2018 Outlook Commentary *

Organic Revenue Growth

We expect 1-3% growth in organic revenue (versus approximately 4% growth previously), whose definition now excludes the impact of the adoption of ASC 606 in the reconciliation of reported revenue.

Pass-through and Out-of-Pocket Costs

The adoption of ASC 606 resulted in certain client contracts previously being accounted for as principal, now being accounted for as agent. This results in a reduction in full year gross revenue of approximately $65 million with a corresponding reduction in direct costs, with no impact on profit.

Foreign Exchange Impact, net

Assuming currency rates remain where they are, and based on our most recent projections, the net impact of foreign exchange is expected to be positive by approximately 50 basis points versus 100 basis points previously.

Impact of Non-GAAP Acquisitions (Dispositions), net

Our current expectations are that the impact of acquisitions, net of disposition activity, will increase revenue by approximately 80 basis points.

Adjusted EBITDA Margin

We expect margins to be flat to 40 basis points of expansion versus approximately 20 basis points expansion previously. Our revised outlook incorporates an approximately 60 basis point benefit from the shift from gross to net revenue accounting related to certain client contracts, whereas our prior outlook did not. Our revised outlook therefore implies an approximately 60 basis point reduction from our prior outlook, excluding the impact from the accounting change.

* The Company has excluded a quantitative reconciliation with respect to the Company's 2018 guidance under the "unreasonable efforts" exception in item 10(e)(1)(i)(B) of Regulation S-K.

SCHEDULE 1

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ in 000s, except share and per share amounts)

Three Months Ended March 31,

2018 (1)

2017

Revenue

$                    326,968

$                    344,700

Operating expenses:

Cost of services sold

243,030

237,563

Office and general expenses

83,879

87,840

Depreciation and amortization

12,375

10,898

Other asset impairment

2,317

-

341,601

336,301

Operating profit (loss)

Other income (expense):

Other, net

(6,219)

2,567

Interest expense and finance charges

(16,231)

(16,768)

Interest income

148

227

(22,302)

(13,974)

Loss before income taxes and equity in earnings of non-consolidated affiliates

(36,935)

(5,575)

Income tax expense (benefit)

(8,330)

3,969

Loss before equity in earnings of non-consolidated affiliates

(28,605)

(9,544)

Equity in earings (losses) of non-consolidated affiliates

86

(139)

Net loss

(28,519)

(9,683)

Net income attributable to the noncontrolling interests

(897)

(883)

Net loss attributable to MDC Partners Inc.

(29,416)

(10,566)

Accretion on convertible preference shares

(2,027)

(507)

Net loss attributable to MDC Partners Inc. common shareholders

$                    (31,443)

$                    (11,073)

Loss per common share:

Basic and diluted:

Net loss attributable to MDC Partners Inc. common shareholders

$                       (0.56)

$                       (0.21)

Weighted average number of common shares outstanding:

Basic and diluted

56,415,042

52,998,244

(1) Effective January 1, 2018, we adopted ASC Topic 606, "Revenue from Contracts with Customers" (ASC 606). ASC 606 was applied using the modified retrospective method, with the cumulative effect of the initial adoption being recognized as an adjustment to opening retained earnings at January 1, 2018. As a result, comparative prior periods have not been adjusted and continue to be reported under ASC 605 "Revenue  Recognition" (ASC 605). For the three months ended March 31, 2018, the adoption of ASC 606 reduced revenue by $21.3 million, increased operating loss by $6.1 million, and increased Net loss attributable to MDC Partners common shareholders by $4.4 million, or $0.08 per share. As required, we have provided a reconciliation of the current presentation under ASC 606 to the prior presentation under ASC 605 in this release in Schedule 2.

