PRESS RELEASE

FOR IMMEDIATE RELEASE

 

FOR:	MDC Partners Inc.		CONTACT:	David Doft
	745 Fifth Avenue, 19th Floor			Chief Financial Officer
	New York, NY 10151			646-429-1818
				ddoft@mdc-partners.com

 

MDC PARTNERS INC. REPORTS RECORD RESULTS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2013

 

- EBITDA GUIDANCE INCREASED FROM $142-146 MILLION TO $152-157
MILLION, IMPLYING YEAR OVER YEAR GROWTH OF +28% TO +33% -

 

- QUARTERLY DIVIDEND INCREASED 21% FROM $0.14 TO $0.17 PER SHARE
UNDERSCORING STRONG FREE CASH FLOW GENERATION -

  

SECOND QUARTER HIGHLIGHTS:

·

Revenue increased from $273.5 million to $288.1 million, an increase of 5.3%

·

Organic revenue increased 5.7%

·

EBITDA increased from $32.3 million to $43.4 million, an increase of 34.3%

·

EBITDA margin increased 330 basis points from 11.8% to 15.1%, an increase of 28.0%

·

Free Cash Flow increased from $15.0 million to $25.9 million, an increase of 72.8%

·

Net New Business wins totaled $20.3 million

·

Net Debt-to-EBITDA leverage declined to 3.1x at June 30, 2013, from 3.4x at March 31, 2013

 

YEAR TO DATE HIGHLIGHTS:

·

Revenue increased from $508.7 million to $555.2 million, an increase of 9.1%

·

Organic revenue increased 9.3%

·

EBITDA increased from $40.7 million to $73.8 million, an increase of 81.4%

·

EBITDA margin increased 530 basis points from 8.0% to 13.3%, an increase of 66.3%

·

Free Cash Flow increased from $7.9 million to $40.8 million, an increase of 419.4%

·

Net New Business wins totaled $73.3 million

 

NEW YORK, NY (July 25, 2013) – MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and six months ended June 30, 2013.

 

 

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, “Our second quarter results were very strong.  Organic revenue grew an impressive 5.7% and EBITDA increased 34%, representing a 330 basis point increase in EBITDA margin.  Our stellar financial profile is a direct result of our ability to deliver tangible, measurable financial results for our clients through our marketing communications, technology, data analytics insights and strategic consulting capabilities, which in turn solidifies strong client relationships, higher value work, and opportunities to integrate and provide more solutions to clients across MDC Partner firms.  Our results in the first half of the year, as well as our solid new business pipeline, give us the confidence to once again increase our financial guidance for 2013.  We now expect revenue growth of between 8% and 10%, EBITDA growth of between 28% and 33% and Free Cash Flow growth of between 61% and 71%.  For the longer-term, on an organic basis, we expect to convert mid-to-high single digit revenue growth into double digit EBITDA growth.  This would imply free cash flow growth in excess of 20%."

 

Guidance for 2013 is revised as follows:

 

				Prior		Revised		Implied
		2012		2013		2013		Year over Year
		Actuals		Guidance		Guidance		Change
Revenue		$1.07 billion		$1.145 - $1.170 billion		$1.155 - $1.180 billion		+7.9% to +10.2%
EBITDA		$118.4 million		$142 - $146 million		$152 - $157 million		+28.4% to +32.6%
Free Cash Flow		$49.6 million		$70 - $75 million		$80 - $85 million		+61.3% to +71.4%
Implied EBITDA Margin		11.1%		12.4% - 12.5%		13.1% - 13.3%		+200 to 220 basis points

 

Consolidated revenue for the second quarter of 2013 was $288.1 million, an increase of 5.3% compared to $273.5 million in the second quarter of 2012. EBITDA for the second quarter of 2013 was $43.4 million, an increase of 34.3% compared to $32.3 million in the second quarter of 2012, as the company realized 330 basis points of EBITDA margin expansion. Net income attributable to MDC Partners in the second quarter was $9.8 million compared to a loss of ($20.1) million in the second quarter of 2012. Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the second quarter of 2013 was $0.30 compared to a loss of ($0.57) per share in the same period of 2012. Free cash flow was $25.9 million in the second quarter of 2013, compared with $15.0 million in the second quarter of 2012.

