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Item 8. Financial Statements and Supplementary Data

2022-03-17 compared with 2021-03-16 · 888 added, 1020 removed, 556 unchanged (77% of the section changed)

Financial Statements and Supplementary Data

MDC PARTNERS INC.

AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for each of the Three Years in the Period Ended December 31, 2020

Consolidated Statements of Comprehensive Income (Loss) for each of the Three Years in the Period Ended December 31, 2020

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2020

Consolidated Statements of Shareholders’ Deficit for each of the Three Years in the Period Ended December 31, 2020

Notes to Consolidated Financial Statements

Financial Statement Schedules:

Schedule II — Valuation and Qualifying Accounts for each of the Three Years in the Period Ended December 31, 20 2 0

T a b l e o f C o n t e n t s

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

MDC Partners Inc.

New York, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MDC Partners Inc.

(the “Company”) and subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedules presented in Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 16, 2021 expressed an unqualified opinion thereon.

Change in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases on January 1, 2019 due to the adoption of Accounting Standards Codification, Leases (“ASC 842”).

To the shareholders and the Board of Directors of Stagwell Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stagwell Inc.

and subsidiaries (the “ Company ” ) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders ’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “ financial statements ” ).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company ’ s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2022, expressed an adverse opinion on the Company ’ s internal control over financial reporting because of material weaknesses.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

These financial statements are the responsibility of the Company ’ s management.

Our responsibility is to express an opinion on the Company ’ s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

1 unchanged sentence

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

As described in Notes 2 and 5 to the consolidated financial statements, the Company provides an extensive range of services to its clients offering a variety of marketing and communication capabilities.

The determination of the Company’s performance obligations is specific to the services included within each revenue contract.

Based on the services to be provided to a client within a contract, and how those services are provided, multiple services could represent separate performance obligations or be combined and considered as one performance obligation.

Revenue is typically recognized based on the measure of progress of each distinct performance obligation, as services are performed.

Revenue is typically recognized using input methods (including direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract.

We identified the determination of the measure of progress of performance obligations as a critical audit matter.

The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions.

T a b l e o f C o n t e n t s

degree of auditor judgment was required to evaluate the key assumptions used to estimate costs to complete the contracts, including the labor hours, materials, and third-party costs to complete the contracts.

Changes in these estimates can have a significant impact on the revenue recognized each period.

Auditing these aspects involved especially challenging auditor judgment due to the nature and extent of audit effort required to evaluate the reasonableness of management’s assumptions and estimates over the duration of these contracts.

The primary procedures we performed to address this critical audit matter included:

Testing the operating effectiveness of certain controls relating to management’s estimation of the measure of progress of each performance obligation within revenue contracts including:

(i) development of contract budgets, (ii) ongoing assessment and revisions to contract budgets, and (iii) ongoing review of contract status including nature of activities to complete.

Assessing the reasonableness of management’s estimation of the measure of progress for a sample of contracts through:

(i) corroborating measure of progress against relevant evidence outside the accounting function, (ii) performing retrospective review of the estimated costs to complete to assess the reasonableness of management’s judgments, (iii) testing a sample of revenue contracts and underlying documents to determine the accuracy of key cost inputs, such as labor hours, materials, and third-party costs, and (iv) assessing the reasonableness of the measure of progress of performance obligations through testing of a sample of costs incurred to date and estimated costs to complete.

Goodwill Impairment Assessment

As described in Notes 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance as of December 31, 2020 was $668.2 million.

The Company tests for impairment annually on a reporting unit basis or more often when impairment indicators exist.

As a result of the COVID-19 pandemic, the Company performed an interim goodwill impairment test in the second quarter of 2020 that resulted in a goodwill impairment charge of $13.4 million.

In connection with the Company’s annual impairment assessment performed as of October 1, 2020 the Company recorded an additional impairment charge of $48.3 million.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company determines the fair value of its reporting units using a discounted cash flow model.

The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to the amount and timing of expected future cash flows, assumed terminal values and appropriate discount rates.

We identified the valuation of certain reporting units during the impairment assessment of goodwill as a critical audit matter.

The principal considerations for our determination are:

(i) for certain reporting units, the deterioration of economic conditions led to an increased sensitivity to estimates due to the decline in the excess of fair value over book value as of the annual testing date of October 1, 2020, as such, the assumptions and judgments used were more sensitive to management’s estimates, and (ii) inherent uncertainties exist related to the Company’s forecasts and how various economic and other factors, including the projected impact from the COVID-19 pandemic, could affect the Company’s forecasted assumptions of future cash flows and the selection of the discount rate included in the income approach.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of management’s forecasts of future cash flows given the inherent uncertainty of COVID-19 through:

(i) comparing actual results to management’s historical forecasts and industry data, (ii) corroborating the consistency of assumptions utilized in management forecasts with other internal information and with evidence obtained in other areas of the audit such as reviewing historical operating results of the reporting unit and reviewing revenue contracts and supporting documentation for cost reductions such as headcount analysis to support future projections, (iii) performing sensitivity analyses of reporting units’ cash flow projections, and (iv) performing procedures to assess the completeness, accuracy and relevance of the underlying data used in the discounted cash flow analysis.

• Utilizing personnel with specialized knowledge and skill in valuation to assist in:

(i) evaluating the appropriateness of the methodologies and the valuation models utilized by management to determine the fair values of the reporting units, and (ii) assessing the reasonableness of certain assumptions incorporated into the valuation models including terminal growth rates and discount rates.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2006.

New York, New York

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue — Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

The Company ’ s revenue is primarily derived from the provision of marketing and communications services which includes strategy, creative and production for advertising campaigns, public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management, media buying and planning, experiential marketing and application/website design and development.

Each of the Company ’ s operating companies (referred to as Brands) generate revenue from one or more of these services.

The Brands have numerous customers and contracts, under a variety of contract terms and provisions.

The volume of such contracts and the diversity of the terms in such contracts introduces significant complexity in assessing the accounting under the revenue accounting standard.

This complexity includes the critical judgements around defining performance obligations and the recognition of revenue when or as the customer obtains control of the promised services in an amount that reflects the consideration expected to be received in exchange for those services.

Given the volume and diversity of the Company’s contracts, performing audit procedures to evaluate whether revenue was appropriately recorded, required a high degree of auditor judgement and an increased extent of audit effort and is therefore considered a critical audit matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the testing of the Company’s application of revenue accounting standard to their revenue contracts included the following, among others:

• Assessed the nature and amount of revenue recorded by Brand and evaluated the overall application of the revenue accounting standard,

• Selected a sample of contracts, specifically including individually material revenue contracts, across the Brands and types of contracts.

Testing included consideration of the specific application of the revenue accounting standard, including the identification of the performance obligation(s), the evaluation of the methods applied in the recognition and measurement of revenue, and the verification of the timing of delivery, transaction price and performance of services related to the revenue recorded.

• Tested the mathematical accuracy of revenue recorded for each selection based on audit evidence obtained.

Intangible Assets – Acquisitions and Dispositions — Refer to Notes 2 and 4 t o the financial statements

Critical Audit Matter Description

Stagwell Inc.

was formed on August 2, 2021 as the result of a merger between Stagwell Marketing Group, LLC (a private company, “legacy SMG”) and MDC Partners, Inc.

(an existing public operating company listed on the NASDAQ, “legacy MDC”).

Upon consummation of the merger (“Transaction”), Stagwell has become the issuer through a reverse merger by taking control of MDC, and was renamed Stagwell Inc.

The acquisition consideration totaled $426 million.

The Acquisition was accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including customer relationship assets of $713 million and tradenames of $98 million.

The fair value determination of the acquired customer relationship and tradename intangible assets required management to make significant estimates and assumptions related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates.

Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates for the customer relationships and tradename intangible assets acquired included the following, among others:

• We evaluated the sensitivity of changes in the assumptions on the fair value of the customer relationship and tradename intangible assets.

• We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and industry market data.

• We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) customer attrition rates, (2) discount rates, and (3) royalty rates by:

◦ We assessed the reasonableness of management’s selection of customer attrition rates by comparing the revenue lost from customer attrition to historical data.

◦ Testing the source information underlying the determination of the customer attrition rates, discount rates, and royalty rates, and testing the mathematical accuracy of the calculations.

◦ Developing a range of independent estimates and comparing those to the discount rates and royalty rates selected by management.

/s/ Deloitte & Touche LLP

March 17, 2022

T a b l e o f C o n t e n t s

MDC PARTNERS INC.

We have served as the Company ’ s auditor since 2020.

STAGWELL INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Operations for each of the T wo Years in the Period Ended December 31, 20 2 1

Consolidated Statements of Comprehensive Income (Loss) for each of the Two Years in the Period Ended December 31, 202 1

Consolidated Balance Sheets as of December 31, 202 1 and 20 20

Consolidated Statements of Cash Flows for each of the Two Years in the Period Ended December 31, 202 1

Consolidated Statements of Shareholders’ Equity for each of the Two Years in the Period Ended December 31, 2021

Notes to Consolidated Financial Statements

Financial Statement Schedules:

Schedule II — Valuation and Qualifying Accounts for each of the Two Years in the Period Ended December 31, 2021

Financial Statements

STAGWELL INC.

AND SUBSIDIARIES

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(thousands of United States dollars, except per share amounts)

Years Ended December 31,

2020 2019 2018

Services $ 1,199,011 $ 1,415,803 $ 1,475,088

Twelve Months Ended December 31,

Revenue $ 1,469,363 $ 888,032

Operating Expenses

Cost of services sold 769,899 961,076 991,198

Cost of services 906,856 571,588

Office and general expenses 424,038 191,679

2 unchanged sentences

1,424,637 804,292

Operating income (loss) ( 45,757 ) 79,460 1,434

Operating income 44,726 83,740

Other Income (expenses):

Interest expense and finance charges, net ( 62,163 ) ( 64,942 ) ( 67,075 )

Foreign exchange gain (loss) ( 982 ) 8,750 ( 23,258 )

Other, net 20,500 ( 2,401 ) 230

Interest expense, net ( 31,894 ) ( 6,223 )

Foreign exchange, net ( 3,332 ) ( 721 )

Gain on sale of business and other, net 50,058 544

14,832 ( 6,400 )

Income (loss) before income taxes and equity in earnings of non-consolidated affiliates ( 88,402 ) 20,867 ( 88,669 )

Income before income taxes and equity in earnings of non-consolidated affiliates 59,558 77,340

Income tax expense 23,398 5,937

Income (loss) before equity in earnings of non-consolidated affiliates ( 204,957 ) 10,551 ( 118,284 )

Equity in earnings (losses) of non-consolidated affiliates ( 2,240 ) 352 62

Net income (loss) ( 207,197 ) 10,903 ( 118,222 )

Net income attributable to the noncontrolling interest ( 21,774 ) ( 16,156 ) ( 11,785 )

Net loss attributable to MDC Partners Inc.

( 228,971 ) ( 5,253 ) ( 130,007 )

Accretion on and net income allocated to convertible preference shares ( 14,179 ) ( 12,304 ) ( 8,355 )

Net loss attributable to MDC Partners Inc.

Income before equity in earnings of non-consolidated affiliates 36,160 71,403

Equity in (income) losses of non-consolidated affiliates ( 240 ) 58

Net income 35,920 71,461

Net income attributable to noncontrolling and redeemable noncontrolling interests ( 14,884 ) ( 15,105 )

Net income attributable to Stagwell Inc.

common shareholders $ 21,036 $ 56,356

Loss Per Common Share:

Net loss attributable to MDC Partners Inc.

common shareholders $ ( 3.34 ) $ ( 0.25 ) $ ( 2.42 )

Net loss attributable to MDC Partners Inc.

common shareholders $ ( 3.34 ) $ ( 0.25 ) $ ( 2.42 )

Net loss attributable to Stagwell Inc.

common shareholders $ ( 0.04 ) N/A

Net loss attributable to Stagwell Inc.

common shareholders $ ( 0.04 ) N/A

Weighted Average Number of Common Shares Outstanding:

Basic 72,862,178 69,132,100 57,218,994

Diluted 72,862,178 69,132,100 57,218,994

See notes to the Consolidated Financial Statements.

T a b l e o f C o n t e n t s

MDC PARTNERS INC.

Basic 90,426,215 N/A

Diluted 90,426,215 N/A

See notes to the Audited Consolidated Financial Statements .

STAGWELL INC.

AND SUBSIDIARIES

1 unchanged sentence

(thousands of United States dollars)

Years Ended December 31,

2020 2019 2018

Comprehensive Income (Loss)

Net income (loss) $ ( 207,197 ) $ 10,903 $ ( 118,222 )

Other comprehensive income (loss), net of applicable tax:

Twelve Months Ended December 31,

COMPREHENSIVE INCOME

Net income $ 35,920 $ 71,461

Other comprehensive income (loss)

Foreign currency translation adjustment ( 6,000 ) 2,371

Benefit plan adjustment, net of income tax expense (benefit) of ($519) for 2020, ($740) for 2019 and $223 for 2018 ( 1,354 ) ( 1,911 ) 555

Benefit plan adjustment 722 —

Net unrealized loss on available for sale investment — ( 5,156 )

Other comprehensive income (loss) ( 5,278 ) ( 2,785 )

Comprehensive income (loss) for the period ( 199,459 ) 2,301 ( 114,509 )

Comprehensive income for the period 30,642 68,676

Comprehensive income attributable to the noncontrolling interests ( 14,884 ) ( 15,105 )

Comprehensive loss attributable to MDC Partners Inc.

Comprehensive income attributable to Stagwell Inc.

$ 15,758 $ 53,571

See notes to the Consolidated Financial Statements.

T a b l e o f C o n t e n t s

MDC PARTNERS INC.

See notes to the Audited Consolidated Financial Statements .

STAGWELL INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(thousands of United States dollars)

(thousands of United States dollars, except share amounts)

December 31, 2021 December 31, 2020

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Cash and cash equivalents $ 184,009 $ 92,457

Accounts receivable, less allowance for doubtful accounts of $5,473 and $3,304 374,892 449,288

Accounts receivable, net 696,937 225,733

Expenditures billable to clients 63,065 11,063

1 unchanged sentence

Total Current Assets 1,005,841 365,686

Fixed assets, at cost, less accumulated depreciation of $136,166 and $129,579 90,413 81,054

Fixed assets, net 118,603 35,614

Right-of-use assets - operating leases 311,654 57,752

1 unchanged sentence

Other intangible assets, net 937,695 186,035

Deferred tax assets 179 84,900

Other assets 29,064 17,043

Total Assets $ 4,055,580 $ 1,013,855

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT

LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

Current Liabilities

8 unchanged sentences

Long-term lease liabilities - operating leases 342,730 52,606

Deferred tax liabilities, net 103,093 16,050

Other liabilities 57,147 5,801

2 unchanged sentences

Commitments, Contingencies and Guarantees (Note 14)

Shareholders’ Deficit:

Convertible preference shares, 145,000 authorized, issued and outstanding at December 31, 2020 and 2019 152,746 152,746

Common stock and other paid-in capital 104,367 101,469

Shareholders' Equity:

Members' capital — 358,756

Common shares - Class A & B 118 —

Common shares - Class C 2 —

Paid-in capital 382,893 —

Accumulated deficit ( 6,982 ) —

Accumulated other comprehensive income (loss) 2,739 ( 4,269 )

MDC Partners Inc.

Shareholders' Deficit ( 449,899 ) ( 230,833 )

Accumulated other comprehensive loss ( 5,278 ) —

Stagwell Inc.

Shareholders' Equity 370,753 358,756

Noncontrolling interests 508,287 39,787

Total Shareholders' Deficit ( 408,910 ) ( 190,575 )

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit $ 1,511,314 $ 1,828,306

See notes to the Consolidated Financial Statements.

MDC PARTNERS INC.

Total Shareholders' Equity 879,040 398,543

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity $ 4,055,580 $ 1,013,855

See notes to the Audited Consolidated Financial Statements .

STAGWELL INC.

AND SUBSIDIARIES

1 unchanged sentence

(thousands of United States dollars)

Years Ended December 31,

2020 2019 2018

Twelve Months Ended December 31,

Cash flows from operating activities:

Net income (loss) $ ( 207,197 ) $ 10,903 $ ( 118,222 )

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Net income $ 35,920 $ 71,461

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Stock-based compensation 75,032 —

1 unchanged sentence

Impairment and other losses 16,240 —

Provision for bad debt 2,031 6,222

Deferred income taxes ( 3,818 ) ( 5,463 )

Adjustment to deferred acquisition consideration 18,721 4,520

Deferred income taxes (benefits) 108,556 4,791 21,585

Gain on sale of assets and other 771 ( 4,107 ) 22,451

Interest from preferred investments — ( 600 )

Equity in losses of unconsolidated affiliates, net of dividends received — ( 58 )

Transaction costs contributed by Stagwell Media LP — 10,160

Foreign currency translation loss on foreign denominated debt — 721

Other ( 1,463 ) 1,329

Gain on sale of business ( 43,440 ) —

Changes in working capital:

1 unchanged sentence

Expenditures billable to clients ( 35,371 ) 10,078

Prepaid expenses and other current assets 24,840 3,474 ( 17,189 )

Accounts payable, accruals and other current liabilities ( 144,123 ) ( 14,077 ) ( 18,222 )

Acquisition related payments ( 13,330 ) ( 5,223 ) ( 29,141 )

Cash in trusts — — ( 656 )

Other assets 3,997 ( 10,461 )

Accounts payable ( 46,356 ) 5,606

Accruals and other liabilities 61,974 22,922

Advance billings 76,021 7,423

Deferred acquisition related payments ( 5,351 ) —

Net cash provided by operating activities 200,856 138,080

1 unchanged sentence

Capital expenditures ( 22,626 ) ( 12,099 )

Proceeds from sale of assets 19,616 23,050 2,082

Proceeds from sale of business, net 37,232 —

Acquisitions, net of cash acquired 150,346 ( 14,732 )

2 unchanged sentences

Cash flows from financing activities:

Repayment of borrowings under revolving credit facility ( 550,135 ) ( 1,303,350 ) ( 1,625,862 )

Repayment of borrowings under revolving credit facility and term loan ( 719,088 ) ( 126,994 )

Proceeds from borrowings under revolving credit facility 516,669 167,000

Proceeds from issuance of common and convertible preference shares, net of issuance costs — 98,620 —

Acquisition related payments ( 35,391 ) ( 30,155 ) ( 32,172 )

Distributions to noncontrolling interests and other ( 16,036 ) ( 12,049 ) ( 14,537 )

Repurchase of Bonds ( 21,999 ) — —

Net cash provided by (used in) financing activities ( 73,426 ) ( 11,729 ) 21,434

Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts 2,978 1 77

Net increase (decrease) in cash, cash equivalents, and cash held in trusts including cash classified within assets held for sale ( 46,176 ) 74,926 ( 11,640 )

Change in cash and cash equivalents held in trusts classified within held for sale — ( 3,307 ) ( 8,298 )

Change in cash and cash equivalents classified within assets held for sale — 4,441 —

Net increase (decrease) in cash and cash equivalents ( 46,176 ) 76,060 ( 19,938 )

Cash and cash equivalents at beginning of period 106,933 30,873 50,811

Cash and cash equivalents at end of period $ 60,757 $ 106,933 $ 30,873

MDC PARTNERS INC.

