Unless otherwise indicated, references to the "Company" mean MDC Partners Inc. and its subsidiaries, and references to a fiscal year means the Company's year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2009 means the period beginning January 1, 2009, and ending December 31, 2009).

The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP") of the United States of America ("US GAAP"). However, the Company has included certain non-US GAAP financial measures and ratios, which it believes, provide useful information to both management and readers of this report in measuring the financial performance and financial condition of the Company. One such term is "organic revenue" which means growth in revenues from sources other than acquisitions or foreign exchange impacts. These measures do not have a standardized meaning prescribed by US GAAP and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other titled measures determined in accordance with US GAAP.

The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30, 2009 and 2008, and the financial condition of the Company as of September 30, 2009. This analysis should be read in conjunction with the interim condensed consolidated financial statements presented in this interim report and the annual audited consolidated financial statements and Management's Discussion and Analysis presented in the Annual Report to Shareholders for the year ended December 31, 2008 as reported on Form 10-K. All amounts are in U.S. dollars unless otherwise stated.

The Company's objective is to create shareholder value by building market-leading subsidiaries and affiliates that deliver innovative, value-added marketing communications and strategic consulting services to their clients. Management believes that shareholder value is maximized with an operating philosophy of "Perpetual Partnership" with proven committed industry leaders in marketing communications.

We manage the business by monitoring several financial and non-financial performance indicators. The key indicators that we review focus on the areas of revenues and operating expenses and capital expenditures. Revenue growth is analyzed by reviewing the components and mix of the growth, including: growth by major geographic location; existing growth by major reportable segment (organic); growth from currency changes; and growth from acquisitions.

We conduct our businesses through the Marketing Communications Group. Within the Marketing Communications Group, there are three reportable operating segments:
Strategic Marketing Services ("SMS"), Customer Relationship Management ("CRM") and Specialized Communication Services ("SCS"). In addition, MDC has a "Corporate Group" which provides certain administrative, accounting, financial and legal functions. Through our operating "partners", MDC provides advertising, consulting, customer relationship management, and specialized communication services to clients throughout the United States, Canada, Europe and Jamaica.

The operating companies earn revenue from agency arrangements in the form of retainer fees or commissions; from short-term project arrangements in the form of fixed fees or per diem fees for services; and from incentives or bonuses. Additional information about revenue recognition appears in Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

We measure operating expenses in two distinct cost categories: cost of services sold, and office and general expenses. Cost of services sold is primarily comprised of employee compensation related costs and direct costs related primarily to providing services. Office and general expenses are primarily comprised of rent and occupancy costs and administrative service costs including related employee compensation costs. Also included in operating expenses is depreciation and amortization.

Because we are a service business, we monitor these costs on a percentage of revenue basis. The cost of services sold tends to fluctuate in conjunction with changes in revenues, whereas office and general expenses and depreciation and amortization, which are not directly related to servicing clients, tend to decrease as a percentage of revenue as revenues increase because a significant portion of these expenses are relatively fixed in nature.

We measure capital expenses as either maintenance or investment related. Maintenance capital expenses are primarily composed of general upkeep of our office facilities and equipment that are required to continue to operate our businesses. Investment capital expenses include expansion costs, the build out of new capabilities, technology or call centers, or other growth initiatives not related to the day to day upkeep of the existing operations. Growth capital expenses are measured and approved based on the expected return of the invested capital.

Certain Factors Affecting Our Business

Acquisitions and Dispositions. Our strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry. We engaged in a number of acquisition and disposal transactions during the 2008 to 2009 period, which affected revenues, expenses, operating income and net income. Additional information regarding material acquisitions is provided in Note 4 "Acquisitions" and information on dispositions is provided in Note 6 "Discontinued Operations" in the Notes to the Unaudited Condensed Consolidated Financial Statements.

Foreign Exchange Fluctuations. Our financial results and competitive position are affected by fluctuations in the exchange rate between the US dollar and non-US dollars, primarily the Canadian dollar. See also "Quantitative and Qualitative Disclosures About Market Risk - Foreign Exchange."

Seasonality. Historically, with some exceptions, we generate the highest quarterly revenues during the fourth quarter in each 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.