 

For the six month period ended June 30, 2013, consolidated revenue was $555.2 million, an increase of 9.1% compared to $508.7 million in the six months ended June 30, 2012. EBITDA for the six months ended June 30, 2013 increased 81.4% to $73.8 million compared to $40.7 million in the same period of 2012. Loss attributable to MDC Partners in the six months ended June 30, 2013 was ($33.3) million compared to a loss of ($46.4) million in 2012 as a result of $55.6 million of expenses related to the redemption of Notes in the Company’s recent refinancing. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the six months ended June 30, 2013 was ($1.01) compared to a loss of ($1.41) per share in the same period of 2012. Cash flows provided by continuing operating activities for the six months ended June 30, 2013 were $54.6 million compared to ($3.5) million used in the same period of 2012. Free cash flow was $40.8 million in the six months ended June 30, 2013, compared with $7.9 million in the same period of 2012.

 

David Doft, CFO of MDC Partners, said, “Our outstanding financial performance has allowed us to continue to improve our balance sheet.  As of the end of the second quarter, our leverage was 3.1 times net debt-to-EBITDA, well ahead of our long-term plan.  In addition, we expect our cash balance to increase as we continue to grow and scale our platform as a significant portion of our incremental revenue flows through to the bottom line.  While we will certainly utilize the cash on our balance sheet to invest in the growth of the business, we also believe that it is prudent to return cash to shareholders in the form of a dividend.  As such, we are returning to paying our dividend quarterly and are increasing the payout 21% to $0.17 per share from the implied $0.14 per share quarterly paid previously." 

 

 

MDC Partners Announces $0.17 per Share Quarterly Cash Dividend

 

MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.17 per share on all of its outstanding Class A shares and Class B shares for the third quarter of 2013. This dividend will be payable on or about August 20, 2013, to shareholders of record at the close of business on August 6, 2013. In the future, the company expects to pay four quarterly dividends per year rather than the two semi-annual dividends previously declared.

 

Conference Call

 

Management will host a conference call on Thursday, July 25, 2013 at 4:30 p.m. (ET) to discuss results. The conference call will be accessible by dialing 1-412-858-4600 or toll free 1-866-605-3852. An investor presentation has been posted on our website www.mdc-partners.com and will be referred to during the conference call.

 

A recording of the conference call will be available one hour after the call until 9:00 a.m. August 9, 2013, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10031503) or by visiting our website at www.mdc-partners.com.

 

About MDC Partners Inc.

 

MDC is one of the world’s largest Business Transformation Organizations that utilizes technology, marketing communications, data analytics, insights and strategic consulting solutions to drive meaningful returns on Marketing and Communications Investments for multinational clients in the United States, Canada, and worldwide.

 

MDC Partners’ durable competitive advantage is to Empower the Most Talented Entrepreneurial Thought Leaders to Drive Business Success to new levels of Achievement, for both our Clients and our Shareholders, reinforcing MDC's reputation as "The Place Where Great Talent Lives."

 

MDC Partners' Class A shares are publicly traded on NASDAQ under the symbol "MDCA" and on the Toronto Stock Exchange under the symbol "MDZ.A".

 

Non-GAAP Financial Measures

 

In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to: (1) presenting EBITDA and EBITDA margin (as defined) for the three and six months ended June 30, 2013 and 2012; and (2) presenting Free Cash Flow for the three and six months ended June 30, 2013 and 2012. Included in this earnings release are tables reconciling MDC’s reported results to arrive at these non-GAAP financial measures. In addition, Net Debt is defined in our credit facility as debt due pertaining to the revolving credit facility plus debt pertaining to the Senior Notes less total cash and cash equivalents.