Shares acquired and cancelled ( 841 ) —

Payment of deferred consideration and other — ( 1,000 )

Contributions — 1,554

Proceeds from issuance of the 5.625% Notes 1,100,000 —

Purchase of noncontrolling interest ( 37,500 ) ( 1,559 )

Debt issuance costs ( 15,053 ) ( 3,099 )

Payment of contingent consideration — ( 500 )

Distributions ( 233,203 ) ( 115,543 )

STAGWELL INC.

AND SUBSIDIARIES

1 unchanged sentence

(thousands of United States dollars)

Years Ended December 31,

2020 2019 2018

Twelve Months Ended December 31,

Repurchase of 7.50% Senior Notes ( 884,398 ) —

Net cash used in financing activities ( 273,414 ) ( 80,141 )

Effect of exchange rate changes on cash and cash equivalents 158 ( 321 )

Net increase in cash and cash equivalents 91,552 28,597

Cash and cash equivalents at beginning of period 92,457 63,860

Cash and cash equivalents at end of period $ 184,009 $ 92,457

Supplemental disclosures:

1 unchanged sentence

Cash interest paid 23,528 9,287

See notes to the Consolidated Financial Statements.

MDC PARTNERS INC.

Non-cash investing and financing activities:

Acquisitions of business $ 425,752 $ 23,720

Acquisitions of noncontrolling interest 170,266 —

Issuance of redeemable noncontrolling interest 27,280 —

Net unrealized gain on available for sale investment — 5,156

Non-cash contributions 12,372 93,880

Non-cash distributions to Stagwell Media LP 13,000 —

Non-cash payment of deferred acquisition consideration 7,080 64,345

Conversion of preferred shares 209,947 —

See notes to the Audited Consolidated Financial Statements .

STAGWELL INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(thousands of United States dollars, except per share amounts)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(thousands of United States dollars, except share amounts)

Twelve Months Ended

December 31, 2021

Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) MDC Partners Inc.

Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit

Shares Amount Shares

Members' capital Convertible Preference Shares Common Shares -

Class A & B Common Shares -

Class C Paid-in Capital Accumulated Deficit Other Comprehensive Loss Stagwell Inc.

Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2020

Net income attributable to MDC Partners Inc.

$ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543

Other comprehensive income — — — — — 7,008 7,008 730 7,738

Vesting of restricted awards — — 1,808,984 — — — — — —

Shares acquired and cancelled — — ( 430,739 ) ( 905 ) — — ( 905 ) — ( 905 )

Stock-based compensation — — — 6,629 — — 6,629 — 6,629

Changes in redemption value of redeemable noncontrolling interests — — — ( 2,800 ) — — ( 2,800 ) — ( 2,800 )

Business acquisitions and step-up transactions, net of tax — — — 1,626 — — 1,626 — 1,626

Net income prior to reorginization 24,742 — — — — — — — — — 24,742 2,693 27,435

Other comprehensive loss ( 375 ) — — — — — — — — — ( 375 ) — ( 375 )

Contributions 250 — — — — — — — — — 250 — 250

Distributions, net ( 204,929 ) — — — — — — — — — ( 204,929 ) — ( 204,929 )

Distributions to noncontrolling interests — — — — — — — — — — — ( 11,936 ) ( 11,936 )

Changes in redemption value of RNCI ( 72 ) — — — — — — — — — ( 72 ) — ( 72 )

Other — — — — — — — — — — — ( 300 ) ( 300 )

Balance at December 31, 2020 145,000 $ 152,746 73,532,848 $ 104,367 $ ( 709,751 ) $ 2,739 $ ( 449,899 ) $ 40,989 $ ( 408,910 )

Twelve Months Ended

December 31, 2019

Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc.

Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit

Shares Amount Shares

Balance at December 31, 2018 95,000 $ 90,123 57,521,323 $ 58,579 $ ( 475,526 ) $ 4,720 $ ( 322,104 ) $ 64,514 $ ( 257,590 )

Net income attributable to MDC Partners Inc.

Effect of reorganization ( 178,372 ) 123,849,000 209,980 78,793,502 77 179,970,051 2 110,555 — — 142,242 636,416 778,658

Reclass NCI to Liability — — — — — — — — — — ( 8,475 ) ( 8,475 )

Impact of PPA adjustment to noncontrolling interests — — — — 1 — — 8,845 — — 8,846 ( 1,549 ) 7,297

Net income (loss) attributable to Stagwell Inc.

— — — — — — — — ( 3,706 ) — ( 3,706 ) 12,602 8,896

Other comprehensive income (loss) — — — — — ( 8,989 ) ( 8,989 ) 387 ( 8,602 )

Issuance of common and convertible preference shares 50,000 62,623 14,285,714 35,997 — — 98,620 — 98,620

Vesting of restricted awards — — 576,932 — — — — — —

Other comprehensive loss — — — — — — — — — ( 5,278 ) ( 5,278 ) — ( 5,278 )

Distributions to noncontrolling interests — — — — — — — — — — — ( 16,338 ) ( 16,338 )

Changes in redemption value of RNCI — — — — — — — — ( 3,834 ) — ( 3,834 ) — ( 3,834 )

Grants of restricted awards — — — 1,961,588 2 — — ( 2 ) — — — — —

Shares acquired and cancelled — — — ( 14,423 ) — — — ( 841 ) — — ( 841 ) — ( 841 )

Stock-based compensation — — — — — — — 70,427 — — 70,427 — 70,427

Changes in redemption value of redeemable noncontrolling interests — — — 3,160 — — 3,160 — 3,160

Business acquisitions and step-up transactions, net of tax — — — 1,911 — — 1,911 — 1,911

Changes in ownership interest — — — ( 91 ) — — ( 91 ) ( 24,642 ) ( 24,733 )

Reclass noncontrolling interests to RNCI — — — — — — — ( 25,236 ) — — ( 25,236 ) ( 2,719 ) ( 27,955 )

Purchases of noncontrolling interests — — — 4,475,653 5 — — ( 14,138 ) — — ( 14,133 ) ( 143,134 ) ( 157,267 )

Tax impact on step up transactions — — — — — — — 23,108 — — 23,108 — 23,108

Conversion of shares — ( 123,849,000 ) ( 209,980 ) 33,035,446 33 — — 209,947 — — — — —

Other — — — — — — — 228 558 — 786 1,240 2,026

Balance at December 31, 2021

MDC PARTNERS INC.

$ — — $ — 118,251,766 $ 118 179,970,051 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040

See notes to the Audited Consolidated Financial Statements

STAGWELL INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT - (continued)

(thousands of United States dollars, except per share amounts)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(thousands of United States dollars, except share amounts)

Twelve Months Ended

December 31, 2020

Convertible Preference Shares Common Shares Common Stock and Other Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income MDC Partners Inc.

Shareholders' Deficit Noncontrolling Interests Total Shareholder's Deficit

Shares Amount Shares

Members' capital Convertible Preference Shares Common Shares -

Class A & B Common Shares -

Class C Paid-in Capital Accumulated Deficit Other Comprehensive Income Stagwell Inc.

Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2019

Net loss attributable to MDC Partners Inc.

$ 316,960 — $ — — $ — — $ — $ — $ — $ — $ 316,960 $ 31,577 $ 348,537

Other comprehensive income (loss) — — — — — 6,674 6,674 ( 2,961 ) 3,713

Expenses for convertible preference shares — ( 97 ) — — — — ( 97 ) — ( 97 )

Vesting of restricted awards — — 243,529 — — — — — —

Shares acquired and cancelled — — ( 108,898 ) ( 776 ) — — ( 776 ) — ( 776 )

Shares issued, acquisitions — — 1,011,561 7,030 — — 7,030 — 7,030

Stock-based compensation — — — 8,165 — — 8,165 — 8,165

Changes in redemption value of redeemable noncontrolling interests — — — ( 4,171 ) — — ( 4,171 ) — ( 4,171 )

Business acquisitions and step-up transactions, net of tax — — — 10,140 — — 10,140 15,410 25,550

Changes in ownership interest — — — — — — — ( 5,965 ) ( 5,965 )

Cumulative effect of adoption of ASC 606 — — — — ( 1,170 ) — ( 1,170 ) — ( 1,170 )

Net income attributable to Stagwell Inc.

56,356 — — — — — — — — — 56,356 18,231 74,587

Other comprehensive loss ( 2,785 ) — — — — — — — — — ( 2,785 ) — ( 2,785 )

Contributions 95,434 — — — — — — — — — 95,434 — 95,434

Distributions ( 108,468 ) — — — — — — — — — ( 108,468 ) ( 7,075 ) ( 115,543 )

Changes in redemption value of RNCI ( 128 ) — — — — — — — — — ( 128 ) — ( 128 )

Other 1,387 — — — — — — — — — 1,387 ( 2,946 ) ( 1,559 )

Balance at December 31, 2020 $ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543

See notes to the Consolidated Financial Statements.

MDC PARTNERS INC.

See notes to the Audited Consolidated Financial Statements

STAGWELL INC.

AND SUBSIDIARIES

1 unchanged sentence

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Basis of Presentation and Recent Developments

The accompanying consolidated financial statements include the accounts of MDC Partners Inc.

(the “Company” or “MDC”), its subsidiaries and variable interest entities for which the Company is the primary beneficiary.

MDC has prepared the consolidated financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting financial information on Form 10-K.

Business and Basis of Presentation

Stagwell Inc.

(the “Company” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and their Brands (“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 consolidated financial statements include the accounts of Stagwell and its subsidiaries.

Stagwell has prepared the audited consolidated 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 Securities and Exchange Commission (the “SEC”) for reporting financial information on this Annual Report on Form 10-K (this “Form 10-K”).

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 COVID-19 pandemic negatively impacted the Company’s results of operations, financial position, and cash flows in 2020.

The Company took actions to address the impact of the pandemic, such as working closely with our clients, reducing our expenses and monitoring liquidity.

On December 21, 2020, MDC Partners Inc.

(“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”).

The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing”) and its direct and indirect subsidiaries.

On August 2, 2021, we completed the previously announced combination of MDC Partners Inc.

(“MDC”) and the operating businesses and subsidiaries of Stagwell Media LP.

(“Stagwell Media”) and a series of related transactions (such combination and transactions, the “Transactions”).

The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) treated as the accounting acquirer.

The results of MDC are included within the Audited Consolidated Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entire period presented.

See Note 4 of the Notes to the Consolidated Financial Statements (the “Notes” included herein for information in connection with the acquisition of MDC.

The Company continues to monitor the worldwide public health threat and government actions to combat COVID-19 and the impact such developments may have on the overall economy, our clients and operations.

The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation of the financial statements.

If the duration of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the judgments, assumptions and estimates will be updated and could result in different results in the future.

The judgments, assumptions and estimates will be updated and could result in different results in the future depending on the continued impact of the COVID-19 pandemic.

The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein.

Intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

The Company reorganized its management structure in 2020 which resulted in a change to our reportable segments.

Prior periods presented have been recast to reflect the change in reportable segments.

See Note 20 of the Notes to the Consolidated Financial Statements included herein.

Nature of Operations

MDC Partners Inc., incorporated under the laws of Canada, is a leading provider of global marketing, advertising, activation, communications and strategic consulting solutions.

Through its Networks (and underlying agencies generally referred to as “Partner Firms”), MDC delivers a wide range of customized services in order to drive growth and business performance for its clients.

The Company operates in North America, Europe, Asia, South America, and Australia.

Recent Developments

On December 21, 2020, MDC and Stagwell Media LP, a Delaware limited partnership (“Stagwell”), announced that they entered into a definitive transaction agreement (the “Transaction Agreement”) providing for the combination of MDC with the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (the “Stagwell Entities”).

Under the terms of the Transaction Agreement, the combination between MDC and the Stagwell Entities will be effected using an “Up-C” partnership structure.

Through a series of steps and transactions (collectively, the “Transactions”), including the domestication of MDC to a Delaware corporation and the merger of MDC Delaware with one of its indirect wholly owned subsidiaries (the “MDC Merger”), MDC Delaware will become a direct subsidiary (from and after the merger, “OpCo”) of a newly-formed, Delaware-organized, NASDAQ-listed corporation (“New MDC”).

Following the MDC Merger, (i) OpCo will convert into a limited liability company that will hold MDC’s operating assets and to which Stagwell will contribute the equity interests of the Stagwell Entities (the “Stagwell Contribution”) in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) Stagwell will contribute to New MDC an aggregate amount of cash equal to $ 100 in exchange for shares of a new Class C series of voting-only common stock (the “New MDC Class C Stock”) equal in number to the Stagwell OpCo Units.

On a pro forma basis, without giving effect to any outstanding preference shares of MDC, the existing holders of MDC’s Class A and Class B shares would receive interests equal to approximately 26 % of the combined company and Stagwell would be issued New MDC Class C Stock equivalent to approximately 74 % of the voting rights of the combined company and exchangeable, together with Stagwell OpCo Units, into Class A shares of New MDC on a one -for-one basis at Stagwell’s election.

The number of Stagwell OpCo Units and shares of New MDC Class C Stock that Stagwell will receive in the Transactions, and the percentage of the combined company that Stagwell will hold following the consummation of the Transactions, will be reduced, and the percentage of the combined company that existing MDC shareholders will hold will be proportionally increased, if Stagwell is unable to effect certain restructuring transactions prior to the closing of the Transactions.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Basis of Presentation and Recent Developments - (continued)

On December 21, 2020, MDC and Broad Street Principal Investments, L.L.C., an affiliate of Goldman Sachs (“Broad Street”), entered into a letter agreement, pursuant to which Broad Street consented to the Transactions subject to entry with MDC into a definitive agreement reflecting revised terms of MDC’s issued and outstanding Series 4 convertible preference shares (the “Goldman Letter Agreement”).

The revised terms of the Series 4 convertible preference shares would (subject to the closing of the Transactions) reduce the conversion price from $ 7.42 to $ 5.00 and extend accretion for two years beyond the date on which accretion would have otherwise ceased, at a reduced rate of 6 %.

In connection with the closing of the Transactions, Broad Street will have the right to redeem up to $ 30 million of its preference shares in exchange for a $ 25 million subordinated note or loan with a 3 -year maturity (i.e., exchange at an approximately 17 % discount to face value).

The $25 million note or loan will accrue interest at 8.0 % per annum and is, pre-payable any time at par without penalty.

On December 21, 2020, MDC entered into consent and support agreements (the “Consent and Support Agreements”) with holders of more than 50% of the aggregate principal amount of its Senior Notes to consent to the consummation of the combination of MDC with the Stagwell Entities.

Pursuant to the Consent and Support Agreements, MDC agreed to increase the interest rate on the Senior Notes by 1 % per annum effective as of the date of the Consent and Support Agreements and to pay a consent fee of 2 % to all holders of Notes upon a successful consent solicitation, or 3 % if a supplemental indenture with the waivers and amendments is executed and becomes operative and the combination of MDC with the Stagwell Entities is consummated.

On February 5, 2021, MDC announced it had received and accepted consents from holders of at least a majority in principal amount of the Senior Notes, and on February 8, 2021, MDC entered into a supplemental indenture providing for waivers and amendments in connection with the combination of MDC with the Stagwell Entities.

On February 8, 2021, MDC filed a proxy statement/prospectus on Form S-4, which describes the Transaction Agreement, the Transactions, and ancillary agreements related thereto in more detail.

On March 11, 2022, the Company and Mark Penn, Chief Executive Officer of the Company, entered into (i) a Second Amended and Restated Employment Agreement (the “Second A&R Employment Agreement”) and (ii) an Amended and Restated Stock Appreciation Rights Agreement (the “A&R SARs Agreement”).

The Second A&R Employment Agreement and the A&R SARs Agreement provide that, with respect to the December 14, 2021 award to Mr.

Penn of 1,500,000 stock appreciation rights (“SARs”) in respect of the Company’s Class A common stock with a base price equal to $ 8.27 under the Company’s 2016 Stock Incentive Plan (the “Plan”), (i) the SARs will be settled only in cash upon any exercise, and (ii) the SARs will be considered to have been granted outside of the Plan and are not subject to stockholder approval.

Significant Accounting Policies

1 unchanged sentence

Principles of Consolidation .

The accompanying consolidated financial statements include the accounts of MDC Partners Inc.

The accompanying consolidated financial statements include the accounts of Stagwell 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.

2 unchanged sentences

The preparation of the consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use assets and the amounts of revenue and expenses reported during the period.

These estimates and assumptions affect the reported amounts of assets and

liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use lease assets and 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.

1 unchanged sentence

To the extent actual results differ from the assumptions used, results of operations and cash flows could be materially affected.

The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use assets and other identifiable intangible assets.

See Note 18 of the Notes to the Consolidated Financial Statements included herein for additional information regarding fair value measurements.

See Note 18 of the Notes included herein for additional information regarding fair value measurements.

Concentration of Credit Risk .

1 unchanged sentence

Credit is granted to qualified clients in the ordinary course of business.

Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit risk.

No client accounted for more than 10% of the Company’s consolidated accounts receivable as of December 31, 2020 or December 31, 2019.

No sales to an individual client or country other than in the United States accounted for more than 10% of revenue for the fiscal years ended December 31, 2020, 2019, or 2018.

As the Company operates in foreign markets, it is always considered at least reasonably possible foreign operations will be disrupted in the near term.

Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit ris k.

No sales to an individual client accounted for more than 7% of revenue for the twelve months ended December 31, 2021 and 2020.

Cash and Cash Equivalents .

The Company’s cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, 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.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Significant Accounting Policies - (continued)

The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts and international cash balances that may not qualify for foreign government insurance programs.

To date, the Company has not experienced any losses on cash and cash equivalents.

Allowance for Doubtful Accounts .

3 unchanged sentences

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.