SCHEDULE 2

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES

(US$ in 000s, except percentages)

For the Three Months Ended March 31, 2018

As Reported

Adjustments

Adjusted to Exclude
the Impact of
Adoption of ASC 606

Revenue

$                    326,968

$                     21,276

$                    348,244

Costs of services sold

243,030

15,197

258,227

Operating loss

(14,633)

6,079

(8,554)

Net loss attributable to MDC Partners, Inc. common shareholders

(31,443)

4,436

(27,007)

Loss per common share - basic and diluted

(0.56)

0.08

(0.48)

Organic Revenue Growth

1.0%

-

1.0%

Adjusted EBITDA

$                       7,824

$                       6,079

$                     13,903

margin

2.4%

4.0%

*    The table above summarizes the impact of the adoption of ASC 606 on our US GAAP and non-GAAP performance metrics.

Note: Actuals may not foot due to rounding.

SCHEDULE 3

MDC PARTNERS INC.

UNAUDITED REVENUE RECONCILIATION

(US$ in 000s, except percentages)

Three Months Ended

Revenue $

% Change

March 31, 2017 as reported under ASC 605

$                  344,700

Organic revenue growth ⁽¹⁾

3,296

1.0%

Non-GAAP acquisitions (dispositions), net

(5,261)

(1.5%)

Foreign exchange impact

5,509

1.6%

Impact of adoption of ASC 606 ⁽²⁾

(21,276)

Total change

(17,732)

(5.1%)

March 31, 2018 as reported under ASC 606

$                  326,968

(1)  "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth, excluding the impact of adopting ASC 606. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms which the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

(2)  In accordance with the adoption of ASC 606, we were required to change certain aspects of our revenue recognition accounting policy as it relates to performance incentives, retainer fees, and certain third-party pass-through and out-of-pocket costs. Under the prior guidelines, performance incentives were recognized in revenue when specific quantitative goals were achieved, or when the Company's performance against qualitative goals was determined by the client. Under ASC 606, the Company now estimates the amount of the incentive that will be earned at the inception of the contract and recognizes such incentive over the term of the contract. Additionally, previously, fees for non-refundable retainers were generally recognized on a straight-line basis over the term of the specific customer arrangement. Under ASC 606, an input method is typically used to measure progress and recognize revenue for these types of arrangements. Finally, the adoption of ASC 606 resulted in certain client arrangements previously being accounted for as principal, now being accounted for as agent. In these instances, certain third-party pass-through and out-of-pocket costs which were billed to clients in connection with services being provided, are no longer included in revenue and therefore the revenue recorded is equal to the net amount retained.

Note: Actuals may not foot due to rounding.

SCHEDULE 4

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Three Months Ended March 31, 2018, as reported under ASC 606

Global 

Domestic

Advertising and

Integrated

Creative

Specialized

Media

Communications

Agencies

Agencies

 Communications

 Services

All Other

Corporate

Total

Revenue

$              326,968

$    150,355

$      21,296

$      43,150

$      31,257

$      80,910

$             -

$    326,968

Net loss attributable to MDC Partners Inc.

$    (29,416)

Adjustments to reconcile to operating profit (loss):

   Net income attributable to the noncontrolling interests

897

   Equity in earnings of non-consolidated affiliates

(86)

   Income tax benefit

(8,330)

   Interest expense and finance charges, net

16,083

   Other, net

6,219

Operating profit (loss)

$                    (561)

$    (15,761)

$        3,454

$        4,027

$           487

$        7,232

$    (14,072)

$    (14,633)

margin

-0.2%

-10.5%

16.2%

9.3%

1.6%

8.9%

-4.5%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

12,151

8,016

353

1,002

644

2,136

224

12,375

Other asset impairment

-

-

-

-

-

-

2,317

2,317

Stock-based compensation

3,789

2,547

149

336

74

683

1,248

5,037

Deferred acquisition consideration adjustments

2,586

1,434

-

528

82

542

-

2,586

Distributions from non-consolidated affiliates **

-

-

-

-

-

-

20

20

Other items, net ***

-

-

-

-

-

-

122

122

Adjusted EBITDA *

$                17,965

$      (3,764)

$        3,956

$        5,893

$        1,287

$      10,593

$    (10,141)

$        7,824

margin

5.5%

-2.5%

18.6%

13.7%

4.1%

13.1%

2.4%

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

**   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 legal fees and related expenses, net of insurance proceeds, relating to the SEC investigation and related class action litigation claims.  See Schedule 8 for reconciliation of amounts.