Results of Operations:
For the Three Months Ended September 30, 2009
(thousands of United States dollars)

                                  Strategic        Customer          Specialized
                                  Marketing      Relationship       Communication
                                   Services       Management          Services         Corporate        Total
Revenue                           $   86,302      $     26,276     $        22,047     $        -     $ 134,625

Cost of services sold                 50,284            18,682              16,560              -        85,526

Office and general expenses           17,700             5,006               3,977          4,718        31,401

Depreciation and amortization          5,245             1,732                 422            115         7,514

Operating Profit/(Loss)               13,073               856               1,088        (4,833)        10,184

Other Income (Expense):
Other expense, net                                                                                      (3,080)
Interest expense, net                                                                                   (3,775)

Income from continuing
operations before income taxes,
equity in affiliates                                                                                      3,329
Income tax expense                                                                                        1,149

Income from continuing
operations before equity in
affiliates                                                                                                2,180
Equity in earnings of
non-consolidated affiliates                                                                                  60

Income from continuing
operations                                                                                                2,240
Loss from discontinued
operations attributable to MDC
Partners Inc., net of taxes                                                                                   -

Net income                                                                                                2,240
Net income attributable to the
noncontrolling interests             (1,817)                 -               (387)              -       (2,204)
Net income attributable to MDC
Partners Inc.                                                                                         $      36

Non cash stock based
compensation.                     $      705     $          44     $           248     $    1,234     $   2,231

Results of Operations:
For the Three Months Ended September 30, 2008
(thousands of United States dollars)

                      Restated for Discontinued Operations

                                    Strategic         Customer          Specialized
                                    Marketing       Relationship       Communication
                                    Services         Management          Services          Corporate        Total

Revenue                            $    81,279     $       32,673     $        28,137     $         -     $ 142,089

Cost of services sold                   49,611             23,888              21,059               -        94,558

Office and general expenses             18,108              5,780               5,077           2,899        31,864

Depreciation and amortization            4,872              1,845                 642              69         7,428

Operating Profit/(Loss)                  8,688              1,160               1,359          (2,968 )       8,239

Other Income (Expense):
Other income, net                                                                                             2,418
Interest expense, net                                                                                        (3,117 )

Income from continuing
operations before income taxes,
equity in affiliates                                                                                          7,540
Income tax expense                                                                                            2,222

Income from continuing
operations before equity in
affiliates                                                                                                    5,318
Equity in earnings
non-consolidated affiliates                                                                                      69

Income from continuing
operations                                                                                                    5,387

Loss from discontinued
operations attributable to MDC
Partners Inc., net of taxes                                                                                    (771 )

Net Income                                                                                                    4,616
Net income attributable to the
noncontrolling interests                (1,180 )              (60 )              (126 )             -        (1,366 )
Net Income attributable to MDC
Partners, Inc.                                                                                            $   3,250

Non cash stock based
compensation                       $       475     $           31     $           174     $     1,149     $   1,829

Results of Operations:
For the Nine Months Ended September 30, 2009
(thousands of United States dollars)

                                  Strategic        Customer          Specialized
                                  Marketing      Relationship       Communication
                                   Services       Management          Services         Corporate        Total
Revenue                           $  247,675      $     85,702     $        62,869     $        -     $  396,246

Cost of services sold                148,349            62,771              48,524              -        259,644

Office and general expenses           53,298            15,802              10,857         12,769         92,726

Depreciation and amortization         15,826             5,340               1,257            288         22,711

Operating Profit/(Loss)               30,202             1,789               2,231       (13,057)         21,165

Other Income (Expense):
Other expense, net                                                                                       (2,991)
Interest expense, net                                                                                   (10,987)

Income from continuing
operations before income taxes,
equity in affiliates                                                                                       7,187
Income tax expense                                                                                         3,373

Income from continuing
operations before equity in
affiliates                                                                                                 3,814
Equity in earnings of
non-consolidated affiliates                                                                                  258

Income from continuing
operations                                                                                                 4,072
Loss from discontinued
operations attributable to MDC
Partners Inc., net of taxes                                                                                (361)

Net income                                                                                                 3,711
Net income attributable to the
noncontrolling interests             (2,965)                 -               (604)              -        (3,569)
Net income attributable to MDC
Partners Inc.                                                                                         $      142

Non cash stock based
compensation.                     $    1,509     $          92     $           574     $    3,998     $    6,173

Results of Operations:
For the Nine Months Ended September 30, 2008
(thousands of United States dollars)

                      Restated for Discontinued Operations

                                  Strategic         Customer          Specialized
                                  Marketing       Relationship       Communication
                                   Services        Management          Services         Corporate        Total

Revenue                           $  246,383     $      104,179     $        89,378     $        -     $ 439,940

Cost of services sold                152,943             75,936              63,531              -       292,410

Office and general expenses           56,681             18,011              15,935         12,127       102,754

Depreciation and amortization         18,085              5,550               1,950            204        25,789

Operating Profit/(Loss)               18,674              4,682               7,962        (12,331 )      18,987

Other Income (Expense):
Other income, net                                                                                          5,545
Interest expense, net                                                                                     (9,790 )

Income from continuing
operations before income taxes,
equity in affiliates                                                                                      14,742
Income tax expense                                                                                         6,415