 

 

This press release contains forward-looking statements. The Company’s representatives may also make forward-looking statements orally from time to time. Statements in this press release that are not historical facts, including statements about the Company’s beliefs and expectations, earnings guidance, recent business and economic trends, potential acquisitions, estimates of amounts for deferred acquisition consideration and “put” option rights, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

 

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

 

	·	risks associated with severe effects of international, national and regional economic downturn;

	·	the Company’s ability to attract new clients and retain existing clients;

	·	the spending patterns and financial success of the Company’s clients;

	·	the Company’s ability to retain and attract key employees;

	·	the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to “put” option right and deferred acquisition consideration;

	·	the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; and

·

foreign currency fluctuations.

 

The Company’s business strategy includes ongoing efforts to engage in material acquisitions of ownership interests in entities in the marketing communications services industry. The Company intends to finance these acquisitions by using available cash from operations, from borrowings under its credit facility and through incurrence of bridge or other debt financing, any of which may increase the Company’s leverage ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate ownership. At any given time the Company may be engaged in a number of discussions that may result in one or more material acquisitions. These opportunities require confidentiality and may involve negotiations that require quick responses by the Company. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of the Company’s securities.

 

Investors should carefully consider these risk factors and the additional risk factors outlined in more detail in the Annual Report on Form 10-K under the caption “Risk Factors” and in the Company’s other SEC filings.

 

 

SCHEDULE 1

 

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenue		$	288,137			$	273,506			$	555,151			$	508,658
Operating Expenses:
Cost of services sold			190,695				187,620				369,702				363,666
Office and general expenses			61,353				73,985				129,358				133,853
Depreciation and amortization			9,615				13,631				19,237				23,619
			261,663				275,236				518,297				521,138
Operating profit (loss)			26,474				(1,730	)			36,854				(12,480	)
Other Income (Expenses):
Other, net			(2,876	)			214				(184	)			(809	)
Interest expense and finance charges			(10,375	)			(11,830	)			(22,803	)			(22,826	)
Loss on Redemption of Notes			-				-				(55,588	)			-
Interest income			33				45				69				113
Income (loss) from continuing operations before income taxes and equity in affiliates			13,256				(13,301	)			(41,652	)			(36,002	)
Income tax expense (benefit)			1,727				2,544				(12,523	)			3,807
Income (loss) from continuing operations before equity in affiliates			11,529				(15,845	)			(29,129	)			(39,809	)
Equity in earnings of non-consolidated affiliates			82				34				123				306
Income (loss) from continuing operations			11,611				(15,811	)			(29,006	)			(39,503	)
Loss from discontinued operations, net of taxes			(279	)			(2,493	)			(1,836	)			(3,585	)
Net income (loss)			11,332				(18,304	)			(30,842	)			(43,088	)
Net income attributable to the noncontrolling interests			(1,516	)			(1,810	)			(2,500	)			(3,307	)
Net income (loss) attributable to MDC Partners Inc.		$	9,816			$	(20,114	)		$	(33,342	)		$	(46,395	)
Income (loss) Per Common Share:
Basic:
Income (loss) from continuing operations attributable to MDC Partners Inc. common shareholders		$	0.32			$	(0.57	)		$	(1.01	)		$	(1.41	)
Discontinued operations attributable to MDC Partners Inc. common shareholders		$	(0.01	)		$	(0.08	)		$	(0.05	)		$	(0.11	)
Income (loss) attributable to MDC Partners Inc. common shareholders		$	0.31			$	(0.65	)		$	(1.06	)		$	(1.52	)
Income (loss) Per Common Share:
Diluted:
Income (loss) from continuing operations attributable to MDC Partners Inc. common shareholders		$	0.30			$	(0.57	)		$	(1.01	)		$	(1.41	)
Discontinued operations attributable to MDC Partners Inc. common shareholders		$	(0.01	)		$	(0.08	)		$	(0.05	)		$	(0.11	)
Net Income (loss) attributable to MDC Partners Inc. common shareholders		$	0.29			$	(0.65	)		$	(1.06	)		$	(1.52	)
Weighted Average Number of Common Shares:
Basic			31,398,928				30,872,050				31,316,866				30,380,991
Diluted			34,116,291				30,872,050				31,316,866				30,380,991