Allowance for doubtful accounts was $ 5,638 and $ 5,109 at December 31, 2021 and 2020, respectively.

Expenditures Billable to Clients .

Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing 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.

Such amounts are invoiced to clients at various times over the course of the period.

Fixed Assets .

Fixed assets are stated at cost, net of accumulated depreciation.

Computers, furniture and fixtures are depreciated on a straight-line basis over periods of three to seven years.

Computers, furniture and fixtures, and capitalized software are depreciated on a straight-line basis over periods of three to ten years .

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 and maintenance costs are expensed as incurred.

Accumulated depreciation was $ 44,652 and $ 28,364 at December 31, 2021 and 2020 respectively.

Effective January 1, 2019, the Company adopted Accounting Standards Codification, Leases (“ASC 842”).

As a result, the 2018 fiscal year has not been adjusted and continues to be reported under ASC 840, Leases.

The Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments.

All right-of-use lease assets are reviewed for impairment.

See Note 10 of the Notes to the Consolidated Financial Statements included herein for further information on leases.

With the adoption of ASC 842, the Company elected to apply the package of practical expedients:

(i) whether a contract is or contains a lease, (ii) the classification of existing leases, and (iii) whether previously capitalized costs continue to qualify as initial indirect costs.

Additionally, the Company elected the practical expedient to not separate non-lease components from lease components for all operating leases.

See Note 10 of the Notes included herein for further information on leases.

Impairment of Long-lived Assets .

3 unchanged sentences

The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate.

Equity Method Investments .

Equity method investments are 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 proportionate share of the net income or loss of equity method investments is included in the results of operations and any dividends and distributions reduce the carrying value of the investments.

The Company’s equity method investments, include various interests in investment funds.

The carrying amount for these investments, which are included in Other assets within the Consolidated Balance Sheets as of December 31, 2020 and 2019 was $ 3,947 and $ 6,161 , respectively.

The Company’s management periodically evaluates these investments to determine if there has been a decline in value that is other than temporary.

Other Investments .

From time to time, the Company makes investments in start-ups, such as advertising technology and innovative consumer product companies, where the Company does not exercise significant influence over the operating and financial policies of the investee.

Non-marketable equity investments do not have a readily determinable fair value and are recorded at cost, less any impairment, adjusted for qualifying observable investment balance changes.

The carrying amount for these investments, which are included in Other assets within the Consolidated Balance Sheets as of December 31, 2020 and 2019 was $ 7,257 and $ 9,854 , respectively.

The Company is required to measure these other investments at fair value and recognize any changes in fair value within net income or loss.

For investments that don’t have readily determinable fair values, and don’t qualify for certain criteria, an alternative for measurement exists.

The alternative is to measure these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The Company has elected to measure these investments under the alternative method.

The Company performs a qualitative assessment to review these investments for impairment by identifying any impairment indicators, such as significant deterioration of earnings or significant change in the industry.

If the qualitative assessment indicates an investment is impaired, the Company estimates the fair value and reduces the carrying value of the investment down to its fair value with the loss recorded within net income or loss.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Significant Accounting Policies - (continued)

Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist.

For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test.

Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.

Qualitative factors considered in the assessment include industry and market considerations, the competitive

environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.

If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary.

3 unchanged sentences

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.

For the 2020 annual impairment test, the Company used an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.

The income approach requires the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.

The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data.

The Company generally applies an equal weighting to the income and market approaches for the impairment test.

The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.

The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective.

2 unchanged sentences

The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations.

See Note 8 of the Notes to the Consolidated Financial Statements included herein for additional information regarding the Company’s impairment test.

Definite Lived Intangible Assets .

Definite lived intangible assets are subject to amortization over their useful lives.

The method of amortization selected reflects the pattern in which the economic benefits of the specific intangible asset is consumed or otherwise used.

If that pattern cannot be reliably determined, a straight-line amortization method is used over the estimated useful life.

Intangible assets that are subject to amortization are reviewed for potential impairment at least annually or whenever events or circumstances indicate that carrying amounts may not be recoverable.

For the 2020 annual impairment test, the Company used an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.

See Note 8 of the Notes to the Consolidated Financial Statements included herein for further information.

A straight-line amortization method is used over the estimated useful life which is representative of the pattern of how the economic benefits of the specific intangible asset is consumed.

Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

The Company uses an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.

Business Combinations.

4 unchanged sentences

A substantial portion of the intangible assets 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 trademarks.

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 and trademarks.

Deferred Acquisition Consideration .

Most acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments.

Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities, and are derived from the projected performance of the acquired entity and are

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Significant Accounting Policies - (continued)

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.

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.

Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments.

Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period.

These liabilities are derived from the projected performance of the acquired entity.

These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period.

At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability.

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 the results of operations.

In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Audited Consolidated Statements of Operations.

Redeemable Noncontrolling Interests .

1 unchanged sentence

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, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period.

In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Common stock and other paid-in capital in the Consolidated Balance Sheets (but not less than their initial redemption value), except for foreign currency translation adjustments.

or the growth rate of the earnings of the relevant subsidiary during that period.

In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the Audited Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Retained earnings or Paid-in capital (when at an accumulated deficit) in the Audited Consolidated Balance Sheets (but not less than their initial redemption value), except 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.

See Note 13 of the Notes to the Consolidated Financial Statements for detail on the impact on the Company’s earnings (loss) per share calculation.

Subsidiary 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 reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable.

Any difference between the purchase price and noncontrolling interest is recorded to Common stock and other paid-in capital in the Consolidated Balance Sheets.

Control to Control Subsidiary Purchases.

Transactions involving the purchase, sale or issuance of interests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable.

Any difference between the purchase price and noncontrolling interest is recorded to Paid-in capital in the Audited Consolidated Balance Sheets.

In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the results of operations.

Revenue Recognition .

The Company’s revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

See Note 5 of the Notes to the Consolidated Financial Statements included herein for additional information.

Cost of Services Sold .

Cost of services sold primarily consists of staff costs, and does not include depreciation charges for fixed assets.

Interest Expense .

The Company’s revenue is recognized when control of the promised services are transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

See Note 5 of the Notes included herein for additional information.

Cost of Services .

Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients.

Cost of services sold does not include depreciation, amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements.

Deferred Financing Costs .

The Company uses the effective interest method to amortize deferred financing costs and any original issue premium or discount, if applicable.

The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs on the Credit Agreement.

The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs.

Income Taxes.

2 unchanged sentences

Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse.

The Company records associated interest and penalties as a component of income tax expense.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.

The Company records associated interest and penalties as a component of income tax expense.

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 evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors.

6 unchanged sentences

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.

The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Significant Accounting Policies - (continued)

pricing-model or other acceptable method and is recorded in Operating income over the service period, in this case the award’s vesting period.

The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing-model or other acceptable method and is recorded in Operating income (loss) over the service period, in this case the award’s vesting period.

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.

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.

Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (“profits interests awards”).

The profits interests awards are substantive equity, settled in cash and accounted for under ASC 718, Share Based Payments.

The profits interests awards represent a liability that is remeasured at fair value at each reporting period.

Retirement Costs .

1 unchanged sentence

Under the defined contribution plans, these subsidiaries, in some cases, make annual contributions to participants’ accounts which are subject to vesting.

The Company’s contribution expense pursuant to these plans was $ 8,203 , $ 11,909 and $ 11,136 for the years ended December 31, 2020, 2019, and 2018, respectively.

The Company’s contribution expense pursuant to these plans was $ 9,797 and $ 3,949 for the twelve months ended December 31, 2021 and 2020, respectively.

The Company also has a defined benefit pension plan.

See Note 12 of the Notes to the Consolidated Financial Statements included herein for additional information on the defined benefit plan.

See Note 12 of the Notes included herein for additional information on the defined benefit plan.

Income (Loss) per Common Share .

2 unchanged sentences

In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.

The Company has 145,000 authorized and issued convertible preference shares.

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 are outstanding, as shares of convertible preference shares are participating securities due to their dividend rights.

See Note 15 of the Notes to the Consolidated Financial Statements included herein for additional information.

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 functional currency of the Company is the Canadian dollar;

however, it has decided to use U.S.

dollars as its reporting currency for consolidated reporting purposes.

The functional and reporting currency of the Company is the U.S.

Generally, the Company’s subsidiaries use their local currency as their functional currency.

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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 (loss) 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 (loss).

Cumulative translation adjustments are not included in Net income (loss) 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 income (loss).

The balance sheets of non-U.S.

dollar based subsidiaries are translated at the period end rate.

The Consolidated Statements of Operation of the Company and its non-U.S.

The Consolidated Statements of Operations of the Company and its 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) income.

New Accounting Pronouncement

In December 2019, the FASB issued ASU 2019-12, Income Taxes, to simplify the accounting for income taxes, including amending the rules for performing intra-period tax allocations and calculating income taxes in interim periods, the accounting for transactions that result in a step-up in the tax basis of goodwill, as well as other amendments.

Gains and losses arising from the Company’s foreign currency transactions are reflected in Foreign exchange, net on the Consolidated Statements of Operations.

New Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and other items.

ASU 2021-08 is effective January 1, 2023;

We do not expect the adoption of ASU 2019-12 will have a material effect on our results of operations and financial position.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

however, the Company has early adopted the standard and retrospectively applied it to the financial statements herein.

In March 2020, the FASB issued ASU 2020-04, and in January subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 is effective upon issuance, through December 31, 2022.

The Company is evaluating the impact of the adoption of this guidance on the Company's financial statements and disclosures.

Acquisitions and Dispositions

2020 Acquisition

On July 1, 2020, the Company acquired the remaining 10 % ownership interest of Veritas it did not already own for an aggregate purchase price of $ 2,187 , of which $ 1,087 was a deferred cash payment.

As a result of the transaction, the Company reduced noncontrolling and redeemable noncontrolling interests by $ 2,651 .

The difference between the purchase price and the noncontrolling interest of $ 464 was recorded in Common stock and other paid-in capital in the Consolidated Balance Sheets.

On March 19, 2020, the Company acquired the remaining 22.5 % ownership interest of KWT Global it did not already own for an aggregate purchase price of $ 2,118 , comprised of a closing cash payment of $ 729 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 1,389 .

The contingent deferred payments are based on the financial results of the underlying business from 2019 to 2020 with final payment due in 2021.

As a result of the transaction, the Company reduced redeemable noncontrolling interests by $ 1,615 .

The difference between the purchase price and the redeemable noncontrolling interest of $ 503 was recorded in Common stock and other paid-in capital in the Consolidated Balance Sheets.

2020 Disposition

On February 14, 2020, the Company sold substantially all the assets and certain liabilities of Sloane and Company LLC (“Sloane”), an indirectly wholly owned subsidiary of the Company, to an affiliate of The Stagwell Group LLC (“Stagwell”), for an aggregate sale price of $ 26,696 , consisting of cash received at closing plus contingent deferred payments expected to be paid over the next two years.

The sale resulted in a gain of $ 16,827 , which is included in Other, net within the Consolidated Statement of Operations.

Sloane was included within Allison & Partners which is included within the All Other category.

2021 Acquisitions

On November 15, 2019, the Company acquired the remaining 35 % ownership interest of Laird + Partners it did not own for an aggregate purchase price of $ 2,389 , comprised of a closing cash payment of $ 1,588 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 801 .

The contingent deferred payments are based on the financial results of the underlying business from 2018 to 2020 with final payment due in 2021.

As a result of the transaction, the Company reduced redeemable noncontrolling interests by $ 5,045 .

The difference between the purchase price and the redeemable noncontrolling interest of $ 2,656 was recorded in common stock and other paid-in capital in the Consolidated Balance Sheets.

Effective April 1, 2019, the Company acquired the remaining 35 % ownership interest of HPR Partners LLC (Hunter) it did not own for an aggregate purchase price of $ 10,234 , comprised of a closing cash payment of $ 3,890 and additional contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 6,344 .

The contingent deferred payments are based on the financial results of the underlying business from 2018 to 2020 with final payment due in 2021.

As a result of the transaction, the Company reduced redeemable noncontrolling interests by $ 9,486 .

The difference between the purchase price and the noncontrolling interest of $ 745 was recorded in common stock and other paid-in capital in the Consolidated Balance Sheets.

Acquisition of MDC Partners Inc.

On December 21, 2020, MDC Partners Inc.

(“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the a transaction agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”) (the “Transaction Agreement”).

The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”).

In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”);

(ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo;

and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”).

The Transactions were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC 805-10, Business Combinations, with MDC treated as the legal acquirer and SMG treated as the accounting acquirer.

In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company.

SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55 % ownership of OpCo’s common units.

However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes;

rather all factors were considered in arriving at such conclusion.

acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed.

On August 2, 2021, an aggregate of 179,970,051 shares of the Company’s Class C Common Stock were issued to Stagwell Media in exchange for $ 1.8 (the “Stagwell New MDC Contribution”).

The Class C Common Stock does not participate in the earnings of the Company.

Additionally, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”).

The fair value of the purchase consideration is $ 425,752 , consisting of approximately 80,000,000 shares of the Company’s Class A and B Common Stock and Common Stock equivalents based on a per share price of approximately $ 5.42 , the closing stock price on the date of the combination.

ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination.

For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”).

Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation.

The total purchase price to acquire MDC has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill.

The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert.

The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition.

Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the Company.

The preliminary purchase price allocation is as follows:

Cash and cash equivalents $ 130,153

Accounts receivable 413,839

Other current assets 41,736

Fixed Assets 80,047

Right-of-use lease assets - operating leases 253,629

Intangible assets 810,900

Other assets 16,818

Accounts payable ( 170,361 )

Accruals and other liabilities ( 309,081 )

Advance billings ( 211,403 )

Current portion of lease liabilities ( 48,517 )

Current portion of deferred acquisition consideration ( 53,054 )

Long-term debt ( 901,736 )

Revolving credit facility ( 109,954 )

Long-term portion of deferred acquisition consideration ( 8,056 )

Long-term portion of lease liabilities ( 289,128 )

Other liabilities ( 132,394 )

Redeemable noncontrolling interests ( 25,990 )

Preferred shares ( 209,980 )

Noncontrolling interests ( 151,090 )

Net liabilities assumed ( 873,622 )

Goodwill 1,299,374

Purchase price consideration $ 425,752

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC.

Goodwill of $ 1,058,411 , $ 174,719 and $ 66,244 was assigned to the Integrated Agencies Network, the Media Network and the Communications Network reportable segments, respectively.

The majority of the goodwill is non-deductible for income tax purposes.

Goodwill has been updated from the previously reported amount of $ 1,270,081 to reflect a change in certain assets and liabilities, primarily the remeasurement of leases.

There has been no change that impacts the Consolidated Statement of Operations.

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 thirteen years .

The following table presents the details of identifiable intangible assets acquired.

Estimated Fair Value Estimated Useful Life in Years

Trade Names $ 98,000 10

Customer Relationships 712,900 6 - 20

Total Acquired Intangible Assets $ 810,900

MDC operating results are included in the Consolidated Statements of Operations from the date of the acquisition through December 31, 2021 with revenue of $ 605,448 and a nominal net loss.

Transaction expenses were approximately $ 15,000 for the twelve months ended December 31, 2021.

Pro Forma Financial Information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020.

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020

Revenue $ 2,224,343 $ 2,087,025

The proforma net loss was nominal for the twelve months ended December 31, 2021 and 2020.

Acquisition of Goodstuff Holdings Limited

On December 31, 2021, the Company acquired GoodStuff Holdings Limited (“Goodstuff”) for approximately £ 21,000 (approximately $ 28,053 ) of cash consideration as well as contingent consideration up to a maximum of £ 22,000 .

The cash consideration included an initial payment of £ 8,000 , an excess working capital payment of approximately £ 9,000 and approximately £ 4,000 of deferred payments.

The contingent consideration is tied to employees’ service and therefore will be recognized as compensation expense through 2026.

Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of Goodstuff based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill.

The preliminary purchase price allocation is as follows:

Cash and cash equivalents $ 30,985

Accounts receivable 28,685

Other current assets 3,207

Fixed Assets 237

Right-of-use lease assets - operating leases 2,060

Intangible assets 14,974

Other assets 55

Accounts payable ( 6,344 )

Accruals and other liabilities ( 27,353 )

Advance billings ( 15,956 )

Current portion of lease liabilities ( 857 )

Income taxes payable ( 967 )

Long-term portion of lease liabilities ( 3,744 )

Other liabilities ( 1,204 )

Net assets assumed 23,778

Goodwill 4,275

Purchase price consideration $ 28,053

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Goodstuff.

Goodwill of $ 4,275 was assigned to the Media Network.

The majority of the goodwill is non-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 ten years.

The following table presents the details of identifiable intangible assets acquired.

Estimated Fair Value Estimated Useful Life in Years

Trade Names $ 1,349 15

Customer Relationships 13,625 10

Total Acquired Intangible Assets $ 14,974

Pro Forma Financial Information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020.

Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020

Revenue $ 1,488,532 $ 902,577

Net Income 38,719 72,715

Purchases of noncontrolling interests

On October 1, 2021, the Company entered into an agreement to purchase the approximate 27 % remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3 % on October 1, 2021 and the remaining 13.3 % on July 31, 2023, with the option for the seller to delay the second purchase until July 31, 2025.

The purchase price of $ 73,898 , was comprised of a contingent deferred acquisition payment and redeemable noncontrolling interest with estimated present values at the acquisition date of $ 46,618 and $ 27,280 , respectively.

The contingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through 2025.

In addition, at the option of the Company, up to 50 % of the total purchase price can be paid in shares of Class A Common Stock and in no event may the purchase price exceed $ 135,000 .

On December 1, 2021, the Company acquired the approximate 27 % remaining interest of Concentric it did not already own for an aggregate purchase price of $ 8,058 , comprised of a closing cash payment of $ 1,581 in 2022 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 6,477 .

The contingent deferred payments were based on the financial results of the underlying business through 2022 with final payment due in 2023.

On December 31, 2021, the Company acquired the approximate 49 % remaining interest of Instrument it did not already own for an aggregate purchase price of $ 157,072 , comprised of a closing payment of $ 37,500 in cash and $ 37,500 in shares of Class A Common Stock and deferred acquisition payments with an estimated present value at the acquisition date of $ 82,072 .

The deferred payments are not contingent and will be paid in 2023 and 2024.

2020 Acquisitions

On February 14, 2020, the Company acquired Sloane & Company (“Sloane”) from an affiliate of Stagwell for approximately $ 24,400 of total consideration.