Income from continuing
operations before equity in
affiliates                                                                                                 8,327
Equity in earnings of
non-consolidated affiliates                                                                                  290

Income from continuing
operations                                                                                                 8,617

Loss from discontinued
operations attributable to MDC
Partners Inc., net of taxes                                                                               (6,698 )

Net Income                                                                                                 1,919
Net income attributable to the
noncontrolling Interests              (3,708 )             (247 )            (2,578 )            -        (6,533 )
Net loss attributable to MDC
Partners, Inc.                                                                                         $  (4,614 )

Non cash stock based
compensation                      $    1,492     $           98     $           648     $    3,452     $   5,690

Three Months Ended September 30, 2009, Compared to Three Months Ended September 30, 2008

Revenue was $134.6 million for the quarter ended September 30, 2009, representing a decrease of $7.5 million, or 5.3%, compared to revenue of $142.1 million for the quarter ended September 30, 2008. This revenue decrease relates primarily to a decrease in organic revenues of $6.3 million. In addition, a strengthening of the US dollar, primarily versus the Canadian dollar during the quarter ended September 30, 2009, resulted in decreased revenues of $1.2 million.

Operating profit for third quarter of 2009 was $10.2 million, compared to $8.2 million for 2008. The increase in operating profit was primarily the result of an increase in operating profit of $4.4 million in the Strategic Marketing Services ("SMS") segment. This was partially offset by decreases in operating profits of $0.3 million in both the Specialized Communication Services ("SCS") and Customer Relationship Management ("CRM") segments. In addition, Corporate operating expenses increased by $1.9 million.

The income from continuing operations attributable to MDC Partners Inc. for the third quarter of 2009 was $0.1 million, compared to $4.0 million in 2008. This decrease in income of $3.9 million was primarily the result of an increase in unrealized losses on foreign currency transactions of $5.5 million, an increase in net interest expense of $0.7 million, and an increase in net income attributable to noncontrolling interests of $0.8 million. These amounts were offset by an increase in operating profit of $2.0 million and a decrease in income tax expense of $1.1 million.

Marketing Communications Group

The components of revenues for the third quarter of 2009 attributable to the
Marketing Communications Group, which consists of three reportable
segments - SMS, CRM, and SCS are shown in the following table:

                                          Revenue
                                    $000's          %
Quarter ended September 30, 2008   $ 142,089           -
Organic                              (6,251)       (4.4) %
Foreign exchange impact              (1,213)       (0.9) %
Quarter ended September 30, 2009   $ 134,625       (5.3) %

The geographic mix in revenues was consistent between 2009 and 2008 and is demonstrated in the following table:

               2009      2008
US                83 %      83 %
Canada            15 %      15 %
UK and other       2 %       2 %

The operating profit of the Marketing Communications Group increased by approximately 34.0% to $15.0 million from $11.2 million. Operating margins increased by 3.3% and were 11.2% for the third quarter of 2009, compared to 7.9% for the third quarter of 2008. Operating margins increased due primarily to a decrease in direct costs (excluding staff costs) as a percentage of revenues from 14.2% in 2008 to 13.5% in 2009 due to a decrease in reimbursed client related direct costs. Total staff costs as a percentage of revenues decreased from 60.1% in 2008, to 58.1% in 2009. General and administrative costs decreased as a percentage of revenue from 20.4% in 2008 to 19.8% in 2009.

Strategic Marketing Services ("SMS")

Revenues attributable to SMS in the third quarter of 2009 were $86.3 million, compared to $81.3 million in 2008. The year-over-year increase of $5.0 million or 6.2% was attributable primarily to organic growth as a result of net new business wins.

The operating profit of SMS for the third quarter of 2009 increased by approximately 50.5% to $13.1 million in 2009, from $8.7 million in 2008. Operating margins increased to 15.1% in 2009, from 10.7% in 2008. Operating profit increased due primarily to a decrease in total staff costs as a percentage of revenue from 57.9% in 2008 to 55.3% in 2009 as a result of managing costs. In addition, direct costs (excluding staff costs) as a percentage of revenues decreased from 10.9% of revenue in 2008, to 10.7% of revenue in 2009. General and administrative costs decreased as a percentage of revenue from 22.3% in the third quarter of 2008, to 20.5% in 2009, as a result of managing these costs.

Customer Relationship Management ("CRM")

Revenues reported by the CRM segment for the third quarter of 2009 were $26.3 million, a decrease of $6.4 million or 19.6% compared to the $32.7 million reported for 2008. This decrease was a result of existing clients reducing their outsourcing needs.

