2014

MDC Partners Inc. Reports Record Results For The Three And Nine Months Ended September 30, 2013 - EBITDA GUIDANCE INCREASED TO $158-160 MILLION FROM $152-157 MILLION, IMPLYING YEAR OVER YEAR GROWTH OF +31.5% TO +33.2% -

- MDC PARTNERS DECLARES 3-FOR-2 STOCK SPLIT -

- QUARTERLY DIVIDEND INCREASED 41.2% TO $0.24 FROM $0.17 PER SHARE PRE-SPLIT AND TO $0.16 FROM $0.113 PER SHARE POST-SPLIT, UNDERSCORING CONTINUED STRONG FREE CASH FLOW GENERATION -

NEW YORK, Oct. 28, 2013 /PRNewswire/ --

THIRD QUARTER HIGHLIGHTS:   

  • Revenue increased to $289.0 million from $265.9 million, an increase of 8.7%
  • Organic revenue increased 9.3% 
  • EBITDA increased to $39.4 million from $34.4 million, an increase of 14.7% 
  • EBITDA margin increased 80 basis points to 13.7% from 12.9%, an increase of 6.2%
  • Free Cash Flow increased to $23.9 million from $17.9 million, an increase of 33.1%
  • Net New Business wins totaled $34.2 million 
  • Net Debt-to-EBITDA leverage was maintained at 3.1x at September 30, 2013

YEAR TO DATE HIGHLIGHTS:   

  • Revenue increased to $842.5 million from $771.9 million, an increase of 9.1%  
  • Organic revenue increased 9.4% 
  • EBITDA increased to $115.0 million from $76.4 million, an increase of 50.6% 
  • EBITDA margin increased 370 basis points to 13.6% from 9.9%, an increase of 37.4%
  • Free Cash Flow increased to $66.5 million from $26.6 million, an increase of 150.2% 
  • Net New Business wins totaled $107.5 million

MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended September 30, 2013. 

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "Our financial results in the third quarter show that our business continues to perform exceptionally well.  Organic revenue grew 9.3% and EBITDA increased 14.7%, representing an 80 basis point increase in EBITDA margin.  Our performance in the quarter, as well as what continues to be a very robust new business pipeline, gives us the confidence to once again increase our financial guidance for 2013.  We now expect EBITDA growth of between 31.5% and 33.2% and Free Cash Flow growth of between 67.1% and 77.0%.  What's most exciting, however, is that there is still a tremendous runway for growth in the years ahead.  We currently garner only 3% market share in North America, we're in the very early stages of building an international business, and we're just beginning to take market share in some key vertical industries.  As a result, over the long-term, we expect 5-7% annual organic revenue growth, double-digit compounded annual EBITDA growth, and significant free cash flow generation, with growth in excess of 20%.  We are confident that our ability to deliver on these targets will translate into strong returns for our shareholders."

Guidance for 2013 is revised as follows:






Prior



Revised



Implied




2012



2Q 2013



2013



Year over Year




Actuals



Guidance



Guidance



Change


Revenue


 $1.07 billion 



 $1.155 - $1.180 billion 



 $1.155 - $1.180 billion 



 +8.4% to +10.8% 


EBITDA


 $120.2 million 



 $152 - $157 million 



 $158 - $160 million 



 +31.5% to +33.2% 


Free Cash Flow 

 $50.9 million 



 $80 - $85 million 



 $85 - $90 million 



 +67.1% to +77.0% 















EBITDA Margin

11.3%



13.1% - 13.3%



13.5% - 13.7%



+220 to 240 basis points


Consolidated revenue for the third quarter of 2013 was $289.0 million, an increase of 8.7% compared to $265.9 million in the third quarter of 2012.  EBITDA for the third quarter of 2013 was $39.4 million, an increase of 14.7% compared to $34.4 million in the third quarter of 2012, as the company realized 80 basis points of EBITDA margin expansion in the third quarter of 2013.  Net loss attributable to MDC Partners in the third quarter was ($21.2) million compared to a loss of ($14.5) million in the third quarter of 2012 attributable to a one-time stock-based compensation charge of $22.2 million which relates to the pending exercise of stock appreciation rights.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the third quarter of 2013 was ($0.44) compared to a loss of ($0.42) per share in the same period of 2012.  Free cash flow was $23.9 million in the third quarter of 2013, compared with $17.9 million in the third quarter of 2012.