Total consideration included a cash payment of $ 18,900 made by Stagwell Media (Non-consolidated related party) which was accounted for as a non-cash contribution for the purposes of the Company’s Consolidated Statement of Cash Flows and Statement of Changes in Equity, the acquisition date fair value of the contingent deferred acquisition consideration of $ 4,800 , and $ 700 of cash paid by the Company.

Sloane is an industry-leading strategic communications firm, based out of New York.

Sloane will extend SKDK’s current suite of services and allow for the expansion into the capital markets and special situations verticals.

On August 14, 2020, the Company acquired Kettle Solutions, LLC (“Kettle”) for approximately $ 5,400 of total consideration.

Total consideration included a cash payment of $ 4,900 , plus an additional $ 500 due upon the finalization of Kettle’s working capital accounts, as outlined in the purchase agreement.

The purchase agreement also offers the previous owners of Kettle an additional $ 11,900 in deferred consideration, and is dependent on Kettle reaching contractually defined operating goals in 2020, 2021, 2022 and 2023.

Kettle is an industry recognized web design and content creation firm that assists its customers in developing and executing marketing campaigns, based out of New York.

On October 30, 2020, the Company acquired Truelogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L.

(collectively referred to as “Truelogic”), for approximately $ 17,300 of total consideration.

Total consideration included a cash payment of $ 8,900 , the acquisition date fair value of the contingent deferred acquisition consideration of $ 7,900 , and an additional $ 500 due upon the finalization of Truelogic’s working capital accounts, as outlined in the purchase agreement.

Truelogic is a software development firm based in Buenos Aires that assists customers in sourcing top South American engineering talent and developing small-scale software projects.

Truelogic is included in the Company’s Code and Theory Brand, which is part of its Integrated Agencies Reportable segment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition (in thousands):

Sloane Kettle Truelogic Total

Cash, cash equivalents and restricted cash $ — $ 49 $ 90 $ 139

Accounts receivable and other current assets 2,768 2,732 2,958 8,458

Other noncurrent assets — 172 10 182

Intangible assets 5,900 1,930 9,500 17,330

Property and equipment 72 58 50 180

Right-of-use lease assets – operating leases — 533 201 734

Accounts payable and other current liabilities ( 469 ) ( 552 ) ( 1,063 ) ( 2,084 )

Advanced billings ( 130 ) ( 310 ) ( 429 ) ( 869 )

Operating lease liabilities — ( 533 ) ( 201 ) ( 734 )

Goodwill 16,275 1,323 6,184 23,782

Total net assets acquired $ 24,416 $ 5,402 $ 17,300 $ 47,118

Goodwill recognized on the Sloane, Kettle and Truelogic acquisitions is fully-deductible for income tax purposes.

The following table reports the fair value of intangible assets acquired, including the corresponding weighted average amortization periods, as of the date of each acquisition (in thousands, except years):

Weighted Average Amortization Period Sloane Kettle Truelogic Total

Customer relationships 10 years $ 4,600 $ 1,600 $ 9,100 $ 15,300

Trade names and trademarks 11 years 1,300 330 400 2,030

Total $ 5,900 $ 1,930 $ 9,500 $ 17,330

The following table summarizes the total revenue and net income included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the twelve months ended December 31, 2020 from the date of each acquisition (in thousands):

Twelve Months Ended December 31, 2020

Revenue $ 22,381

Net Income 2,685

Pro Forma Financial Information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the 2020 acquisitions as if they had occurred as of January 1, 2020.

Twelve Months Ended December 31, 2020

Revenue $ 911,203

Net Income 75,767

2021 Disposition

On March 8, 2019, the Company consummated the sale of Kingsdale, an operating segment with operations in Toronto and New York City that provides shareholder advisory services.

As consideration for the sale, the Company received cash plus the assumption of certain liabilities totaling approximately $ 50,000 in the aggregate.

The sale resulted in a loss of approximately $ 3,000 , which was included in Other, net within the Consolidated Statement of Operations.

On September 15, 2021, the Company sold Reputation Defender to a strategic buyer for approximately $ 40,000 resulting in a gain of approximately $ 43,000 .

The gain is recognized within the All Other category in Gain on sale of business and other, net within the Audited Consolidated Statements of Operations.

The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The MDC network provides an extensive range of services to our clients offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Revenue - (continued)

management, media training, influencer engagement and events management.

The Stagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management.

We also provide media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development.

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Public relations services and application/website design and development are typically each considered one performance obligation as there is a significant integration of these services into a combined output.

Certain of the Company’s contracts consist of a single performance obligation.

In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations because its services are highly interrelated, and the integration of the various components is essential to the overall promise to the Company’s customer.

In certain of the Company’s client contracts, the performance obligation is a stand-ready obligation because the Company provides a constant level of similar services over the term of the contract.

We typically satisfy our performance obligations over time, as services are performed.

Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract.

To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting.

For client contracts when the Company has a stand-ready obligation to perform services on an ongoing basis over the life of the contract, where the scope of these arrangements includes an undefined number of broad activities and there are no significant gaps in performing the services, the Company recognizes revenue ratably using a time-based measure.

In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term.

Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation.

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Accordingly, for these contracts the Company has included reimbursed expenses in revenue.

In other arrangements where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned.

The role of MDC’s agencies under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines.

The obligation of MDC’s agencies under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan.

provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned.

The role of Stagwell’s agencies under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines.

The obligation of Stagwell’s agencies under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan.

We do not obtain control prior to transferring these services to our clients;

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Disaggregated Revenue Data

The Company provides a broad range of services to a large base of clients across the full spectrum of industry verticals on a global basis.

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 agency 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 Partner Firms.

Representation of a client rarely means

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Revenue - (continued)

that MDC handles marketing communications for all brands or product lines of the client in every geographical location.

The Company’s Partner firms often cooperate with one another through referrals and the sharing of both services and expertise, which enables MDC to service clients’ varied marketing needs by crafting custom integrated solutions.

Additionally, the Company maintains separate, independent operating companies to enable it to effectively manage potential conflicts of interest by representing competing clients across the MDC network.

The following table presents revenue disaggregated by client industry vertical for the twelve months ended December 31, 2020, 2019 and 2018:

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 for all Brands or product lines of the client in every geographical location.

The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service clients’ varied marketing needs by crafting custom integrated solutions.

The following table presents revenue disaggregated by our principal capabilities for the twelve months ended December 31, 2021 and 2020:

Twelve Months Ended December 31,

Industry Reportable Segment 2020 2019 2018

Food & Beverage All $ 205,939 $ 280,094 $ 313,368

Retail All 148,293 148,851 152,552

Consumer Products All 165,105 167,324 162,524

Communications All 77,443 184,870 178,410

Automotive All 67,339 78,985 88,807

Technology All 181,057 118,169 104,479

Healthcare All 100,727 102,221 127,547

Financials All 91,438 112,351 110,069

Transportation and Travel/Lodging All 44,510 88,958 86,419

Other All 117,160 133,980 150,913

Principal Capabilities Reportable Segment 2021 2020

Digital Transformation All Segments $ 400,857 $ 374,689

Creativity and Communications Integrated Agencies Network, Communications Network, Other 561,538 152,499

Performance Media and Data Media Network, Other 341,730 253,011

Consumer Insights and Strategy Integrated Agencies Network, Other 165,238 107,833

$ 1,469,363 $ 888,032

MDC has historically largely focused where the Company was founded in North America, the largest market for its services in the world.

Stagwell has historically largely focused where the Company was founded in North America, the largest market for its services in the world.

The Company has expanded its global footprint to support clients looking for help to grow their businesses in new markets.

MDC’s Partner Firms are located in the United States, Canada, and an additional eleven countries around the world.

Stagwell’s Brands are located in the United States and United Kingdom, and more than thirty other countries around the world.

In the past, 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.

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Twelve Months Ended December 31,

Geographic Location Reportable Segment 2020 2019 2018

Geographical Location Reportable Segment 2021 2020

United States All $ 1,219,816 $ 804,418

Canada All 81,930 105,067 124,001

United Kingdom All 105,961 41,489

Other All 143,586 42,125

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Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients.

Unbilled service fees were $ 49,110 and $ 65,004 at December 31, 2020 and December 31, 2019, respectively, and are included as a component of Accounts receivable on the Consolidated Balance Sheets.

Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $ 10,552 and $ 30,133 at December 31, 2020 and December 31, 2019, respectively, and are included on the Consolidated Balance Sheets as Expenditures billable to clients.

Unbilled service fees were $ 116,558 and $ 30,570 at December 31, 2021 and 2020, respectively, and are included as a component of Accounts receivable on the Audited Consolidated Balance Sheets.

Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $ 63,065 and $ 11,063 at December 31, 2021 and 2020, respectively, and are included on the Consolidated Balance Sheets as Expenditures billable to clients.

Such amounts are invoiced to clients at various times over the course of providing services.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Revenue - (continued)

Contract liabilities consist of fees billed to clients in excess of fees recognized as revenue and are classified as Advance billings and within Accruals and other liabilities on the Company’s Consolidated Balance Sheets.

In arrangements in which we are acting as an agent, the revenue recognition related to the contract liability is presented on a net basis within the Consolidated Statements of Operations.

Advance billings at December 31, 2020 and December 31, 2019 were $ 152,956 and $ 171,742 , respectively.

The decrease in the advance billings balance of $ 18,786 for the twelve months ended December 31, 2020 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $ 152,361 of revenues recognized that were included in the advance billings balances as of December 31, 2019 and reductions due to the incurrence of third-party costs.

Contract liabilities classified within Accruals and other liabilities at December 31, 2020 and December 31, 2019 were $ 112,755 and $ 216,931 , respectively.

The decrease in the balance of $ 104,176 for the twelve months ended December 31, 2020 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $ 210,078 of revenues recognized that were included in the balance as of December 31, 2019 and reductions due to the incurrence of third-party costs.

Changes in the contract asset and liability balances during the twelve months ended December 31, 2020 and December 31, 2019 were not materially impacted by write offs, impairment losses or any other factors.

Additions to contract assets of $ 99,853 were added during the period as a result of the acquisition of MDC.

Contract liabilities consist of fees received from or billed to clients in excess of fees recognized.

Such fees are classified as Advance billings presented on the Company’s Consolidated Balance Sheets.

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 Consolidated Statements of Operations.

Advance billings at December 31, 2021 and 2020 were $ 361,885 and $ 66,418 , respectively.

The increase in the Advance billings balance of $ 295,467 for the twelve months ended December 31, 2021 was primarily driven by the acquisition of MDC, representing a 211,403 increase, and by cash payments received or due in advance of satisfying our performance obligations, partially offset by $ 64,446 recognized that were included in the Advance billings balances as of December 31, 2020 and reductions due to the incurrence of third-party costs.

Changes in the contract asset and liability balances during the twelve months ended December 31, 2021 were not materially impacted by write offs, impairment losses or any other factors.

The majority of our contracts are for periods of one year or less.

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Income (Loss) Per Common Share

The following table sets forth the computation of basic and diluted loss per common share:

The following table sets forth the computations of basic and diluted income (loss) per common share:

Twelve Months Ended December 31, 2021

2020 2019 2018

Net loss attributable to MDC Partners Inc.

$ ( 228,971 ) $ ( 5,253 ) $ ( 130,007 )

Accretion on convertible preference shares ( 14,179 ) ( 12,304 ) ( 8,355 )

Net loss attributable to MDC Partners Inc.

Net loss attributable to Stagwell Inc.

common shareholders $ ( 3,706 )

Basic weighted average number of common shares outstanding 72,862,178 69,132,100 57,218,994

Dilutive effect of equity awards — — —

Diluted weighted average number of common shares outstanding 72,862,178 69,132,100 57,218,994

Basic $ ( 3.34 ) $ ( 0.25 ) $ ( 2.42 )

Diluted $ ( 3.34 ) $ ( 0.25 ) $ ( 2.42 )

Anti-dilutive stock awards 5,341,846 5,450,426 1,442,518

Restricted stock and restricted stock unit awards of 642,837 , 135,386 and 1,012,637 as of December 31, 2020, 2019 and 2018 respectively, are excluded from the computation of diluted loss per common share because the performance contingency necessary for vesting has not been met as of the reporting date.

In addition, there were 145,000 , 145,000 , and 95,000 Preference Shares outstanding which were convertible into 28,853,621 , 26,656,285 , and 10,970,714 Class A common shares at December 31, 2020, 2019, and 2018, respectively.

These Preference Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted loss per common share calculation.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Weighted average number of common shares outstanding 90,426,215

Earnings Per Share - Basic & Diluted $ ( 0.04 )

Anti-dilutive:

Class C shares 179,970,051

Stock Appreciation Rights and Restricted Awards 9,508,668

On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares.

Pursuant to the notices, the 50,000,000 issued and outstanding Series 6 Preferred Shares were converted into 12,086,700 Class A Common Shares, in the aggregate, on October 7, 2021, and the 73,849,000 issued and outstanding Series 8 Preferred Shares were converted into 20,948,746 Class A Common Shares, in the aggregate, on November 8, 2021.

The combination of MDC and SMG was completed on August 2, 2021, which was treated as a reverse acquisition for financial reporting purposes.

SMG was treated as the accounting acquirer and MDC was the accounting acquiree.

Therefore, under applicable accounting principles, the historical financial results of SMG prior to August 2, 2021 are considered our historical financial results.

Accordingly, historical information presented in this Form 10-K for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.

SMG’s equity structure, prior to the combination with MDC , was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members' Capital.

Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share.

Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within th e Consolidated Statements of Operations .

The following is a summary of the Company’s fixed assets as of December 31:

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Computers, furniture and fixtures $ 41,839 $ ( 18,136 ) $ 23,703 $ 21,373 $ ( 13,210 ) $ 8,163

$ 93,850 $ ( 74,766 ) $ 19,084 $ 93,224 $ ( 69,687 ) $ 23,537

Leasehold improvements 91,572 ( 17,759 ) 73,813 22,689 ( 10,667 ) 12,022

132,729 ( 61,400 ) 71,329 117,409 ( 59,892 ) 57,517

Capitalized Software 29,844 ( 8,757 ) 21,087 19,916 ( 4,487 ) 15,429

$ 163,255 $ ( 44,652 ) $ 118,603 $ 63,978 $ ( 28,364 ) $ 35,614

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $ 24,598 , $ 25,133 and $ 27,111 , respectively.

Depreciation expense for the twelve months ended December 31, 2021 and 2020 was $ 19,696 and $ 10,144 , respectively.

Goodwill and Intangible Assets

As of December 31, goodwill was as follows:

Goodwill Integrated Networks - Group A Integrated Networks -Group B Media & Data Network All Other Total

Integrated Agencies Network Media Network Communication Network All Other Corporate Total

Balance at December 31, 2019 $ 88,094 $ 177,073 $ 33,258 $ 26,760 $ — $ 325,185

Acquired goodwill 7,070 235 16,275 195 23,775

Impairment loss recognized ( 4,879 ) — — — ( 4,879 )

Transfer of goodwill between segments (1)

— ( 120 ) 3,612 ( 3,492 ) —

Foreign currency translation — 3,331 — ( 566 ) — 2,765

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Disposition — — — ( 935 ) — ( 935 )

Impairment loss recognized — ( 16,137 ) ( 5,287 ) ( 40,237 ) ( 61,661 )

Transfer of goodwill between segments — 19,696 4,546 ( 24,242 ) —

Foreign currency translation ( 502 ) ( 1,020 ) — ( 194 ) — ( 1,716 )

Balance at December 31, 2021 $ 1,153,073 $ 358,613 $ 115,777 $ 25,260 $ — $ 1,652,723

(1) Transfers of goodwill relate to changes in segments.

For the twelve months ended December 31, 2020, the Company recognized an impairment charge of $ 61,661 to write-down the carrying value of goodwill in excess of the fair value at four reporting units, one in the Integrated Networks - Group B reportable segment, one in Media & Data Network reportable segment and two within the All Other category.

As of December 31, 2020, there were two reporting units with negative net asset carrying value in the Integrated Networks - Group A reportable segment and the All Other category.

The goodwill allocated to these reporting units is $ 14,854 and $ 5,479 , respectively.

For the twelve months ended December 31, 2019, the Company recognized an impairment charge of $ 4,879 to write-down the carrying value of goodwill in excess of the fair value at one reporting unit within the Integrated Networks - Group A.

For the twelve months ended December 31, 2018, the Company recognized an impairment of goodwill and other assets of $ 87,204 primarily to write-down the carrying value of goodwill in excess of the fair value at three reporting units, one in each of the Integrated Networks - Group B reportable segment, the Media & Data Network reportable segment and within the All Other category.

The total accumulated goodwill impairment charges as of December 31, 2020 and 2019, were $ 238,965 and $ 177,304 , respectively.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Goodwill and Intangible Assets - (continued)

The gross and net amounts of acquired intangible assets other than goodwill as of December 31,

For the twelve months ended December 31, 2021 and 2020, no impairment loss was recognized.

There were no accumulated goodwill impairment charges as of December 31, 2021 and 2020.

The gross and net amounts of intangible assets other than goodwill as of December 31,

Intangible Assets 2021 2020

Trademark (indefinite life) $ — $ 14,600

Customer relationships – gross $ 875,541 $ 154,510

1 unchanged sentence

Customer relationships – net $ 782,795 $ 98,211

Trademarks (definite life) – gross $ 32,711 $ 28,695

Trademarks – gross $ 190,162 $ 118,647

Less accumulated amortization ( 36,775 ) ( 32,431 )

Trademarks (definite life) – net $ 13,917 $ 14,753

Trademarks – net $ 153,387 $ 86,216

Noncompete – gross $ 3,989 $ 4,005

Less accumulated amortization ( 3,386 ) ( 2,980 )

Noncompete – net $ 603 $ 1,025

Other intangible assets – gross $ 3,717 $ 2,893

Less accumulated amortization ( 2,807 ) ( 2,310 )

Other intangible assets – net $ 910 $ 583

Total intangible assets $ 1,073,409 $ 280,055

1 unchanged sentence

Total intangible assets – net $ 937,695 $ 186,035

During the first quarter of 2020, the Company reassessed its estimate of the useful life of a trademark in the amount of $ 14,600 , acquired as a result of a business combination.

The Company revised the useful life to five years from indefinite lived.

During the fourth quarter of 2020, the Company recognized an impairment of two trademarks totaling $ 12,071 , equal to the excess carrying value above the fair value for a reporting unit within the Integrated Networks - Group B reportable segment and a reporting unit within the All Other category.

The intangible assets impairment is included in Impairment and other losses in the Consolidated Statement of Operations.

The weighted average amortization period for customer relationships is eight years and trademarks is nine years .