Operating profit earned by CRM decreased to $0.9 million in 2009, from $1.2 million for the third quarter of 2008. Operating margins were 3.3% for the third quarter of 2009 as compared to 3.6% for the third quarter of 2008. The decrease in margins is primarily attributable to a decrease in revenue. Cost of services sold decreased from 73.1% in 2008, to 71.1% in 2009. In addition, general and administrative costs as a percentage of revenue increased from 17.7% in 2008, to 19.1% in 2009 as a result of relatively fixed costs against a decrease in revenues.

Specialized Communication Services ("SCS")

SCS generated revenues of $22.0 million for the third quarter of 2009, a decrease of $6.1 million, or 21.6% lower than revenues of $28.1 million in 2008. The period over period decrease was attributable primarily to reduced revenue of $5.3 million as a result of the reduction and delays of client project spending. A strengthening of the US dollar versus the Canadian dollar and British pound in 2009 compared to 2008 resulted in a $0.8 million decrease in revenues from the division's Canadian and UK-based operations.

The operating profit of SCS decreased to $1.1 million in the third quarter of 2009, from $1.4 million in the third quarter of 2008, with operating margins of 4.9% in 2009 compared to 4.8% in 2008. The decrease in operating profit and increase in operating margin is primarily attributable to the decrease in revenue and decrease in direct costs (excluding staff costs) as a percentage of revenue from 36.7% in 2008 to 35.7% in 2009. In addition, total staff costs as a percentage of revenue increased from 45.6% in 2008, to 45.8% in 2009. However, actual staff costs decreased by $2.7 million as the decrease in revenue outpaced these reductions. General and administrative costs as a percentage of revenue was 18.0% in both 2008 and 2009.

Corporate

Operating costs related to the Company's Corporate operations totaled $4.8 million in the third quarter of 2009 compared to $3.0 million in the third quarter of 2008. This increase is primarily due to a 2008 reduction in the third quarter of the corporate bonus accrual and increased travel and entertainment costs in 2009.

Other Income, Net

Other income, net decreased to a net expense of $3.1 million in the third quarter of 2009, compared to a net income of $2.4 million in the third quarter of 2008. The 2009 expense is primarily comprised of a net, foreign exchange loss of $3.1 million for 2009, compared to a gain of $2.5 million recorded in 2008. This unrealized loss was due primarily to the weakening in the US dollar during 2009 and 2008 compared to the Canadian dollar primarily on its US dollar denominated intercompany balances with its Canadian subsidiaries compared to June 30, 2009. At September 30, 2009, the exchange rate was 1.08 Canadian dollars to one US dollar, compared to 1.16 at June 30, 2009.

Net Interest Expense

Net interest expense for the third quarter of 2009 was $3.8 million, an increase of $0.7 million over the $3.1 million net interest expense incurred during the third quarter of 2008. Interest expense remained relatively flat year over year as a result of higher average outstanding debt in 2009, offset by lower interest rates. Interest income was $0.5 million for 2008 and minimal in 2009.

Income Taxes

Income tax expense was $1.1 million in the third quarter of 2009, compared to $2.2 million for the third quarter of 2008. The Company's effective tax rate was consistent with the statutory rate in 2009 and lower than the statutory rate in 2008 due to noncontrolling interest charges, offset by non-deductible stock based compensation and the establishment of a valuation allowance on certain deferred tax assets.

The Company's US operating units are generally structured as limited liability companies, which are treated as partnerships for tax purposes. The Company is only taxed on its share of profits, while noncontrolling holders are responsible for taxes on their share of the profits.

Equity in Affiliates

Equity in affiliates represents the income attributable to equity-accounted affiliate operations. For the third quarter of 2009 and 2008, income of $0.1 million was recorded.

Noncontrolling Interests

Net income attributable to the noncontrolling interests was $2.2 million for the third quarter of 2009, an increase of $0.8 million from the $1.4 million of noncontrolling interest expense incurred during the third quarter of 2008. Such increase was primarily due to the increased profitability in the subsidiaries within the SMS and SCS operating segments who are not 100% owned.

Discontinued Operations Attributable to MDC Partners Inc.

For the third quarter of 2009, the Company incurred no discontinued operations charges, however, in 2008; the Company incurred $0.8 million of such charges.

2008 Discontinued Operations

The operating loss of Bratskeir was $0.5 million net of income tax benefits.

The loss net of taxes from discontinued operations was $0.3 million from Mobium, a division of Colle & McVoy, LLC ("Colle").

Net income (loss) attributable to MDC Partners Inc .

As a result of the foregoing, net income attributable to MDC Partners Inc. recorded for 2009 was minimal compared to a net income attributable to MDC Partners Inc. of $3.3 million or $0.12 per diluted share reported for 2008.

Nine Months Ended September 30, 2009, Compared to Nine Months Ended September 30, 2008

Revenue was $396.2 million for the nine months ended September 30, 2009, . . .