SCHEDULE 5

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Three Months Ended March 31, 2017, as reported under ASC 605

Global 

Domestic

Advertising and

Integrated

Creative

Specialized

Media

Communications

Agencies

Agencies

 Communications

 Services

All Other

Corporate

Total

Revenue

$              344,700

$    179,225

$      20,910

$      40,684

$      35,244

$      68,637

$             -

$    344,700

Net loss attributable to MDC Partners Inc.

$    (10,566)

Adjustments to reconcile to operating profit (loss):

   Net income attributable to the noncontrolling interests

883

   Equity in earnings of non-consolidated affiliates

139

   Income tax expense

3,969

   Interest expense and finance charges, net

16,541

   Other, net

(2,567)

Operating profit (loss)

$                16,968

$         (640)

$        3,524

$        4,348

$        2,642

$        7,094

$      (8,569)

$        8,399

margin

4.9%

-0.4%

16.9%

10.7%

7.5%

10.3%

2.4%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

10,589

5,961

360

1,216

1,005

2,047

309

10,898

Stock-based compensation

4,346

2,989

155

518

160

524

604

4,950

Deferred acquisition consideration adjustments

11,431

8,508

350

344

169

2,060

-

11,431

Other items, net **

-

-

-

-

-

-

135

135

Adjusted EBITDA *

$                43,334

$      16,818

$        4,389

$        6,426

$        3,976

$      11,725

$      (7,521)

$      35,813

margin

12.6%

9.4%

21.0%

15.8%

11.3%

17.1%

10.4%

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

**    Other items, net includes legal fees and related expenses, net of insurance proceeds, relating to the SEC investigation and related class action litigation claims.  See Schedule 8 for reconciliation of amounts.

Note: Results for 2017 have been recasted to reflect the reclassification of one of our marketing services businesses from All Other to the Global Integrated Agencies Segment, effective January 1, 2018.

SCHEDULE 6

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(US$ in 000s)

March 31,

December 31,

2018

2017

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$           29,202

$           46,179

Cash held in trusts

4,467

4,632

Accounts receivable, net

424,918

434,072

Expenditures billable to clients

57,885

31,146

Other current assets

36,273

26,742

Total current assets

552,745

542,771

Fixed assets, net

85,370

90,306

Investments in non-consolidated affiliates

6,442

6,307

Goodwill

832,510

835,935

Other intangible assets, net

66,353

70,605

Deferred tax assets

126,252

115,325

Other assets

31,405

37,643

Total assets

$       1,701,077

$       1,698,892

Liabilities, redeemable noncontrolling interests, and shareholders' deficit

Current liabilities:

Accounts payable

$         202,724

$         244,527

Trust liability

4,467

4,632

Accruals and other liabilities

290,003

327,812

Advance billings

210,245

148,133

Current portion of long-term debt

322

313

Current portion of deferred acquisition consideration

40,909

50,213

Total current liabilities

748,670

775,630

Long-term debt, less current portion

942,806

882,806

Long-term portion of deferred acquisition consideration

82,822

72,213

Other liabilities

55,197

54,110

Deferred tax liabilities

6,899

6,760

Total liabilities

1,836,394

1,791,519

Redeemable noncontrolling interests

54,345

62,886

Shareholders' deficit

Convertible preference shares (liquidation preference $103,379)

90,123

90,220

Common shares

353,074

352,432

Charges in excess of capital

(314,662)

(314,241)

Accumulated deficit

(370,586)

(340,000)

Accumulated other comprehensive gain (loss)

1,425

(1,954)

MDC Partners Inc. shareholders' deficit

(240,626)

(213,543)

Noncontrolling interests

50,964

58,030

Total shareholders' deficit

(189,662)

(155,513)

Total liabilities, redeemable noncontrolling interests, and shareholders' deficit

$       1,701,077

$       1,698,892

SCHEDULE 7

MDC PARTNERS INC.