In total, the weighted average amortization period is eight years .

Amortization expense related to amortizable intangible assets for the years ended December 31, 2020, 2019, and 2018 was $ 11,260 , $ 11,828 , and $ 17,290 , respectively.

For the twelve months ended December 31, 2021, the Company recognized an impairment charge of $ 16,187 to reduce the carrying values of intangible assets within the Integrated Agencies Network and Media Network reportable segments in connection with the abandonment of certain trade names as part of the rebranding of certain Brands.

For the twelve months ended December 31, 2020, no impairment loss was recognized.

The weighted average amortization period for customer relationships is eight years, trademarks is eleven years, noncompete is four years, and other intangible assets is two years.

In total, the weighted average amortization period is ten years.

Amortization expense related to amortizable intangible assets for the twelve months ended December 31, 2021 and 2020 was $ 56,774 and $ 30,881 , respectively.

The estimated amortization expense for the five succeeding years is as follows:

Year Amortization

2022 $ 92,616

Thereafter 508,893

1 unchanged sentence

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, contingent and fixed retention payments tied to continued employment of specific personnel.

Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through Operating income, for contingent purchase price payments, or net interest expense, for fixed purchase price payments.

The Company accounts for retention payments, tied to continued employment, through Operating income as stock-based compensation over the required retention period.

The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the balance sheets as of December 31, 2020 and December 31, 2019.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Deferred Acquisition Consideration - (continued)

Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through operating income.

The Company accounts for certain retention payments through operating income as compensation expense over the required retention period.

The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the Audited Consolidated Balance Sheets as of December 31, 2021 and 2020:

Beginning balance of contingent payments $ 17,847 $ 65,792

Payments ( 12,431 ) ( 66,235 )

Redemption value adjustments (1)

Adjustment to deferred acquisition consideration (1)

Additions (2)

198,937 15,717

Additions - acquisitions and step-up transactions 7,703 7,145

Other ( 705 ) 53

Ending balance of contingent payments $ 222,369 $ 17,847

Fixed payments 263 549

$ 83,065 $ 75,220

(1) Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments and stock-based compensation charges relating to acquisition payments that are tied to continued employment.

Redemption value adjustments are recorded within Office and general expenses on the Consolidated Statements of Operations.

The following table presents the impact to the Company’s Statements of operations due to the redemption value adjustments for the contingent deferred acquisition consideration for the twelve months ended December 31, 2020 and 2019:

Loss attributable to fair value adjustments $ 42,187 $ 5,403

Stock-based compensation 2,806 10,048

Redemption value adjustments $ 44,993 $ 15,451

(1) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments.

Redemption value adjustments are recorded within Office and general expenses on the Audited Consolidated Statements of Operations.

(2) Approximately $ 61,000 of additions in 2021 represent deferred acquisition consideration acquired in connection with the acquisition of MDC.

Approximately $ 136,000 of additions represent deferred acquisition consideration acquired in connection with the purchases of noncontrolling interests.

See Note 4 of the Notes included herein for additional information related to the purchases of Concentric, Targeted Victory, and Instrument.

The Company leases office space in North America, Europe, Asia, South America, and Australia.

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As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date.

Lease payments included in the measurement of the lease liability are comprised of noncancellable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease costs are recognized in the Consolidated Statement of Operations over the lease term on a straight-line basis.

Lease payments included in the measurement of the lease liability are comprised of noncancelable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease costs are recognized in the Consolidated Statements of Operations over the lease term on a straight-line 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.

2 unchanged sentences

Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred.

In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, another variable operating expenses.

Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances on which the variable lease payments are based upon occur.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Leases - (continued)

Some of the Company’s leases include options to extend or renew the lease through 2040.

In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses.

Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances which the variable lease payments are based upon occur.

Some of the Company’s leases include options to extend or renew the leases through 2044.

The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.

From time to time, the Company enters into sublease arrangements both with unrelated third parties and with our partner agencies.

These leases are classified as operating leases and expire between 2021 through 2025.

From time to time, the Company enters into sublease arrangements with unrelated third parties.

These leases are classified as operating leases and expire between years 2022 through 2027.

Sublease income is recognized over the lease term on a straight-line basis.

Currently, the Company subleases office space in North America, Asia, Europe and Australia.

As of December 31, 2020, the Company has entered into three operating leases for which the commencement date has not yet occurred as the premises are in the process of being prepared for occupancy by the landlord.

Accordingly, these three leases represent an obligation of the Company that is not reflected within the Consolidated Balance Sheet as of December 31, 2020.

As of December 31, 2021, the Company has entered into eleven operating leases for which the commencement date has not yet occurred, primarily because the premises are in the process of being prepared for occupancy by the landlord or the space is being renewed.

Accordingly, these eleven leases represent an obligation of the Company that is not reflected within the Audited

Consolidated Balance Sheets as of December 31, 2021.

The aggregate future liability related to these leases is approximately $ 19,069 .

The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the twelve months ended December 31:

Twelve Months Ended December 31, Twelve Months Ended December 31,

The following table presents lease costs and other quantitative information for the twelve months ended December 31, 2021 and 2020:

Twelve Months Ended December 31,

Operating lease cost $ 46,019 $ 25,507

5 unchanged sentences

Operating cash flows $ 53,360 $ 20,942

Right-of-use assets obtained in exchange for operating lease liabilities and other non-cash adjustments $ 45,663 $ 269,801

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments $ 373,179 $ 2,952

Weighted average remaining lease term (in years) - Operating leases 6.76 4.42

Weighted average discount rate - Operating leases 4.0 % 4.0 %

In the twelve months ended December 31, 2020, the Company recorded a charge of $ 22,667 , of which $ 9,969 was to reduce the carrying value of its right-of-use lease assets and related leasehold improvements of certain of its agencies within its Integrated Networks - Group A and Integrated Networks - Group B reportable segments and leased space of Corporate.

The remaining $ 12,698 was related to the acceleration of the variable lease expenses associated with the exit of properties in New York as part of the centralization of the Company’s New York real estate portfolio.

The Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable.

Using adjusted quoted market prices to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value.

This impairment charge is included in Impairment and other losses within the Consolidated Statement of Operations.

In the twelve months ended December 31, 2019, the Company recorded an impairment charge of $ 3,700 to reduce the carrying value of four of its right-of-use lease assets and related leasehold improvements.

Operating lease expense is included in Office and general expenses in the Consolidated Statement of Operations.

Operating lease expense is included in office and general expenses in the Consolidated Statements of Operations.

The Company’s lease expense for leases with a term of 12 months or less is immaterial.

Rental expense for the twelve months ended December 31, 2018 was $ 65,093 , offset by $ 3,671 , in sublease rental income.

The following table presents minimum future rental payments under the Company’s leases at December 31, 2021 and their reconciliation to the corresponding lease liabilities:

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Leases - (continued)

Maturity Analysis

6 unchanged sentences

December 31, 2021 December 31, 2020

Revolving credit agreement $ — $ —

Senior Notes 870,256 900,000

Debt issuance costs ( 27,072 ) ( 12,370 )

Revolving credit facility (1)

$ 110,165 $ 201,636

Interest expense related to long-term debt for the years ended December 31, 2020, 2019, and 2018 was $ 59,147 , $ 62,210 and $ 64,420 , respectively.

The amortization of debt issuance costs included in interest expense for the years ended December 31, 2020, 2019 and 2018 was $ 3,529 , $ 3,346 and 3,193 , respectively.

The revolving credit agreement is a variable rate debt, the carrying value of which approximates fair value.

The Company’s Senior Notes are a fixed rate debt instrument recorded at carrying value.

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 defined below), 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 senior notes due 2024 (the “Senior Notes”).

The Senior Notes were sold in a private placement in reliance on exceptions from registration under the Securities Act of 1933.

The Senior Notes bear interest, payable semiannually in arrears on May 1 and November 1, at a rate of 7.50 % per annum.

The Senior Notes mature on May 1, 2024, unless earlier redeemed or repurchased.

In April 2020, the Company repurchased $ 29,744 of the Senior Notes, at a weighted average price equal to 73.9 % of the principal amount totaling $ 21,999 , and accrued interest of $ 946 .

As a result of the repurchase, we recognized an extinguishment gain of $ 7,388 .

In connection with the Consent and Support Agreements, beginning December 21, 2020, the Company began to accrue interest at a rate of 7.50 % and accrued $ 17.4 million for the 2 % consent fees.

The consent fees were capitalized as an offset to the carrying value of the Senior Notes and will be recognized through interest expense over the remaining maturity term of the Senior Notes.

The Senior Notes are guaranteed on a senior unsecured basis by all of MDC’s existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure, the Credit Agreement.

The Senior 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

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Debt - (continued)

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 Senior Notes in whole at any time or in part from time to time, at varying prices based on the timing of the redemption.

If MDC experiences certain kinds of changes of control (as defined in the Indenture), holders of the Senior Notes may require MDC to repurchase any Senior Notes held by them at a price equal to 101 % of the principal amount of the Senior 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 Senior 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;

Term debt — 994

5.625 % Notes

Debt issuance costs ( 18,564 ) ( 3,612 )

Total debt $ 1,191,601 $ 199,018

Current maturities of long-term debt — ( 994 )

Long-term debt $ 1,191,601 $ 198,024

(1) Included in the repayment of the revolving credit facility are the repayments related to the acquired MDC credit facility of $ 109,954 .

Interest expense related to long-term debt included in Interest expense, net on the Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020 was $ 29,594 and $ 5,472 , respectively.

The amortization of debt issuance costs included in Interest expense, net on the Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020 was $ 2,693 and $ 831 , respectively.

Revolving Credit Agreement

On November 18, 2019, the Company entered into a debt agreement (“JPM Syndicated Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A (“JPM”).

The JPM Syndicated Facility consisted of a five-year revolving credit facility of $ 265,000 (“JPM Revolver”) with the right to be increased by an additional $ 150,000 .

On March 18, 2020, the Company increased the commitments on the JPM Revolver by $ 60,000 to $ 325,000 .

On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (the “Combined Credit Agreement”) with a syndicate of banks led by JPM to increase commitments on the existing JPM Revolver.

The Combined Credit Agreement consists of a $ 500,000 senior secured revolving credit facility with a five-year maturity.

The Combined Credit Agreement contains sub-limits for revolving loans and letters of credit of $ 50,000 for loans denominated in pounds sterling or euros.

It also includes an accordion feature under which the Company may request, subject to lender approval and certain conditions, to increase the amount of the commitments to an aggregate amount not to exceed $ 650,000 .

Borrowings under the Combined Credit Agreement bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest announced from time to time by JPM, (b) the federal funds effective rate from time to time plus 0.50 % and (c) the LIBOR rate plus 1 %, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time.

The Company is also required to pay an unused revolver fee to the lenders under the Combined Credit Agreement in respect of the unused commitments thereunder ranging from 0.15 % to 0.30 % of unused commitments depending on the total leverage ratio, as well as customary letter of credit fees.

Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium.

The Combined Credit Agreement commitment may be reduced by the Company from time to time.

Principal amounts outstanding under the Combined Credit Agreement are due and payable in full at maturity within five years of the date of the Combined Credit Agreement.

If an event of default occurs under the Combined Credit Agreement or any future secured indebtedness, the holders of such secured indebtedness will have a prior right to our assets securing such indebtedness, to the exclusion of the holders of the 5.625 % Notes (as defined below), even if we are in default with respect to the 5.625 % Notes.

In that event, our assets securing such indebtedness would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under the Combined Credit Agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of the 5.625 % Notes and other unsecured indebtedness.

The Combined 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 was in compliance with all covenants at December 31, 2021.

A portion of the Combined Credit Agreement in an amount not to exceed $ 50,000 is available for the issuance of standby letters of credit.

At December 31, 2021 and 2020, the Company had issued undrawn outstanding letters of credit of $ 24,332 and $ 5,500 , respectively.

On November 13, 2020, the Company, JPM as administrative agent, and a group of lenders entered into a term loan agreement that provided the Company with a delayed draw term loan in an aggregate principal amount of $ 90,000 (“DD Term Loan A”) with a maturity date of November 13, 2023.

In connection with the acquisition of MDC, the Company drew down on the full amount of the DD Term Loan A, repaid the amount with the Combined Credit Agreement, and terminated the agreement.

Line of Credit

On August 2, 2021, the Company entered into an unsecured uncommitted line of credit in the aggregate amount of $ 30,000 with JPM (the “Line of Credit”) to meet certain short-term working capital needs.

The Line of Credit expired on August 20, 2021.

In August 2021, the Company issued $ 1,100,000 aggregate principal amount of 5.625 % senior notes (“ 5.625 % Notes”).

A portion of the proceeds from the issuance of the 5.625 % Notes was used to redeem $ 870,300 aggregate principal amount of the outstanding 7.50 % Senior Notes due 2024 (the “Existing Notes”) for a price of $ 904,200 .

This price is equal to 101.625 % of the outstanding principal amount of the Existing Notes being redeemed, plus, accrued, and unpaid interest on the principal amount of such Existing Notes.

The Company did not recognize a gain or loss on redemption.

The 5.625 % Notes are due August 15, 2029 and bear interest of 5.625 % to be paid on February 15 and August 15 of each year, commencing on February 15, 2022.

The 5.625 % Notes are guaranteed on a senior unsecured basis by substantially all of the Company’s subsidiaries.

The 5.625 % Notes rank (i) equally in right of payment with all of the Company’s or any guarantor’s existing and future unsubordinated indebtedness, (ii) senior in right of payment to the Company’s or any guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to any of the Company’s or any guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Combined Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of the Company’s subsidiaries that are not guarantors.

Our obligations under the 5.625 % Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness.

Borrowings under the Combined Credit Agreement are secured by substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.

The Company may, at its option, redeem the 5.625 % Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813 % of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2024, at a redemption price of 101.406 % of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100 % of the principal amount thereof if redeemed on August 15, 2026 and thereafter.

Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625 % Notes at a price equal to 100 % of the principal amount of the 5.625 % Notes plus a “make whole” premium and accrued and unpaid interest.

The Company may also redeem, at its option, prior to August 15, 2024, up to 40 % of the 5.625 % Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625 % of the principal amount thereof.

If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625 % Notes may require the Company to repurchase any 5.625 % Notes held by them at a price equal to 101 % of the principal amount of the 5.625 % Notes plus accrued and unpaid interest.

In addition, if the Company sells assets under certain circumstances, it must offer to repurchase the 5.625 % Notes at a price equal to 100 % of the principal amount of the 5.625 % Notes plus accrued and unpaid interest.

The indenture includes covenants that, among other things, restrict the Company’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 the Company;

make certain types of investments;

create restrictions on the payment of dividends or other amounts from MDC’s restricted subsidiaries;

create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries;

enter into transactions with affiliates;

1 unchanged sentence

enter into sale and leaseback transactions;

and consolidate or merge with or into, or sell substantially all of MDC’s assets to, another person.

and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person.

These covenants are subject to a number of important limitations and exceptions.

The Senior Notes are also subject to customary events of default, including a cross-payment default and cross-acceleration provision.

The 5.625 % Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions.

The Company was in compliance with all covenants at December 31, 2021.

Revolving Credit Agreement

The Company is party to a $ 211,500 secured revolving credit facility due February 3, 2022.

The Company had no amounts outstanding under the revolving credit facility as of December 31, 2020 and December 31, 2019.

On May 29, 2020, the Company, Maxxcom Inc., a subsidiary of the Company (“Maxxcom”), and each of their subsidiaries party thereto entered into an amendment (the “Second Amendment”) to the existing senior secured revolving credit facility, dated as of May 3, 2016 (as amended, the “Credit Agreement”), among the Company, Maxxcom, each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent (“Wells Fargo”), 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.

The Second Amendment reduced the aggregate maximum amount of revolving commitments provided by the lenders to $ 211,500 from $ 250,000 , extended the maturity date of the Credit Agreement from May 3, 2021 to February 3, 2022, and expanded the eligibility criteria for certain of the Company’s receivables to be included in the borrowing base.

Advances under the Credit Agreement, as amended by the Second Amendment, will bear interest as follows:

(i) Non-Prime Rate Loans bear interest at the Non-Prime Rate plus the Non-Prime Rate Margin and (ii) all other Obligations bear interest at the Prime Rate, plus the Prime Rate Margin.

The Non-Prime Rate Margin and Prime Rate Margin will range from 2.50 % to 3.00 % for Non-Prime Rate Loans and from 1.75 % to 2.25 % for Prime 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 Second Amendment increased the required minimum earnings before interest, taxes and depreciation and amortization from $ 105,000 to $ 120,000 measured on a trailing 12-month basis.

The total leverage ratio applicable on each testing date through the period ending December 31, 2020 remained at 6.25 :1.0.

The total leverage ratio applicable on each testing date after December 31, 2020 will be 5.5 :1.0.

The Credit Agreement, which includes financial and non-financial covenants, is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions, and collateralized by a portion of MDC’s outstanding receivable balance.

The Company was in compliance with all of the terms and conditions of its Credit Agreement as of December 31, 2020.

At December 31, 2020 and December 31, 2019, the Company had issued undrawn outstanding letters of credit of $ 18,651 and $ 4,836 , respectively.

Future Principal Repayments

Future principal repayments on the Senior Notes in the aggregate principal amount of $ 870,256 are due in 2024.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Employee Benefit Plans

Interest Rate Swap

The Company also owns an interest rate swap maturing April 2022 with Bank of America to convert $ 10,469 of its variable rate debt as of December 31, 2021 to a fixed rate of 2.7 %.

The fair value of the swap was $ 77 and $ 416 and is included in Accruals and other liabilities on the Audited Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

Employee Benefit Plan

A subsidiary of the Company, sponsors a defined benefit plan with benefits based on each employee’s years of service and compensation.

3 unchanged sentences

Pension Benefits

2020 2019 2018

Service cost $ — $ — $ —

Interest cost on benefit obligation 441

Expected return on plan assets ( 697 )

Curtailment and settlements 2,333 626 1,039

Amortization of actuarial (gains) losses 340 266 258

Net periodic benefit cost $ ( 256 )

The above costs are included within Other, net on the Consolidated Statements of Operations.

The above costs are included within Other, net on the Audited Consolidated Statements of Operations.

The following weighted average assumptions were used to determine net periodic costs at December 31:

Pension Benefits

2020 2019 2018

Discount rate 2.62 %

Expected return on plan assets 6.50 %

Rate of compensation increase N/A N/A N/A

The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes.

Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the years ended December 31:

Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the year ended December 31:

Pension Benefits

2020 2019 2018

Current year actuarial (gain) loss $ 2,213 $ 2,917 $ ( 520 )

Amortization of actuarial loss ( 340 ) ( 266 ) ( 258 )

Total recognized in other comprehensive (income) loss 1,873 2,651 ( 778 )

Current year actuarial gain $ ( 722 )

Total recognized in other comprehensive (income) ( 722 )

Total recognized in net periodic benefit cost and other comprehensive loss $ ( 978 )

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Employee Benefit Plans - (continued)

The following table summarizes the change in benefit obligations and fair values of plan assets for the years ended December 31:

2020 2019 2018

The following table summarizes the change in benefit obligation and fair values of plan assets for the year ended December 31:

Pension Benefits

Change in benefit obligation:

1 unchanged sentence

Interest Cost 441

Actuarial (gains) losses 5,301 6,127 ( 3,522 )

Actuarial gains ( 1,091 )

Benefits paid ( 551 )

3 unchanged sentences

Actual return on plan assets 328

Employer contributions 2,325 2,530 1,228

Benefits paid ( 551 )

Fair value of plan assets, Ending balance 26,355

Unfunded status $ 17,530 $ 15,806 $ 14,757

Amounts recognized in the balance sheet at December 31 consist of the following:

Funded status $ 13,650

(1) Benefit obligation assumed in connection with the acquisition of MDC.

Beginning balance is as of July 31, 2021.

Amounts recognized on the balance sheet at December 31 consist of the following:

Pension Benefits

1 unchanged sentence

Net amount recognized $ 13,650

Amounts recognized in Accumulated Other Comprehensive Loss before income taxes consists of the following components for the years ended December 31:

Amounts recognized in Accumulated Other Comprehensive Loss before income taxes consists of the following components for the year ended December 31:

Pension Benefits

Accumulated net actuarial losses $ 17,403 $ 15,530

Accumulated net actuarial gains $ 722

Amount recognized $ 722

In 2021, the Company estimates that it will recognize $ 413 of amortization of net actuarial losses from accumulated other comprehensive loss, net into net periodic cost related to the pension plan.

In 2022, the Company estimates that it will not recognize any amortization of net actuarial losses from accumulated other comprehensive loss, net into net periodic cost related to the pension plan.

The following weighted average assumptions were used to determine benefit obligations as of December 31:

1 unchanged sentence

Discount rate 2.82 %

Rate of compensation increase N/A N/A

The discount rate assumptions at December 31, 2020 and 2019 were determined independently.

The discount rate assumptions at December 31, 2021 was determined independently.

The discount rate was derived from the effective interest rate of a hypothetical portfolio of high-quality bonds, whose cash flows match the expected future benefit payments from the plan as of the measurement date.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Employee Benefit Plans - (continued)

Fair Value of Plan Assets and Investment Strategy

5 unchanged sentences

Total $ 26,355 $ 26,355 $ — $ —

December 31, 2019 Level 1 Level 2 Level 3

Asset Category:

Money market fund – Short term investments $ 1,275 $ 1,275 $ — $ —

Mutual funds 25,931 25,931 — —

Total $ 27,206 $ 27,206 $ — $ —

The pension plans weighted-average asset allocation for the years ended December 31, 2020 and 2019 are as follows:

The pension plans weighted-average asset allocation for the year ended December 31, 2021 is as follows:

Target Allocation Actual Allocation

2020 2020 2019

Asset Category:

9 unchanged sentences

The pension plan contributions are deposited into a trust, and the pension plan benefit payments are made from trust assets.

During 2020, the Company contributed $ 2,325 to the pension plan.

The Company estimates that it will make approximately $ 2,415 in contributions to the pension plan in 2021.

During 2021, the Company did not make any contributions to the pension plan.

The Company does not expect that it will make any contributions to the pension plan in 2022.

Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefit costs and contributions in future periods.

The following estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years ending December 31:

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Employee Benefit Plans - (continued)

Period Amount

1 unchanged sentence

Noncontrolling and Redeemable Noncontrolling Interests

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 noncontrolling interests in the equity section of the Company’s Consolidated Balance Sheets.

Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through common stock and other paid-in capital (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 amounts recorded in the Company’s Consolidated Balance Sheets.

Noncontrolling Interests

Changes in amounts due to noncontrolling interest holders included in Accruals and other liabilities on the Consolidated Balance Sheets for the twelve months ended December 31, 2020 and 2019 were as follows:

Noncontrolling

Balance, December 31, 2018 $ 9,278

Income attributable to noncontrolling interests 16,156

Distributions made ( 11,392 )

Balance, December 31, 2019 $ 14,028

Income attributable to noncontrolling interests 21,774

Distributions made ( 15,192 )

Balance, December 31, 2020 $ 20,704

Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three years ended December 31, were as follows:

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Noncontrolling & Redeemable Noncontrolling Interests - (continued)

Years Ended December 31,

2020 2019 2018

Net loss attributable to MDC Partners Inc.

$ ( 228,971 ) $ ( 5,253 ) $ ( 130,007 )

Where the incremental

purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.

Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the twelve months ended December 31, 2021 and 2020 were as follows:

Twelve Months Ended December 31,

Net income attributable to Stagwell Inc.

common shareholders $ 21,036 $ 56,356

Transfers from the noncontrolling interest:

Increase in MDC Partners Inc.

paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests 1,626 1,911 10,140

Decrease in Stagwell Inc.

Paid-in capital for purchase of RNCI and noncontrolling interests ( 26,538 ) —

Net transfers from noncontrolling interests $ ( 26,538 ) $ —

Change from net loss attributable to MDC Partners Inc.

Change from net income (loss) attributable to Stagwell Inc.

and transfers to noncontrolling interests $ ( 5,502 ) $ 56,356

The following table presents net income attributable to noncontrolling interests between holders of Class C shares and other equity interest holders for the twelve months ended December 31, 2021 and 2020:

Twelve Months Ended December 31,

Net income attribitable of Class C shareholders $ 6,126 $ —

Net income attribitable of other equity interest holders 9,170 18,231

Net income attributable to noncontrolling interests $ 15,296 $ 18,231

The following table presents noncontrolling interests between holders of Class C shares and other equity interest holders as of December 31, 2021 and 2020:

Noncontrolling interest of Class C shareholders $ 475,373 $ —

Noncontrolling interest of other equity interest holders 32,914 39,787

NCI attributable to noncontrolling interests $ 508,287 $ 39,787

Redeemable Noncontrolling Interests

The following table presents changes in redeemable noncontrolling interests as of December 31, 2020 and 2019:

Years Ended December 31,

The following table presents changes in redeemable noncontrolling interests:

Beginning Balance $ 604 $ 3,602

Redemptions ( 15,231 ) —

Acquisitions (1)

Changes in redemption value 3,834 128

Currency translation adjustments ( 347 ) 3

Net loss attributable to redeemable noncontrolling interests ( 412 ) ( 3,126 )

Other 1,299 —

Ending Balance $ 43,364 $ 604

(1) Approximately $ 26,000 represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC.

Approximately $ 27,000 represents redeemable noncontrolling interests acquired in connection with the purchase of the noncontrolling interest of Targeted Victory.

See Note 4 of the Notes included herein for additional information related to the purchase of Targeted Victory.

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.

2 unchanged sentences

It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The redeemable noncontrolling interest of $ 27,137 as of December 31, 2020, consists of $ 17,184 assuming that the subsidiaries perform over the relevant future periods at their discounted cash flows earnings level and such rights are exercised, $ 9,953 upon termination of such owner’s employment with the applicable subsidiary or death and $ 0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries.

The redeemable noncontrolling interest of $ 43,364 as of December 31, 2021, consists of $ 41,324 , assuming that the subsidiaries perform over the relevant periods at their current profit levels, $ 2,040 upon termination of such owner’s employment with the applicable subsidiary or death, and $ 0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries.

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 twelve months ended December 31, 2020, 2019, and 2018, there was no related impact on the Company’s loss per share calculation.

There is no related impact on the Company’s income per share calculations.

Commitments, Contingencies, and Guarantees

1 unchanged sentence

The Company’s operating entities are involved in legal proceedings of various types.

Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters.

Additionally, 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.

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 effect on the financial condition or results of operations of the Company cash flows.

Deferred Acquisition Consideration and Options to Purchase.

See Notes 9 and 13 of the Notes to the Consolidated Financial Statements included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries.

Natural Disasters.

Certain of the Company’s operations are located in regions of the United States which typically are subject to hurricanes.

During the twelve months ended December 31, 2020, 2019, and 2018 these operations did not incur any material costs related to damages resulting from hurricanes.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Commitments, Contingencies, and Guarantees - (continued)

See Notes 9 and 13 of the Notes included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries.

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.

3 unchanged sentences

At December 31, 2021, the Company had $ 24,332 of undrawn letters of credit.

See Note 11 of the Notes included herein for additional information.

The Company entered into operating leases for which the commencement date has not yet occurred as of December 31, 2021.

See Note 10 of the Notes to the Consolidated Financial Statements included herein for additional information.

See Note 10 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

As of December 31, 2021, the Company estimates its future minimum commitments under these non-cancellable agreements to be:

$ 11,304 , $ 5,945 , and $ 2,003 in 2022, 2023, and 2024, respectively.

Share Capital

The authorized and outstanding share capital of the Company is as follows:

Series 6 Convertible Preference Shares

On March 14, 2019 (the “Series 6 Issue Date”), the Company entered into a securities purchase agreement with Stagwell Agency Holdings LLC (“Stagwell Holdings”), an affiliate of Stagwell, pursuant to which Stagwell Holdings agreed to purchase (i) 14,285,714 newly authorized Class A shares (the “Stagwell Class A Shares”) for an aggregate contractual purchase price of $ 50,000 and (ii) 50,000 newly authorized Series 6 convertible preference shares (“Series 6 Preference Shares”) for an aggregate contractual purchase price of $ 50,000 .

The Company received proceeds of approximately $ 98,620 , 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.

The proceeds allocated to the Stagwell Class A Shares were $ 35,997 and to Series 6 Preference Shares were $ 62,623 based on their relative fair value calculated by utilizing a Monte Carlo Simulation model.

In connection with the closing of the transaction, the Company increased the size of its Board and appointed two nominees designated by Stagwell Holdings.

Except as required by law, the Series 6 Preference Shares do not have voting rights and are not redeemable at the option of Stagwell Holdings.

The holders of the Series 6 Preference Shares have the right to convert their Series 6 Preference Shares in whole at any time and from time to time, and in part at any time and from time to time, 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 preference per share of each Series 6 Preference Share is $ 1,000 .

The initial Conversion Price is $ 5.00 per Series 6 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 Series 6 Preference Shares’ liquidation preference accretes at 8.0 % per annum, compounded quarterly until the five-year anniversary of the Series 6 Issue Date.

During the twelve months ended December 31, 2020 and 2019, the Series 6 Preference Shares accreted at a monthly rate of $ 7.54 and $ 6.96 per Series 6 Preference Share, for total accretion of $ 4,390 and $ 3,261 , respectively, bringing the aggregate liquidation preference to $ 57,651 as of December 31, 2020.

The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc.

common shareholders.

Holders of the Series 6 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 Series 6 Preference Shares.

The Series 6 Preference Shares are convertible at the Company’s option (i) on and after the two-year anniversary of the Series 6 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 Series 6 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 Series 6 Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value.

Series 4 Convertible Preference Shares

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Share Capital - (continued)

On March 7, 2017 (the “Series 4 Issue Date”), the Company issued 95,000 newly created Preference Shares (“Series 4 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 $ 90,123 , 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, the Company increased the size of its Board and appointed one nominee designated by the Purchaser.

Except as required by law, the Series 4 Preference Shares do not have voting rights and are not redeemable at the option of the Purchaser.

See Note 1 of the Notes to the Consolidated Financial Statements for information regarding revised terms of the Series 4 Preference Shares subject to closing of the combination between MDC and the Stagwell Entities.

Subsequent to the ninetieth day following the Series 4 Issue Date, the holders of the Series 4 Preference Shares have the right to convert their Series 4 Preference Shares in whole at any time and from time to time and in part at any time and from time to time 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 preference per share of each Series 4 Preference Share is $ 1,000 .

The Conversion Price of a Series 4 Preference Share is 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.

In connection with the anti-dilution protection provision triggered by the issuance of equity securities to Stagwell Holdings, the Conversion Price per Series 4 Preference Share was reduced to $ 7.42 from the initial Conversion Price of $ 10.00 .

The Series 4 Preference Shares’ liquidation preference accretes at 8.0 % per annum, compounded quarterly until the five-year anniversary of the Series 4 Issue Date.

During the twelve months ended December 31, 2020 and 2019, the Series 4 Preference Shares accreted at a monthly rate of approximately $ 8.84 and $ 8.17 per Series 4 Preference Share, for total accretion of $ 9,789 and $ 9,043 , respectively, bringing the aggregate liquidation preference to $ 128,539 as of December 31, 2020.

The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc.

common shareholders.

Holders of the Series 4 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 Series 4 Preference Shares.

The Series 4 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 Series 4 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 Series 4 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 Series 4 Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value.

Class A Common Shares (“Class A Shares”)

These are an unlimited number of subordinate voting shares, carrying one vote each, with a par value of $ 0 , 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 73,529,105 and 72,150,854 Class A Shares issued and outstanding as of December 31, 2020 and 2019, respectively.

Class B Common Shares (“Class B Shares”)

These are an unlimited number of voting shares, carrying twenty votes each, with a par value of $0, convertible at any time at the option of the holder into one Class A share for each Class B share.

There were 3,743 and 3,749 Class B Shares issued and outstanding as of December 31, 2020 and 2019, respectively.

The authorized and outstanding share capital of the Company is below.

Class A Common Stock (“Class A Shares”)

There are 1,000,000,000 shares of Class A Common Stock authorized.

There were 118,247,820 Class A Shares issued and outstanding as of December 31, 2021.

The Class A Shares are an unlimited number of subordinate voting shares, carrying one vote each, with a par value of $ 0.001 ,entitled to dividends equal to or greater than Class B Shares, and 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.

Class B Common Stock (“Class B Shares”)

There are 5,000 shares of Class B Common Stock authorized.

There were 3,946 of Class B Shares issued and outstanding as of December 31, 2021.

The Class B Shares are an unlimited number of voting shares, carrying twenty votes each, with a par value of $ 0.00 , convertible at any time at the option of the holder into one Class A share for each Class B share.

Class C Common Stock (“Class C Shares”)

There are 250,000,000 shares of Class C Common Stock authorized.

There were 179,970.051 Class C Shares issued and outstanding as of December 31, 2021.

The Class C shares do not participate in the earnings of the Company.

In addition, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities.

Each Class C Share, together with the related Class C unit in OpCo, is convertible at any time, at the option of the holder, into one Class A Share.

In February 2022, holders of Class C Common Stock and OpCo Units (the "Paired Units") exchanged 15,155,141 Paired Units for the same number of shares of Class A Common Stock.

Convertible Preferred Stock (“Preferred Shares”)

The Company had 50,000,000 Series 6 Preferred Shares (par value $ 0.001 per share) outstanding held by Stagwell Agency Holdings LLC and 73,849,000 Series 8 Preferred Shares (par value $ 0.001 per share) held by affiliates of The Goldman Sachs Group, Inc.

The terms of the Preferred Shares provided the Company the option to convert the Preferred Shares to Class A Common Shares if Class A Common Shares traded above 125 % of the $ 5.00 per share conversion price for 30 consecutive trading days.

The Company entered into an agreement with Goldman on August 4, 2021 to redeem $ 30,000 in liquidation value of the Series 8 Preferred Shares for $ 25,000 , resulting in the redemption of 21,151,000 shares.

On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares.

Shares-based Awards

As of December 31, 2020, a total of 18,150,000 shares have been authorized under our employee stock incentive plans, of which 5,108,583 remain available to be issued for future awards.

As of December 31, 2021, of the total number of shares authorized, 2,838,628 remain available to be issued for future awards.

The following tables summarize share-based activity of awards authorized under our employee stock incentive plans and awards (such as inducement awards) and other share-based commitments that have met the requirements to be issued separate from shareholder-approved stock incentive plans.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Share Capital - (continued)

The following table summarizes information about financial performance-based and time-based restricted stock and restricted stock unit awards:

Performance-Based Awards Time-Based Awards

Shares Weighted Average Grant Date Fair

Value Shares Weighted Average

Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value

Balance at December 31, 2020 — $ — — $ —

Shares acquired concurrent with acquisition — — 3,326,021 5.42

Granted 1,048,000 8.68 12,658,713 5.51

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Balance at December 31, 2021 1,048,000 $ 8.68 15,699,102 $ 5.49

Performance based and time-based awards granted in the twelve months ended December 31, 2019 had a weighted average grant date fair value of $ 3.08 and $ 2.54 , respectively.

Performance based and time-based awards granted in December 31, 2018 had a weighted average grant date fair value of $ 9.17 and $ 7.38 , respectively.

The vesting of the performance-based awards is contingent upon the Company meeting cumulative earnings targets over one to three years and continued employment through the vesting date.

The vesting of the performance-based awards is contingent upon the Company meeting cumulative earnings targets over three years and continued employment through the vesting date.

The term of the time-based awards is generally three years with vesting up to generally three years .

The vesting period of the time-based and performance awards is generally commensurate with the requisite service period.

The total fair value of restricted stock and restricted stock unit awards, which vested during the years ended December 31, 2020, 2019 and 2018 was $ 5,138 , $ 4,517 and $ 3,583 , respectively.

The vesting period of the time-based and performance-based awards is generally commensurate with the requisite service period.

The total fair value of restricted stock and restricted stock unit awards, which vested during the twelve months ended December 31, 2021, was $ 1,527 .

At December 31, 2021, the weighted average remaining contractual life for time-based and performance-based awards was 0.37 and 2.37 years, respectively.

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At December 31, 2021, the unrecognized compensation expense for time-based awards was $ 15,376 to be recognized over a weighted average period of 0.37 years.

The following table summarizes information about share option awards:

Share Option Awards

Shares Weighted Average

Grant Date Fair Value Weighted Average Exercise Price

Balance at December 31, 2019 111,866 $ 2.23 $ 4.85

Granted — — —

Forfeited ( 111,866 ) 2.23 4.85

Exercised — — —

Balance at December 31, 2020 — $ — $ —

We use the Black-Scholes option-pricing model to estimate the fair value of options granted.

No options were granted in 2020 and 2019.

The grant date fair value of the options granted in 2018 was determined to be $ 2.23 .

