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Segment Information | 6 Months Ended
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Jun. 30, 2020
Segment Reporting [Abstract] |
Segment Information | Segment Information The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), 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 operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics. The CODM 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 (loss) attributable to MDC Partners Inc. common shareholders plus or minus adjustments to operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates and other items, net. Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). Other items, net includes items such as severance expense and other restructuring expenses, including costs for leases that will either be terminated or sublet in connection with the centralization of our New York real estate portfolio. Effective in the first quarter of 2020, the Company reorganized its management structure resulting in the aggregation of certain Partner Firms into integrated groups (“Networks”). Mr. Penn, appointed key agency executives, that report directly into him, to lead each Network. In connection with the reorganization, we reassessed our reportable segments to align our external reporting with how we operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments. See Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for information regarding a change in reportable segments between the first and second quarter of 2020. The three reportable segments that result from applying the aggregation criteria are as follows: “Integrated Networks - Group A,” “Integrated Networks - Group B” and the “Media & Data Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein and Note 2 of the Company’s 2019 Form 10-K.
• | The Integrated Networks - Group A reportable segment is comprised of the Anomaly Alliance (Anomaly, Concentric Partners, Hunter, Mono, Y Media Labs) and Colle McVoy operating segments.
• | The Integrated Networks - Group B reportable segment is comprised of the Constellation (72andSunny, CPB, Instrument and Redscout) and Doner Partner Network (6degrees, Doner, KWT, Union, Veritas and Yamamoto) operating segments.
The operating segments aggregated within the Integrated Networks - Group A and B reportable segments provide a range of services for its clients, primarily including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast) as well as public relations and communications services, experiential, social media and influencer marketing. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments compete with each other for new business and from time to time have business move between them. While the operating segments are similar in nature, the distinction between the Integrated Networks - Group A and B is the aggregation of operating segments that have the most similar historical and expected average long-term profitability.
• | The Media & Data Network reportable segment is comprised of a single operating segment that combines media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast) with technology and data capabilities. The Media & Data Network includes Gale Partners, Kenna, MDC Media and Northstar.
• | All Other consists of the Company’s remaining operating segments that provide a range of services including advertising, public relations and marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. The All Other category includes Allison & Partners, Bruce Mau, Forsman & Bodenfors, Hello, Team and Vitro.
• | Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Revenue: |
Integrated Networks - Group A | $ | 82,735 |  |  | $ | 103,248 |  |  | $ | 173,356 |  |  | $ | 176,987 |
Integrated Networks - Group B | 93,398 |  |  | 133,394 |  |  | 211,105 |  |  | 266,565 |
Media & Data Network | 28,551 |  |  | 39,456 |  |  | 69,609 |  |  | 82,688 |
All Other | 54,994 |  |  | 86,032 |  |  | 133,350 |  |  | 164,681 |
Total | $ | 259,678 |  |  | $ | 362,130 |  |  | $ | 587,420 |  |  | $ | 690,921 |
Adjusted EBITDA: |  |  |  |  |  |  |
Integrated Networks - Group A | $ | 17,205 |  |  | $ | 18,241 |  |  | $ | 33,507 |  |  | $ | 19,156 |