UNAUDITED SUMMARY CASH FLOW DATA

(US$ in 000s)

2018

2017

Net cash used in operating activities

$                  (61,033)

$                  (33,218)

Net cash used in investing activities

(3,868)

(11,090)

Net cash provided by financing activities

47,618

39,631

Effect of exchange rate changes on cash and cash equivalents

306

(58)

Net decrease in cash and cash equivalents

$                  (16,977)

$                    (4,735)

Note:  Effective January 1, 2018, we adopted ASU 2016-15, "Statement of Cash Flows", which clarifies how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. We applied ASU 2016-15 on a retrospective basis, and accordingly the prior period has been reclassified to conform to the new standard.

SCHEDULE 8

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES

(US$ in 000s)

2017

2018

Q1

Q2

Q3

Q4

FY

Q1

NON-GAAP ACQUISITIONS (DISPOSITIONS), NET

GAAP revenue from prior year acquisitions *

$   18,552

$   24,983

$           -

$           -

$   43,535

$           -

Foreign exchange impact

1,046

1,341

-

-

2,387

-

Contribution to organic revenue (growth) decline **

1,470

(6,399)

-

-

(4,929)

-

Prior year revenue from dispositions ***

(691)

(660)

(3,153)

(6,103)

(10,607)

(5,261)

Non-GAAP acquisitions (dispositions), net

$   20,377

$   19,265

$    (3,153)

$    (6,103)

$   30,386

$    (5,261)

2017

2018

Q1

Q2

Q3

Q4

FY

Q1

OTHER ITEMS, NET

SEC investigation and class action litigation expenses

$        339

$        382

$        330

$        287

$     1,338

$        122

D&O insurance proceeds

(204)

(482)

-

(399)

(1,085)

-

Total other items, net

$        135

$       (100)

$        330

$       (112)

$        253

$        122

2017

2018

Q1

Q2

Q3

Q4

FY

Q1

CASH INTEREST, NET & OTHER

Cash interest paid

$       (999)

$  (30,567)

$       (758)

$  (30,571)

$  (62,895)

$       (649)

Bond interest accrual adjustment

(14,625)

14,625

(14,625)

14,625

-

(14,625)

Adjusted cash interest paid

(15,624)

(15,942)

(15,383)

(15,946)

(62,895)

(15,274)

Interest income

227

178

145

209

759

148

Total cash interest, net & other

$  (15,397)

$  (15,764)

$  (15,238)

$  (15,737)

$  (62,136)

$  (15,126)

2017

2018

Q1

Q2

Q3

Q4

FY

Q1

CAPITAL EXPENDITURES, NET

Capital expenditures

$    (9,413)

$  (11,743)

$    (7,149)

$    (4,653)

$  (32,958)

$    (3,799)

Landlord reimbursements

75

3,146

1,357

1,858

6,436

219

Total capital expenditures, net

$    (9,338)

$    (8,597)

$    (5,792)

$    (2,795)

$  (26,522)

$    (3,580)

2017

2018

Q1

Q2

Q3

Q4

FY

Q1

MISCELLANEOUS OTHER DISCLOSURES

Net income attributable to the noncontrolling interests

$        883

$     2,214

$     3,491

$     8,787

$   15,375

$        897

Cash taxes

$     1,293

$     2,130

$     3,486

$     1,191

$     8,100

$     1,333

*      GAAP revenue from prior year acquisitions for 2018 and 2017 relates to acquisitions which occurred in 2017 and 2016, respectively.

**    Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company's organic revenue growth (decline) calculation.

***  Prior year revenue from dispositions reflects the incremental impact on revenue for the comparable period after the Company's disposition of such disposed business, plus revenue from each business disposed of by the Company in the previous year through the twelve month anniversary of the disposition. 

Note: Actuals may not foot due to rounding.