 

 

SCHEDULE 2

 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)

 

For the Three Months Ended June 30, 2013

 

		Strategic				Performance
		Marketing				Marketing
		Services				Services				Corporate				Total
Revenue		$	200,868			$	87,269				-			$	288,137
Operating profit (loss) as reported		$	27,075			$	4,423			$	(5,024	)		$	26,474
margin			13.5	%			5.1	%							9.2	%
Add:
Depreciation and amortization			5,806				3,482				327				9,615
Stock-based compensation			1,839				1,030				1,885				4,754
Acquisition deal costs			39				181				336				556
Deferred acquisition consideration adjustments to P&L			3,549				(1,538	)			-				2,011
Profit distributions from affiliates			-				-				-				-
EBITDA *		$	38,308			$	7,578			$	(2,476	)		$	43,410
margin			19.1	%			8.7	%							15.1	%

 

*

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

 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)

 

For the Three Months Ended June 30, 2012

 

		Strategic				Performance
		Marketing				Marketing
		Services				Services				Corporate				Total
Revenue		$	183,750			$	89,756				-			$	273,506
Operating profit (loss) as reported		$	13,080			$	2,494			$	(17,304	)		$	(1,730	)
margin			7.1	%			2.8	%							-0.6	%
Add:
Depreciation and amortization			8,828				4,474				329				13,631
Stock-based compensation			1,967				1,887				11,499				15,353
Acquisition deal costs			567				201				162				930
Deferred acquisition consideration adjustments to P&L			4,430				(463	)			-				3,967
Profit distributions from affiliates			-				-				166				166
EBITDA*		$	28,872			$	8,593			$	(5,148	)		$	32,317
margin			15.7	%			9.6	%							11.8	%

 

*

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

 

 

SCHEDULE 3

 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)

 

For the Six Months Ended June 30, 2013

 

		Strategic				Performance
		Marketing				Marketing
		Services				Services				Corporate				Total
Revenue		$	384,712			$	170,439				-			$	555,151
Operating profit (loss) as reported		$	49,350			$	3,038			$	(15,534	)		$	36,854
margin			12.8	%			1.8	%							6.6	%
Add:
Depreciation and amortization			11,640				6,905				692				19,237
Stock-based compensation			2,980				1,859				4,416				9,255
Acquisition deal costs			165				275				652				1,092
Deferred acquisition consideration adjustments to P&L			4,048				260				-				4,308
Profit distributions from affiliates			-				-				3,096				3,096
EBITDA *		$	68,183			$	12,337			$	(6,678	)		$	73,842
margin			17.7	%			7.2	%							13.3	%

 

*

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

 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)

 

For the Six Months Ended June 30, 2012

 

		Strategic				Performance
		Marketing				Marketing
		Services				Services				Corporate				Total
Revenue		$	343,846			$	164,812				-			$	508,658
Operating profit (loss) as reported		$	13,886			$	(781	)		$	(25,585	)		$	(12,480	)
margin			4.0	%			-0.5	%							-2.5	%
Add:
Depreciation and amortization			13,925				9,017				677				23,619
Stock-based compensation			3,833				3,578				13,826				21,237
Acquisition deal costs			650				288				732				1,670
Deferred acquisition consideration adjustments to P&L			6,856				(361	)			-				6,495
Profit distributions from affiliates			-				-				166				166
EBITDA*		$	39,150			$	11,741			$	(10,184	)		$	40,707
margin			11.4	%			7.1	%							8.0	%

 

*

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

 

 

SCHEDULE 4

 

MDC PARTNERS INC.