Integrated Networks - Group B | 16,387 |  |  | 24,848 |  |  | 33,523 |  |  | 43,128 |
Media & Data Network | 892 |  |  | 1,004 |  |  | 2,679 |  |  | 1,036 |
All Other | 6,885 |  |  | 10,937 |  |  | 16,790 |  |  | 17,737 |
Corporate | (5,208 | ) |  | (8,593 | ) |  | (10,770 | ) |  | (13,146 | )
Total Adjusted EBITDA | $ | 36,161 |  |  | $ | 46,437 |  |  | $ | 75,729 |  |  | $ | 67,911 |
Depreciation and amortization | $ | (8,899 | ) |  | $ | (10,663 | ) |  | $ | (18,105 | ) |  | $ | (19,501 | )
Impairment and other losses | (18,839 | ) |  | — |  |  | (19,000 | ) |  | — |
Stock-based compensation | (1,039 | ) |  | (3,634 | ) |  | (4,109 | ) |  | (6,606 | )
Deferred acquisition consideration adjustments | (2,312 | ) |  | (2,073 | ) |  | 2,288 |  |  | 5,570 |
Distributions from non-consolidated affiliates | (1,079 | ) |  | (31 | ) |  | (1,065 | ) |  | (31 | )
Other items, net | (3,895 | ) |  | (6,594 | ) |  | (6,311 | ) |  | (8,220 | )
Total Operating Income | $ | 98 |  |  | $ | 23,442 |  |  | $ | 29,427 |  |  | $ | 39,123 |
Other Income (Expenses): |  |  |  |  |  |  |
Interest expense and finance charges, net | $ | (15,941 | ) |  | $ | (16,413 | ) |  | $ | (31,553 | ) |  | $ | (33,174 | )
Foreign exchange gain (loss) | 5,342 |  |  | 2,932 |  |  | (9,415 | ) |  | 8,374 |
Other, net | 5,884 |  |  | (746 | ) |  | 22,218 |  |  | (4,128 | )
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | (4,617 | ) |  | 9,215 |  |  | 10,677 |  |  | 10,195 |
Income tax expense (benefit) | (7,923 | ) |  | 2,088 |  |  | 5,577 |  |  | 2,835 |
Income before equity in earnings of non-consolidated affiliates | 3,306 |  |  | 7,127 |  |  | 5,100 |  |  | 7,360 |
Equity in earnings (losses) of non-consolidated affiliates | (798 | ) |  | 206 |  |  | (798 | ) |  | 289 |
Net income | 2,508 |  |  | 7,333 |  |  | 4,302 |  |  | 7,649 |
Net income attributable to the noncontrolling interest | (3,101 | ) |  | (3,043 | ) |  | (3,892 | ) |  | (3,472 | )
Net income (loss) attributable to MDC Partners Inc. | (593 | ) |  | 4,290 |  |  | 410 |  |  | 4,177 |
Accretion on and net income allocated to convertible preference shares | (3,509 | ) |  | (3,515 | ) |  | (6,949 | ) |  | (5,625 | )
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | (4,102 | ) |  | $ | 775 |  |  | $ | (6,539 | ) |  | $ | (1,448 | )
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Depreciation and amortization: | (Dollars in Thousands)
Integrated Networks - Group A | $ | 1,566 |  |  | $ | 2,348 |  |  | $ | 3,307 |  |  | $ | 4,289 |
Integrated Networks - Group B | 4,387 |  |  | 4,318 |  |  | 8,913 |  |  | 8,092 |
Media & Data Network | 807 |  |  | 1,335 |  |  | 1,615 |  |  | 2,328 |
All Other | 1,903 |  |  | 2,441 |  |  | 3,802 |  |  | 4,354 |
Corporate | 236 |  |  | 221 |  |  | 468 |  |  | 438 |
Total | $ | 8,899 |  |  | $ | 10,663 |  |  | $ | 18,105 |  |  | $ | 19,501 |
Stock-based compensation: |  |  |  |  |  |  |
Integrated Networks - Group A | $ | (105 | ) |  | $ | 639 |  |  | $ | 1,856 |  |  | $ | 4,234 |
Integrated Networks - Group B | 746 |  |  | 1,627 |  |  | 1,646 |  |  | 2,491 |
Media & Data Network | 4 |  |  | 6 |  |  | (9 | ) |  | 6 |
All Other | 118 |  |  | 170 |  |  | 198 |  |  | 256 |
Corporate | 276 |  |  | 1,192 |  |  | 418 |  |  | (381 | )
Total | $ | 1,039 |  |  | $ | 3,634 |  |  | $ | 4,109 |  |  | $ | 6,606 |
Capital expenditures: |  |  |  |  |  |  |
Integrated Networks - Group A | $ | 208 |  |  | $ | 2,157 |  |  | $ | 566 |  |  | $ | 4,038 |
Integrated Networks - Group B | (272 | ) |  | 1,013 |  |  | 205 |  |  | 2,181 |
Media & Data Network | 111 |  |  | 206 |  |  | 197 |  |  | 344 |
All Other | 134 |  |  | 923 |  |  | 457 |  |  | 1,341 |
Corporate | 1,963 |  |  | 18 |  |  | 2,265 |  |  | 19 |
Total | $ | 2,144 |  |  | $ | 4,317 |  |  | $ | 3,690 |  |  | $ | 7,923 |
The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed. See Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for a summary of the Company’s revenue by geographic region for the three and six months ended June 30, 2020 and 2019.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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