The assumptions for the model were as follows:

expected life of 4.9 years, risk free interest rate of 2.9 %, expected volatility of 52.9 % and dividend yield of 0 %.

Options granted in 2018 vest in 3 years.

The term of these awards is 5 years.

The vesting period of these awards is generally commensurate with the requisite service period.

These awards were all forfeited in 2020.

No options were exercised during 2020, 2019 and 2018.

There are no options outstanding as of December 31, 2020.

No options vested in 2020, 2019 and 2018.

The following table summarizes information about stock appreciation rights (“SAR”) awards:

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Share Capital - (continued)

Shares Weighted Average

Grant Date Fair Value Weighted Average Exercise Price

Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price

Balance at December 31, 2020 — $ — $ —

Shares acquired concurrent with acquisition 3,378,634 2.94 2.95

Granted 1,597,945 2.39 8.13

Forfeited ( 83,800 ) 1.35 6.60

Exercised — — —

Balance at December 31, 2021 4,892,779 $ 2.79 $ 4.58

We use the Black-Scholes option-pricing model to estimate the fair value of the SAR awards.

No SAR awards were granted in 2020.

SAR awards granted in 2019 vest in equal installments on each of the first 3 anniversaries of the grant date and have grant date fair values ranging from $ 0.68 to $ 1.41 .

The grant date fair values of the options granted in 2021 ranged from $ 2.20 to $ 3.66 .

The assumptions for the model were as follows:

expected life of 3 to 4 years, risk free interest rate of 1.8 % to 2.3 %, expected volatility of 62.5 % to 67.1 % and dividend yield of 0 %.

expected life ranging from 2.8 to 4 years, risk free interest rate of approximately 1.0 %, expected volatility ranging from of 35.5 % to 38.1 %, and dividend yield of 0.0 %.

Options granted in 2021 vest in 1 to 3 years.

The term of these awards is 5 years.

The vesting period of awards granted is generally commensurate with the requisite service period.

No SAR awards were granted in 2018.

The vesting period of these awards is generally commensurate with the requisite service period.

As of December 31, 2021, 1,950,000 SAR awards vested and were exercisable.

The aggregate intrinsic value of the SAR awards outstanding as of December 31, 2020 is $ 480 .

No SAR awards were exercised during 2020, 2019 and 2018.

No SAR awards vested in 2019 and 2018.

The aggregate intrinsic value of the SAR awards outstanding as of December 31, 2021 was $ 19,677 .

At December 31, 2021, the weighted average remaining contractual life for the SAR awards was 1.15 years.

At December 31, 2021, the unrecognized compensation expense for these awards was $ 4,639 to be recognized over a weighted average period of 1.15 years.

For the years ended December 31, 2020, 2019 and 2018, $ 5,774 , $ 2,460 , and $ 5,892 was recognized in stock compensation related to all stock compensation awards, respectively.

The related income tax expense for the years ended December 31, 2020, 2019 and 2018 was $ 0 , $ 643 , and $ 472 , respectively.

For the twelve months ended December 31, 2021, $ 75,032 was recognized in stock compensation related to all stock compensation awards.

The related income tax benefit for the twelve months ended December 31, 2021 was $ 5,289 .

Subsidiary Awards

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 its profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, pay a profit share distribution.

The profits interests awards are settled in cash and the corresponding liability at fair value was $ 36,418 at December 31, 2021 (Level 3 fair value model), and included as a component of Accruals and other liabilities and Other liabilities on the Audited Consolidated Balance Sheets.

Changes in Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) for the twelve months ended December 31 were:

Pension Foreign Currency Translation Total

Balance December 31, 2018 $ ( 13,101 ) $ 17,821 $ 4,720

Other comprehensive income before reclassifications — ( 7,078 ) ( 7,078 )

Amounts reclassified from accumulated other comprehensive loss (net of tax benefit of $740) ( 1,911 ) — ( 1,911 )

Other comprehensive income ( 1,911 ) ( 7,078 ) ( 8,989 )

Defined Benefit Pension Foreign Currency Translation Total

Balance December 31, 2020 — — —

Other comprehensive loss before reclassifications — ( 6,000 ) ( 6,000 )

Amounts reclassified from accumulated other comprehensive loss (net of tax benefit of $519) ( 1,354 ) — ( 1,354 )

Amounts reclassified from accumulated other comprehensive loss 722 — 722

Other comprehensive loss 722 ( 6,000 ) ( 5,278 )

Balance December 31, 2021 $ 722 $ ( 6,000 ) $ ( 5,278 )

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Prior to the merger with MDC, total equity was reported as Members' Equity.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law.

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The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.

The components of the Company’s income (loss) before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were:

2020 2019 2018

The components of the Company’s income before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were:

Income (Loss):

3 unchanged sentences

The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were:

2020 2019 2018

Current tax provision

2 unchanged sentences

27,216 11,400

7,999 5,525 8,030

Deferred tax provision (benefit):

3 unchanged sentences

( 3,818 ) ( 5,463 )

Income tax expense (benefit) $ 116,555 $ 10,316 $ 29,615

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Income Taxes - (continued)

Income tax expense $ 23,398 $ 5,937

A reconciliation of income tax expense (benefit) using the U.S.

federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows:

2020 2019 2018

Income (loss) before income taxes, equity in non-consolidated affiliates and noncontrolling interest $ ( 88,402 ) $ 20,867 $ ( 88,669 )

Income before income taxes, equity in non-consolidated affiliates and noncontrolling interest $ 59,558 $ 77,340

Statutory income tax rate 21.0 % 21.0 %

Tax expense (benefit) using U.S.

Tax expense using U.S.

statutory income tax rate $ 12,507 $ 16,241

State and foreign taxes ( 3,486 ) 1,496 ( 3,944 )

Non-deductible stock-based compensation 1,162 3,823 1,512

Global intangible low-taxed income 1,363 1,147 710

Base erosion and anti-abuse tax 4,697 2,504 389

Other non-deductible expense 1,043 273 1,388

Change to valuation allowance 128,938 ( 2,830 ) 49,482

Effect of the difference in U.S.

federal and local statutory rates 67 1,422 ( 152 )

Noncontrolling interests ( 4,649 ) ( 3,566 ) ( 2,674 )

Other impacts of foreign operations 1,160 2,724 612

Impact of goodwill impairments 10,158 436 8,703

Adjustments to accrued taxes in previous periods 4,641 ( 3,544 ) 1,192

Adjustment to deferred tax balances* ( 9,999 ) 1,920 ( 8,845 )

Impact of disregarded entity structure ( 6,954 ) ( 16,049 )

Foreign, net 1,055 752

State taxes, net 4,359 1,980

Stock compensation 4,009 —

Changes in tax rates 4,908 —

Valuation allowance ( 15 ) 1,286

Other, net 3,529 1,727

Income tax expense (benefit) $ 116,555 $ 10,316 $ 29,615

Income tax expense $ 23,398 $ 5,937

Effective income tax rate 39.3 % 7.7 %

*Adjustments to deferred tax balances in 2020 are primarily offset by changes to valuation allowance.

Income tax expense for the twelve months ended December 31, 2020 was $ 116,555 (associated with a pre-tax loss of $ 88,402 ) compared to an income tax expense of $ 10,316 (associated with pre-tax income of $ 20,867 ) for the twelve months ended December 31, 2019.

Income tax expense in 2020 included the impact of increasing valuation allowance primarily associated with U.S.

deferred tax assets and the impact of non-deductible goodwill impairments of foreign operations.

Income tax expense in 2019 included the impact of base erosion and anti-abuse tax and non-deductible stock compensation offset by a reduction in valuation allowance primarily associated with Canadian deferred tax assets.

Income tax expense for the twelve months ended December 31, 2021 was $ 23,398 (associated with a pre-tax income of $ 59,558 ) compared to an income tax expense of $ 5,937 (associated with pre-tax income of $ 77,340 ) for the twelve months ended December 31, 2020.

Prior to merger on August 2, 2021, the Company was a limited liability company classified as a disregarded entity for U.S.

federal income tax purposes, and as such was not subject to taxes from a U.S.

federal income tax perspective.

After the merger on August 2, 2021, the Company is a corporation with an investment in a limited liability company classified as a partnership for U.S.

federal income tax purposes, and as such a portion of the consolidated income is not subject to taxes from a U.S.

federal income tax perspective.

The tax rate of 21% has been used to capture the U.S.

federal taxes of the Company and the corporations owned by the Company and recorded in the Consolidated Statements of Operations and Comprehensive Income.

The significant drivers of the effective tax rate for 2021 relate to the segmentation of the income between the portion subject to entity level tax and the portion of income reported directly by the non-controlling interests, state income taxes, and non-deductible stock based compensation.

The significant drivers of the effective tax rate for 2020 relate to the segmentation of income between the portion subject to entity level tax and the portion of income reported directly by the Member, state income taxes, as well as valuation allowances established during the period.

Income taxes receivable were $ 790 and $ 0 at December 31, 2021 and 2020, respectively, and were included in other current assets on the balance sheet.

1 unchanged sentence

It is the Company’s policy to classify interest and penalties arising in connection with unrecognized tax benefits as a component of income tax expense.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Income Taxes - (continued)

The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, were as follows:

Deferred tax assets:

Accounting reserves and other $ 20,831 $ 10,987

Net operating loss carryforwards 47,139 60,705

Net operating losses $ 33,112 $ 10,229

Tax credits 6,644 583

Operating lease liability 48,173 4,141

Interest deductions 30,760 —

Refinancing charge — 669

Goodwill and intangibles 122,045 117,421

Stock compensation 1,693 1,736

Pension plan 4,856 4,414

Unrealized foreign exchange 11,995 11,373

Capital loss carryforwards 13,657 13,081

Lease liabilities 77,870 76,397

Accruals and other liabilities 3,720 —

Other 15,160 3,344

Gross deferred tax asset 137,569 18,297

2 unchanged sentences

Deferred tax liabilities:

Right-of-use assets $ ( 57,890 ) $ ( 67,613 )

Refinancing charge ( 1,675 ) —

Withholding taxes ( 475 ) ( 546 )

Capital assets ( 1,893 ) ( 382 )

Goodwill amortization ( 88,326 ) ( 98,677 )

Right of use asset - operating leases 37,001 3,577

Property and equipment, net 4,212 463

Goodwill and intangibles 83,607 21,959

Residual basis differences 102,297 —

Other 6,854 2,639

Total deferred tax liabilities 233,971 28,638

Net deferred tax asset (liability) $ ( 27,806 ) $ 80,713

Net deferred tax liability $ ( 102,227 ) $ ( 15,892 )

Deferred tax assets $ 866 $ 158

1 unchanged sentence

$ ( 102,227 ) $ ( 15,892 )

The Company has net operating loss carryforwards of $ 229,224 which expire in years 2021 through 2040.

Stagwell Inc.

itself has net operating loss carryforwards of $ 133,859 which expire years 2031 through 2041.

These definite lived net operating loss carryforwards consist of $ 17,862 relating to U.S federal, and $ 115,997 relating to U.S.

Stagwell Inc.

also had indefinite net operating loss carryforwards of $ 119,415 which consist of $ 37,367 relating to U.S.

federal, and $ 82,048 relating to U.S.

Stagwell Inc.

also has foreign tax credit and general business carryovers of $ 6,644 which expire between 2024 and 2031.

Stagwell Inc.’s consolidated corporate subsidiaries also have net operating loss carryforwards of $ 49,026 which expire in years 2022 through 2044.

These definite lived net operating loss carryforwards consist of $ 17,411 relating to U.S.

1 unchanged sentence

states and $ 2,736 relating to non-U.S.

The Company also has indefinite net operating loss carryforwards of $ 122,299 .

These indefinite loss carryforwards consist of $ 42,003 relating to the U.S.

federal, $ 69,967 relating to U.S.

states, and $ 10,329 relating to non-U.S.

In addition, the Company has indefinite capital loss carryforwards of $ 103,074 in Canada and foreign tax credit carryforwards in the U.S.

of $ 5,460 which expire in years 2024 through 2027.

The Company maintained a valuation allowance of $ 198,452 as of December 31, 2020 relating to both U.S.

and foreign deferred tax assets, and $ 65,649 as of December 31, 2019 relating to foreign deferred tax assets.

The corporate subsidiaries also have indefinite net operating loss carryforwards of $ 21,639 .

These indefinite loss carryforwards consist of $ 8,840 relating to U.S.

federal, and $ 12,799 relating to non-U.S.

The majority of the consolidated corporate subsidiaries' U.S.

tax attributes are subject to an annual limitation as a result of historic acquisitions which constituted a change of ownership as defined under Internal Revenue Code 382.

1 unchanged sentence

A change to these factors could impact the estimated valuation allowance and income tax expense.

In 2020, the Company’s evaluation resulted in the recognition of a valuation allowance against its U.S.

deferred tax assets.

Given a three-year U.S.

cumulative pre-tax loss as of December 31, 2020 and other factors, the Company concluded it is more likely than not that such U.S.

deferred tax assets will not be realized.

Income tax expense for the year ended December 31, 2020

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Income Taxes - (continued)

included a charge of approximately $ 129 million in connection with the change in the valuation allowance, which primarily relates to the U.S.

The Company has historically asserted that its unremitted foreign earnings are permanently reinvested except for certain international entities.

The Company has provided $ 475 and $ 546 as an estimate of the tax costs of repatriation with respect to $ 4,745 and $ 5,462 of undistributed foreign earnings from certain international entities that are not subject to the permanent reinvestment assertion as of December 31, 2020 and 2019.

We have not changed our permanent reinvestment assertion with respect to any other international entities as we intend to use the related historical earnings and profits to fund international operations and investments, and therefore have not recorded income taxes on such amounts.

The Company maintained a valuation allowance of $ 5,825 as of December 31, 2021 relating to both U.S.

and foreign deferred tax assets, and $ 5,551 as of December 31, 2020 relating to U.S.

and foreign deferred tax assets.

The Company is permanently reinvested with respect to its foreign earnings in certain jurisdictions, and no deferred taxes have been recorded related to such earnings as the determination of the amount is not practicable.

The Company currently does not intend to distribute previously taxed income.

Upon distribution in the future, the Company may incur state and foreign withholding taxes on such income, the amount of which is not practicable to compute.

As of December 31, 2021 and 2020, the Company recorded a liability for unrecognized tax benefits as well as applicable penalties and interest in the amount of $ 1,120 and $ 0 , respectively.

As of December 31, 2020 and 2019, accrued penalties and interest included in unrecognized tax benefits were approximately $ 135 and $ 111 , respectively.

As of December 31, 2021 and 2020, accrued penalties and

interest included in unrecognized tax benefits were approximately $ 82 and $ 0 , respectively.

If these unrecognized tax benefits were to be recognized, it would affect the Company’s effective tax rate.

2020 2019 2018

A reconciliation of the change in unrecognized tax benefits is as follows:

5 unchanged sentences

Unrecognized tax benefits - Ending Balance $ 1,038 $ —

The Company has presented $ 477 of the unrecognized tax benefits as of December 31, 2020 as a reduction to the deferred tax asset.

It is reasonably possible that the amount of unrecognized tax benefits could decrease by a range of $ 300 to $ 400 in the next twelve months as a result of expiration of certain statute of limitations.

14 unchanged sentences

The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Liabilities that are not Measured at Fair Value on a Recurring Basis

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at December 31, 2021 and 2020:

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Fair Value Measurements - (continued)

December 31, 2021 December 31, 2020

1 unchanged sentence

Amount Fair Value

Senior Notes $ 870,256 $ 883,580 $ 900,000 $ 812,250

5.625 % Notes

$ 1,100,000 $ 1,120,900 $ — $ —

Our long-term debt includes fixed rate debt.

1 unchanged sentence

Therefore, this debt is classified as Level 2 within the fair value hierarchy.

Non-financial Assets and Liabilities that are not Measured at Fair Value on a Recurring Basis

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value assessment) and right-of-use lease assets (Level 2 fair value assessment).

Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.

The Company recognized an impairment of goodwill of $ 61,661 for the twelve months ended December 31, 2020 as compared to an impairment of goodwill of $ 4,879 for the twelve months ended December 31, 2019.

The Company also recognized an impairment of intangible assets of $ 12,071 for the twelve months ended December 31, 2020.

See Notes 2 and 8 of the Notes to the Consolidated Financial Statements for information related to the measurement of the fair value of goodwill.

In the twelve months ended December 31, 2020, the Company recorded a charge of $ 22,667 , of which $ 9,969 was to reduce the carrying value of right-of-use lease assets and related leasehold improvements.

Financial Liabilities Measured at Fair Value on a Recurring Basis

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial instruments that are measured at fair value on a recurring basis at December 31, 2021 and 2020:

December 31, 2021 December 31, 2020

Amount Fair Value Carrying

Amount Fair Value

Interest Rate Swap $ 77 $ 77 $ 416 $ 416

Call Options — — 360 360

Preferred Shares — — 12,033 12,033

The interest rate swap and call options are classified as Level 3 within the fair value hierarchy.

As of December 31, 2020, the Company owned preferred shares in a company called Finn Partners.

The preferred shares had a cost basis of $ 10,000 , accrued non-cash dividends, on a cost basis, at a rate of 6 % annually.

The shares were redeemable to cash in the amount of the cost-plus accrued interest at any time after February 28, 2021 or upon a liquidation event and were also convertible to common shares of Finn Partners at any time until February 28, 2021 using a conversion ratio of 1 % per $ 1,000 of preferred shares held including accrued dividends.

The conversion feature was not bifurcated and was clearly and closely related to the host instrument, preferred shares.

Management determined that the preferred shares were a debt-like financial instrument and should be accounted for as available-for-sale securities at their fair value at each reporting period.

These preferred shares were considered to be a Level 3 fair value measurement since they utilize unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions.

On March 11, 2021, the Company transferred all of its ownership in the preferred shares.

The Company recognized a gain of $ 1,200 within Gain on sale of business and other, net on the Audited Consolidated Statements of Operations for the twelve months ended December 31, 2021 related to this transaction.

Contingent deferred acquisition consideration (Level 3 fair value measurement) is recorded at the acquisition date fair value and adjusted at each reporting period.

The estimated liability is determined in accordance with various contractual valuation formulas and is dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate.

The estimated liability is determined in accordance with models of each business' future performance, including revenue growth and free cash flows.

These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate.

These growth rates are consistent with the Company’s long-term forecasts.

As of December 31, 2020, the discount rate used to measure these liabilities was 5.1 %.

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 Consolidated Balance Sheets are subject to material uncertainty.