FREE CASH FLOW

(US$ in 000s)

 

		Three Months Ended June 30,								For the Six Months Ended June 30,
		2013				2012				2013				2012
Cash Flows Provided by (used in) Continuing Operating Activities		$	86,579			$	(16,733	)		$	54,607			$	(3,475	)
Distributions			-				166				3,096				166
Interest Expense, Net			10,342				11,785				22,734				22,713
Changes in Working Capital			(73,644	)			37,984				(25,818	)			20,725
Changes in Non-Current Assets & Liabilities			18,343				(2,192	)			17,121				(1,074	)
Other			1,790				1,307				2,102				1,652
EBITDA		$	43,410			$	32,317			$	73,842			$	40,707
Net Income Attributable to Noncontrolling Interests			(1,516	)			(1,810	)			(2,500	)			(3,307	)
Capital Expenditures, net (1)			(6,589	)			(4,360	)			(9,241	)			(8,935	)
Cash Taxes			(132	)			(323	)			(199	)			(347	)
Cash Interest, net & Other (2)			(9,291	)			(10,847	)			(21,121	)			(20,267	)
Free Cash Flow (3)		$	25,882			$	14,977			$	40,781			$	7,851

 

(1) Capital Expenditures, net represents capital expenditures net of landlord reimbursements.

(2) Cash Interest, net & Other represents the quarterly accrual of cash interest under our Senior Notes.

(3) Free Cash Flow is a non-GAAP measures. As shown above, Free Cash Flow represents EBITDA less net income attributable to noncontrolling interests, less capital expenditures, less cash taxes, less net cash interest (including interest paid and other).

 

 

SCHEDULE 5

 

MDC PARTNERS INC.

CONSOLIDATED BALANCE SHEETS

(US$ in 000s)

 

		June 30,				December 31,
		2013				2012
		(Unaudited)
Assets
Current Assets:
Cash and cash equivalents		$	77,336			$	60,330
Accounts receivable, net			337,487				326,087
Expenditures billable to clients			57,161				58,842
Other current assets			23,255				16,892
Total Current Assets			495,239				462,151
Fixed assets, net			52,597				52,914
Investment in affiliates			880				-
Goodwill			715,717				720,071
Other intangible assets, net			55,483				63,243
Deferred tax assets			22,878				9,332
Other assets			46,649				37,234
Total Assets		$	1,389,443			$	1,344,945
Liabilities, Redeemable Noncontrolling Interests and Deficit
Current Liabilities:
Accounts payable		$	232,115			$	356,847
Accruals and other liabilities			250,712				93,895
Advance billings			137,824				131,908
Current portion of long term debt			1,345				1,858
Current portion of deferred acquisition consideration			77,771				104,325
Total Current Liabilities			699,767				688,833
Long-term debt			550,593				429,845
Long-term portion of deferred acquisition consideration			56,093				92,121
Other liabilities			45,944				47,985
Deferred tax liabilities			53,688				53,018
Total Liabilities			1,406,085				1,311,802
Redeemable Noncontrolling Interests			128,455				117,953
Shareholders' Deficit Common shares			255,225				253,870
Shares to be issued			424				424
Charges in excess of capital			(83,828	)			(72,913	)
Accumulated deficit			(350,055	)			(316,713	)
Stock subscription receivable			(55	)			(55	)
Accumulated other comprehensive loss			(9,034	)			(7,445	)
MDC Partners Inc. Shareholders' Deficit			(187,323	)			(142,832	)
Noncontrolling Interests			42,226				58,022
Total Deficit			(145,097	)			(84,810	)
Total Liabilities, Redeemable Noncontrolling Interests and Deficit		$	1,389,443			$	1,344,945

 

 

SCHEDULE 6

 

MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)

 

		Six Months Ended June 30,
		2013				2012
Cash flows provided by (used in) continuing operating activities		$	54,607			$	(3,475	)
Discontinued operations			(536	)			(3,086	)
Net cash provided by (used in) operating activities			54,071				(6,561	)
Cash flows provided by (used in) continuing investing activities			(9,032	)			26,336
Discontinued operations			(7	)			14
Net cash provided by (used in) investing activities			(9,039	)			26,350
Net cash provided by (used in) continuing financing activities			(28,408	)			44,187
Effect of exchange rate changes on cash and cash equivalents			382				(376	)
Net increase in cash and cash equivalents		$	17,006			$	63,600