s reportable segments, management believes there have beenThere were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2017March 31, 2024, that has materially affected, or wereis reasonably likely to materially affect, our internal control over financial reporting.





PART II. OTHER INFORMATION

Item 1. Legal Proceedings
The Company’s operating entitiesIn the ordinary course of business, we are involved in various legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believeproceedings. We do not currently expect that the outcome of suchthese proceedings or claims will have a material adverse effect on its financial condition orour results of operations, except as set forth below and under “Item 1A Risk Factors” of this Quarterly Report on Form 10-Q in connection with the ongoing Canadian securities class action litigation claim.cash flows or financial position.
Class Action Litigation in Canada
On August 7, 2015, Roberto Paniccia issued a Statement of Claim in the Ontario Superior Court of Justice in the City of Brantford, Ontario seeking to certify a class action suit naming the following as defendants: MDC, former CEO Miles S. Nadal, former CAO Michael C. Sabatino, CFO David Doft and BDO U.S.A. LLP.  The Plaintiff alleges violations of section 138.1 of the Ontario Securities Act (and equivalent legislation in other Canadian provinces and territories) as well as common law misrepresentation based on allegedly materially false and misleading statements in the Company’s public statements, as well as omitting to disclose material facts with respect to the SEC investigation.  The Company intends to continue to vigorously defend this Canadian suit on the same basis as which the U.S. class action was previously dismissed.  A first case management meeting has been held. The Plaintiff has served his material for leave to proceed under the Securities Act. MDC and the other defendants have served a motion to limit the scope of the proposed class definition to Canadian residents who purchased and sold shares of MDC stock on the Toronto Stock Exchange. Those motions are scheduled to be heard by the Court on November 21, 2017.
ItemItem 1A.    Risk Factors
There arehave been no material changes into the risk factors set forth in Part I, Item 1A “Risk Factors” of our 2023 Form 10-K. These risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject to include the Company’s Annual Report onfactors listed under note about “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K/A for the year ended December 31, 2016.10-Q.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
None.Unregistered Sales of Equity Securities
In the three months ended March 31, 2024, the Company granted 21,593 restricted stock units underlying shares of Class A Common Stock as inducement for employment. We also issued 1,045,296 shares of Class A Common Stock as purchase consideration in connection with acquisitions and for additional interests in subsidiaries. These transactions were exempt from registration under Section 4(a)(2) of the Securities Act. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of these shares.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers
On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of the Repurchase Program. Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $250.0 million of shares of our outstanding Class A Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on March 1, 2026. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. The Board will review the Repurchase Program periodically and may authorize adjustments of its terms. Pursuant to its Credit Agreement (as defined and discussed in Note 8 of the Notes included herein) and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar value of shares it may repurchase in the open market.
49
The following table details our monthly shares repurchased during the first quarter of 2024 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program:
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Program (2)
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (2)
1/1/2024 - 1/31/20241,034,693 $6.56 1,029,540 $131,839,608 
2/1/2024 - 2/28/20241,587,444 $6.47 1,114,223 $124,812,923 
3/1/2024 - 3/31/20242,205,730 $5.83 1,877,200 $113,953,763 
Total4,827,867 $6.20 4,020,963 $113,953,763 

(1) Includes information for all shares repurchased by the Company, including shares repurchased as part of the Company’s publicly announced Repurchase Program, and 806,904 shares to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.

(2) Only includes information for shares repurchased as part of the Company’s publicly announced Repurchase Program.

Item 3.    Defaults Upon Senior Securities
None.

Item 4.     Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
The Company received comment letters fromDuring the Securities andquarterly period covered by this Form 10-Q, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Commission (the “SEC”) DivisionAct) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Corporation Finance dated May 18, 2016, August 9, 2016, October 5, 2016, December 16, 2016, February 28, 2017, June 14, 2017 and October 4, 2017, regarding its Annual Reports on Form 10-K for the fiscal years ended December 31, 2015 and December 31, 2016. The Company has filed detailed responses to each of these letters with the SEC, and we have incorporated into our subsequent periodic filings with the SEC (including this Quarterly Report on Form 10-Q) additional disclosures that we believe are responsive to the SEC’s comments. Certain of these SEC comments remained unresolved as of November 1, 2017, specifically relating to the Company’s disclosure concerning its evaluation of internal controls for the identification and aggregation of reportable segments in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280-10.Regulation S-K).

Item 6.    Exhibits
The exhibits required by this item are listed on the Exhibit Table.Index.

50

Table of Contents
EXHIBIT INDEX
Exhibit No.Description
Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 9, 2023).
Amended and Restated Bylaws of Stagwell Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2021).
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.**
101Interactive Data File, for the period ended March 31, 2024. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.*
* Filed herewith.
** Furnished herewith
51

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.
 
STAGWELL INC.
MDC PARTNERS INC./s/ Mark Penn
Mark Penn
/s/ David DoftChairman of the Board and Chief Executive Officer (Principal Executive Officer)
David DoftMay 2, 2024
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer and Authorized Signatory(Principal Financial Officer)
May 2, 2024
November 1, 2017

EXHIBIT INDEX
52
Exhibit No.Description
12
Statement of computation of ratio of earnings to fixed charges.*
31.1
Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2
Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1
Schedule of Advertising and Communications Companies.*
101Interactive data file.*
* Filed electronically herewith.


67