See Note 9 of the Notes to the Consolidated Financial Statements included herein for additional information regarding contingent deferred acquisition consideration.

At December 31, 2020 and 2019, the carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximated their fair value because of their short-term maturity.

As of December 31, 2021, the discount rate used to measure these liabilities ranged from 3.5 % to 7.2 %.

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 Audited Consolidated Balance Sheets are subject to material uncertainty.

See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

At December 31, 2021 and 2020, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.

Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurement) and right-of-use lease assets (Level 2 fair value measurement).

Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.

The Company did not recognize an impairment of goodwill or right-of-use lease assets in the twelve months ended December 31, 2021 and 2020.

The Company did recognize an impairment for intangible assets (Level 3 fair value measurement) of $ 16,187 in the twelve months ended December 31, 2021 and did not recognize an impairment for intangible assets in the twelve months ended December 31, 2020.

See Note 8 of the Notes included herein for further detail.

Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, including Stagwell and its affiliates.

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.

Below are the related party transactions that are significant in nature:

In October 2019, a Partner Firm of the Company entered into an arrangement with a Stagwell affiliate, in which the Stagwell affiliate and the Partner Firm will collaborate to provide various services to a client of the Partner Firm.

The Partner Firm and the Stagwell affiliate pitched and won this business together, with the client ultimately determining the general scope of work for each agency.

Under the arrangement, which was structured as a sub-contract due to client preference, the Partner Firm is expected to pay the Stagwell affiliate, for services provided by the Stagwell affiliate in connection with serving the client, approximately $ 2,000 which has been fully recognized as of December 2020.

As of December 31, 2020, $ 1,200 was owed to the affiliate.

During 2020, a Partner Firm of the Company entered into an arrangement with certain Stagwell affiliates to perform media planning, buying and reporting services.

Under the arrangement, the Partner Firm is expected to receive from the Stagwell affiliates approximately $ 56,700 , which has been fully recognized as of December 2020.

As of December 31, 2020, $ 110 was due from the affiliates.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Related Party Transactions - (continued)

In January 2020, a Partner Firm of the Company entered into an arrangement with a Stagwell affiliate to develop advertising technology for the Partner Firm.

Under the arrangement the Partner Firm recorded approximately $ 483 , of which $ 2 was owed to the affiliate as of December 31, 2020.

This transaction has been completed.

In August 2020, the Company entered into an arrangement with a Stagwell affiliate to provide audience and brand research, concept testing and landscape related to the ongoing new business pitches for clients of the Company.

Under the arrangement the Company is expected to pay the Stagwell affiliate approximately $ 145 , which has been fully recognized as of October 2020.

As of December 31, 2020, $ 63 was owed to the affiliate.

In November 2020, a Partner Firm of the Company entered into an arrangement with a certain Stagwell affiliate to perform event management services.

Under the arrangement, the Partner Firm is expected to receive from the Stagwell affiliate approximately $ 457 , which is expected to be recognized through March of 2021.

As of December 31, 2020, $ 67 was due from the affiliate.

On February 14, 2020, Sloane sold substantially all its assets and certain liabilities to an affiliate of Stagwell.

See Note 4 of the Notes to the Consolidated Financial Statements for information related to this transaction.

The Company entered into an agreement commencing on January 1, 2020 to sublease office space through July 2021 to a company whose chairman is a member of the Company’s Board of Directors.

As of December 31, 2020, the total future rental income related to the sublease is approximately $122.

In August 2016, a Brand of the Company entered into an arrangement to provide technology development services to a client in which several of Brand’s partners hold key leadership positions.

Under the arrangement, the Brand is expected to receive from the client approximately $ 1,844 , which is expected to be fully recognized as of December 31, 2022.

twelve months ended December 31, 2021 and 2020, the Company recognized $ 950 and $ 1 , respectively, in revenue related to this transaction.

As of December 31, 2021 and 2020, $ 506 and $ 134 , respectively, was due from the client.

In December 2018, a Brand entered into a continuous arrangement to provide marketing services to a client in which a family member of one of the Brand’s partners holds an executive leadership position.

During the twelve months ended December 31, 2021 and 2020, the Company recognized $ 243 and $ 522 , respectively, in revenue related to this transaction.

As of December 31, 2021 and 2020, $ 88 and $ 109 , respectively, was due from the client.

In December 2018, a Brand entered into a continuous arrangement with a third party in which the third party appointed the Brand as the manager of proprietary data to be used in the Brand’s ordinary course of business.

A family member of one of the Brand’s partners holds an executive leadership position in this entity.

Under the arrangement, the Brand is expected to pay the affiliate based upon the success of their services with no minimum or maximum spend.

During the twelve months ended December 31, 2021 and 2020, the Company incurred $ 1,473 and $ 8,009 , respectively, in expenses related to this transaction.

As of December 31, 2021 and 2020, $ 569 and $ 3,020 , respectively, was due to the vendor.

In 2019, the Company entered into an arrangement to provide polling services to a client in which a family member of one of the Company’s Chief Executive Officer holds a key leadership position.

Under the arrangement, the Company will receive from the client approximately $ 772 which is expected to be fully recognized as of December 2022.

During the twelve months ended December 31, 2021 and 2020, the Company recognized revenue of $ 436 and $0, respectively, related to this arrangement.

As of December 31, 2021 and 2020, $ 70 and $0 was due from the client, respectively.

In March 2019, a Brand of the Company, entered into a loan agreement with a third party who holds a minority interest in the Brand.

The loan receivable of $ 3,784 and $ 3,391 due from the third party is included within Other current assets in the Company’s Audited Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

The Company recognized $ 307 and $ 249 of interest income within Interest expense, net on its Audited Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020, respectively.

In October 2020, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of the Brand’s partners holds a key leadership position.

During the twelve months ended December 31, 2021 and 2020, the Company recognized $ 5,146 and $ 4,866 , respectively, in revenue related to this transaction.

As of December 31, 2021 and 2020, $ 0 and $ 7,125 , respectively, was due from the client related to this arrangement.

In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company.

The arrangement was for the Brand to provide marketing program campaign creative services.

Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 944 which will be fully recognized in January 2022.

The Company recorded $ 430 of related party revenue for the twelve months ended December 31, 2021.

As of December 31, 2021, $ 238 was due from the related party.

In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company.

The arrangement was for the Brand to provide strategic communications support.

Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 320 which has been fully recognized in December 2021.

The Company recorded $ 207 of related party revenue for the twelve months ended December 31, 2021.

As of December 31, 2021, $ 0 was due from the related party.

In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company.

Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 3,396 which will be fully recognized in April 2022.

During the twelve months ended December 31, 2021, the Company recognized $ 3,132 in revenue related to this transaction.

As of December 31, 2021, $ 3,132 was due from the client.

In 2021, a Brand entered into an arrangement to obtain sales and management services from an affiliate for which the CEO of the Brand is a shareholder of the affiliate.

Under the arrangement, the Brand has incurred $ 788 of related party expense for the twelve months ended December 31, 2021.

As of December 31, 2021, $ 23 was due to the related party.

In June 2021, a Brand entered into a continuous arrangement to provide marketing services to a client in which all of the Brand’s partners have an ownership interest.

During the twelve months ended December 31, 2021, the Company recognized $ 4,814 in revenue related to this transaction.

As of December 31, 2021, $ 4,033 was due from the client.

The Stagwell Group LLC, the registered investment advisor of Stagwell Media, engaged certain of its Brands to provide services for the Stagwell Group for interagency customers.

The Company recorded $ 0 and $ 900 of related party revenue for the twelve months ended December 31, 2021 and 2020, respectively.

Stagwell Media made noncash investments in the Company of $ 12,400 and $ 93,900 during the twelve months ended December 31, 2021 and 2020, respectively.

Additionally, during the twelve months ended December 31, 2021 and 2020, the Company made cash investments of $ 1,600 and $ 1,500 .

On March 11, 2021, Stagwell Media received a Noncash distribution of $ 13,000 for the transfer of the Company’s ownership in the Finn Partners Preferred shares.

Additionally, the Company made cash distributions to Stagwell Media of $ 191,900 and $ 108,500 during the twelve months ended December 31, 2021 and 2020, respectively.

Segment Information

3 unchanged sentences

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.

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”).

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.

The three reportable segments that resulted from our reassessment 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 in Note 2 of the Notes to the Consolidated Financial Statements included herein.

• 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.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Segment Information - (continued)

The operating segments aggregated within the Integrated Networks - Group A and B reportable segments provide a range of services for their 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;

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 has three reportable segments as follows:

“Integrated Agencies Network,” “Media Network” and the “Communications 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 Audited Consolidated Financial Statements included herein.

• The Integrated Agencies Network includes four integrated operating segments:

the Anomaly Alliance, Constellation, the Code and Theory Network, and the Doner Partner Network.

These operating networks are organized for go-to-market and collaboration incentive purposes and to facilitate integrated and flexible offerings for our clients.

Each integrated network consists of agencies that offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications.

The Agencies included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows:

Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout agencies), the Code & Theory Network (Code and Theory, Forsman & Bodenfors, National Research Group, Observatory, Hello Design and Colle McVoy agencies), Constellation (72andSunny, Crispin Porter Bogusky, Instrument, Team Enterprises, Harris and Redscout agencies) and the Doner Partner Network (Doner, KWT Global, Bruce Mau Design, Vitro, Harris X, Northstar, Veritas and Yamamoto agencies).

These integrated network 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.

• 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.

In addition, these operating segments may occasionally compete with each other for new business or have business move between them.

• The Media Network reportable segment is comprised of a single operating segment, our specialist network branded the Stagwell Media Network (“SMN”).

SMN serves as a unified media and data management structure with omni-channel media placement, creative media consulting, influencer and business-to-business marketing capabilities.

Our Agencies in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data.

SMN’s Agencies combine media buying and planning across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel agencies Assembly, Goodstuff, MMI Agency, 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 communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison & Partners SKDK (including Sloane & Company), and Targeted Victory Agencies.

• All Other consists of the Company’s digital innovation group, Reputation Defender (which was sold in September 2021) and Stagwell Marketing Cloud products such as PRophet.

• 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.

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.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Segment Information - (continued)

Years Ended December 31,

2020 2019 2018

Integrated Networks - Group A $ 379,648 $ 392,101 $ 393,890

Integrated Networks - Group B 435,589 531,717 551,317

Media & Data Network 139,015 161,451 183,287

Twelve Months Ended December 31,

(Dollars in Thousands)

Integrated Agencies Network $ 819,758 $ 229,646

Media Network 374,930 254,311

Communications Network 248,832 382,815

All Other 25,843 21,260

Total $ 1,199,011 $ 1,415,803 $ 1,475,088

Total Revenue $ 1,469,363 $ 888,032

Adjusted EBITDA:

Integrated Networks - Group A $ 79,793 $ 74,822 $ 75,609

Integrated Networks - Group B 84,297 84,568 74,091

Media & Data Network 9,707 7,746 12,205

Integrated Agencies Network $ 166,768 $ 42,360

Media Network 62,770 27,669

Communications Network 45,527 78,562

All Other ( 769 ) ( 1,893 )

3 unchanged sentences

Impairment and other losses ( 16,240 ) —

Stock compensation expense ( 14,179 ) ( 31,040 ) ( 18,416 )

Deferred acquisition consideration expense/(income) ( 42,187 ) ( 5,403 ) 457

Loss on investments ( 2,175 ) ( 2,048 ) ( 779 )

Other expense ( 31,244 ) ( 9,274 ) ( 7,879 )

Total Operating Income (Loss) $ ( 45,757 ) $ 79,460 $ 1,434

Stock-based compensation ( 75,032 ) —

Deferred acquisition consideration ( 18,721 ) ( 4,497 )

Other items, net ( 21,430 ) ( 13,906 )

Total Operating Income

$ 44,726 $ 83,740

Twelve Months Ended December 31,

(Dollars in Thousands)

Other Income (expenses):

Interest expense and finance charges, net $ ( 62,163 ) $ ( 64,942 ) $ ( 67,075 )

Foreign exchange gain (loss) ( 982 ) 8,750 ( 23,258 )

Other, net 20,500 ( 2,401 ) 230

Income (loss) before income taxes and equity in earnings of non-consolidated affiliates ( 88,402 ) 20,867 ( 88,669 )

Interest expense, net $ ( 31,894 ) $ ( 6,223 )

Foreign exchange, net ( 3,332 ) ( 721 )

Gain on sale of business and other, net 50,058 544

Income before income taxes and equity in earnings of non-consolidated affiliates 59,558 77,340

Income tax expense 23,398 5,937

Income (loss) before equity in earnings of non-consolidated affiliates ( 204,957 ) 10,551 ( 118,284 )

Equity in earnings of non-consolidated affiliates ( 2,240 ) 352 62

Net income (loss) ( 207,197 ) 10,903 ( 118,222 )

Net income attributable to the noncontrolling interest ( 21,774 ) ( 16,156 ) ( 11,785 )

Net loss attributable to MDC Partners Inc.

( 228,971 ) ( 5,253 ) ( 130,007 )

Accretion on and net income allocated to convertible preference shares ( 14,179 ) ( 12,304 ) ( 8,355 )

Net loss attributable to MDC Partners Inc.

Income before equity in earnings of non-consolidated affiliates 36,160 71,403

Equity in (income) losses of non-consolidated affiliates ( 240 ) 58

Net income 35,920 71,461

Net income attributable to noncontrolling and redeemable noncontrolling interests ( 14,884 ) ( 15,105 )

Net income attributable to Stagwell Inc.

common shareholders $ 21,036 $ 56,356

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Segment Information - (continued)

Years Ended December 31,

2020 2019 2018

Depreciation and amortization:

(Dollars in Thousands)

Integrated Networks - Group A $ 6,467 $ 8,559 $ 9,602

Integrated Networks - Group B 17,204 15,904 19,032

Media & Data Network 4,376 4,303 3,820

Integrated Agencies Network $ 40,087 $ 9,616

Media Network 23,590 19,861

Communications Network 7,553 5,903

All Other 2,498 3,681

2 unchanged sentences

Stock-based compensation:

Integrated Networks - Group A $ 7,580 $ 24,420 $ 5,792

Integrated Networks - Group B 3,191 4,303 6,890

Media & Data Network 122 63 320

All Other 304 374 755

Corporate 2,982 1,880 4,659

Total $ 14,179 $ 31,040 $ 18,416

Capital expenditures:

Integrated Networks - Group A $ 1,087 $ 5,934 $ 8,228

Integrated Networks - Group B 987 9,270 6,352

Media & Data Network 569 627 1,632

Integrated Agencies Network $ 47,584 $ —

Media Network 4,857 —

Communications Network 15,928 —

All Other 39 —

1 unchanged sentence

Total $ 75,032 $ —

A summary of the Company’s long-lived assets, comprised of fixed assets, goodwill and intangibles, net, by geographic region at December 31, is set forth in the following table.

United States Canada Other Total

Long-lived Assets

2020 $ 80,447 $ 3,461 $ 6,505 $ 90,413

2019 $ 68,497 $ 4,475 $ 8,082 $ 81,054

Goodwill and Intangible Assets

2020 $ 614,168 $ 51,267 $ 36,620 $ 702,055

2019 $ 659,584 $ 64,842 $ 62,158 $ 786,584

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.

Corporate’s capital expenditures in 2020 are primarily for leasehold improvements at its new headquarters at One World Trade Center in connection with the centralization of the Company’s New York real estate portfolio.

As of December 31, 2020, the Company had $ 12,993 of capital expenditures that were incurred in the current year, but not yet paid.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Segment Information - (continued)

A summary of the Company’s revenue by geographic region at December 31 is set forth in the following table.

United States Canada Other Total

2020 $ 959,636 $ 81,930 $ 157,445 $ 1,199,011

2019 $ 1,116,045 $ 105,067 $ 194,691 $ 1,415,803

2018 $ 1,152,399 $ 124,001 $ 198,688 $ 1,475,088

Quarterly Results of Operations (Unaudited)

The following table sets forth a summary of the Company’s consolidated unaudited quarterly results of operations for the years ended December 31, in thousands of dollars, except per share amounts.

First Second Third Fourth

2020 $ 327,742 $ 259,678 $ 283,423 $ 328,168

2019 $ 328,791 $ 362,130 $ 342,907 $ 381,975

Cost of services sold:

2020 $ 222,693 $ 165,632 $ 172,531 $ 209,043

2019 $ 237,154 $ 240,749 $ 222,448 $ 260,725

Net Income (loss):

2020 $ 1,794 $ 2,508 $ 14,804 $ ( 226,303 )

2019 $ 316 $ 7,333 $ 5,513 $ ( 2,259 )

Net income (loss) attributable to MDC Partners Inc.:

2020 $ 1,003 $ ( 593 ) $ 4,076 $ ( 233,457 )

2019 $ ( 113 ) $ 4,290 $ ( 1,752 ) $ ( 7,678 )

Income (loss) per common share:

2020 $ ( 0.03 ) $ ( 0.06 ) $ ( 0.07 ) $ ( 3.23 )

2019 $ ( 0.04 ) $ 0.01 $ ( 0.07 ) $ ( 0.15 )

2020 $ ( 0.03 ) $ ( 0.06 ) $ ( 0.07 ) $ ( 3.23 )

2019 $ ( 0.04 ) $ 0.01 $ ( 0.07 ) $ ( 0.15 )

The above revenue, cost of services sold, and income (loss) have primarily been affected by acquisitions and divestitures.

Historically, with some exceptions, the Company’s fourth quarter generates the highest quarterly revenues in a year.

The fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur.

Income (loss) has been affected as follows:

• The fourth quarter of 2020 and 2019 included a foreign exchange gain of $ 6,274 and a gain of $ 4,349 , respectively.

• The fourth quarter of 2020 and 2019 included stock-based compensation charges of $ 3,611 and $ 18,408 , respectively.

• The fourth quarter of 2020 and 2019 included changes in deferred acquisition resulting in income of $ 41,672 and $ 9,030 , respectively.

MDC PARTNERS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

Quarterly Results of Operations (Unaudited) - (continued)

• The fourth quarter of 2020 and 2019 included goodwill, intangible asset, right-of-use asset, related leasehold improvement impairment charges, and expenses to accelerate the variable costs associated with certain leases of $ 77,240 and goodwill, right-of-use assets and related leasehold improvement impairment charges of $ 6,655 , respectively.

• The fourth quarter of 2020 included income tax expense of approximately $129 million, related to the increase in the valuation allowance primarily for U.S.

deferred tax assets.

See Note 5 of the Notes included herein for a summary of the Company’s revenue by geographic region for the twelve months ended December 31, 2021 and 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data