For the nine month period ended September 30, 2013, consolidated revenue was $842.5 million, an increase of 9.1% compared to $771.9 million in the nine months ended September 30, 2012.  EBITDA for the nine months ended September 30, 2013 increased 50.6% to $115.0 million compared to $76.4 million in the same period of 2012.  Loss attributable to MDC Partners in the nine months ended September 30, 2013 was ($54.5) million compared to a loss of ($60.9) million in 2012 as a result of $55.6 million of expenses related to the redemption of Notes in the Company's refinancing during the first quarter and a one-time stock-based compensation charge of $22.2 million in the third quarter which relates to the pending exercise of stock appreciation rights, offset by the increase in EBITDA.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the nine months ended September 30, 2013 was ($1.39) compared to a loss of ($1.80) per share in the same period of 2012.  Cash flows provided by continuing operating activities for the nine months ended September 30, 2013 were $113.2 million compared to $19.4 million provided in the same period of 2012.  Free cash flow was $66.5 million in the nine months ended September 30, 2013, compared with $26.6 million in the same period of 2012.

David Doft, CFO of MDC Partners, said,  "Our very strong financial performance has allowed us to continue to improve our balance sheet and fund deferred acquisition consideration, while sustaining a leverage ratio of 3.1 times net debt-to-EBITDA, tracking to our long-term target of below 2.5 times net debt-to-EBITDA.  Because our free cash flow is ahead of plan and expected to continue to increase and as we target a 3% dividend yield, we are increasing our dividend 41.2% to $0.24 per share versus the $0.17 per share paid out last quarter.  Finally, because our stock has recently increased, and because we would like to be able to offer prospective shareholders a more liquid stock, we are moving forward with a three-for-two stock split, effective November 22."  

MDC Partners Announces 3-For-2 Stock Split

MDC Partners today also announced that its Board of Directors has approved a three-for-two split of its outstanding Class A and Class B shares in the form of a stock dividend.  Subject to regulatory approval, the additional shares will be distributed to shareholders of record at the close of business on November 22, 2013.  Shareholders who have stock certificates of MDC Partners should retain them.  The transfer agent will distribute confirmation of the additional shares on November 27, 2013.  Trading is expected to begin on a post-split basis on the Toronto Stock Exchange on November 20, 2013 and on the NASDAQ on November 29, 2013.

MDC Partners Announces $0.24 per Share Quarterly Cash Dividend

MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.24 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 November 22, 2013, to shareholders of record at the close of business on November 7, 2013.  This cash dividend will be paid prior to implementing the three-for-two stock split.  Following MDC's planned three-for-two stock split, the dividend would increase from $0.113 per share to $0.16 per share.

Conference Call

Management will host a conference call on Monday, October 28, 2013 at 4:30 p.m. (ET) to discuss results.  The conference call will be accessible by dialing 1-412-317-0790 or toll free 1-877-870-4263.  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. November 13, 2013, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10035197) 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".



CONTACT:

David Doft


Chief Financial Officer


646-429-1818


ddoft@mdc-partners.com



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 nine months ended September 30, 2013 and 2012; and (2) presenting Free Cash Flow for the three and nine months ended September 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 September 30, 


Nine Months Ended September 30, 



2013

2012


2013

2012















Revenue


$288,907

$265,855


$842,520

$771,940








Operating Expenses:







Cost of services sold


189,219

179,069


556,777

540,109

Office and general expenses


88,976

72,342


217,535

204,987

Depreciation and amortization


9,476

12,245


28,455

35,615



287,671

263,656


802,767

780,711








Operating profit (loss)


1,236

2,199


39,753

(8,771)








Other Income (Expenses):







Other, net


1,733

(432)


1,549

(1,241)

Interest expense and finance charges


(10,589)

(11,594)


(33,392)

(34,420)

Loss on Redemption of Notes


-

-


(55,588)

-

Interest income


37

109


202

257








Loss from continuing operations before income taxes







  and equity in affiliates


(7,583)

(9,718)


(47,476)

(44,175)








Income tax expense (benefit)


4,334

2,207


(8,189)

6,014








Loss from continuing operations before equity in affiliates


(11,917)

(11,925)


(39,287)

(50,189)

Equity in earnings of non-consolidated affiliates


73

93


196

399








Loss from continuing operations


(11,844)

(11,832)


(39,091)

(49,790)

Loss from discontinued operations attributable to MDC Partners Inc.,

net of taxes


(7,446)

(1,352)


(11,041)

(5,942)

Net loss


(19,290)

(13,184)


(50,132)

(55,732)

Net income attributable to the noncontrolling interests


(1,910)

(1,312)


(4,410)

(5,159)

Net loss attributable to MDC Partners Inc.


($21,200)

($14,496)


($54,542)

($60,891)








Loss Per Common Share:







Basic and Diluted:







   Loss from continuing operations attributable to MDC







      Partners Inc. common shareholders


($0.44)

($0.42)


($1.39)

($1.80)

   Discontinued operations attributable to MDC







      Partners Inc. common shareholders


($0.24)

($0.05)


($0.35)

($0.19)

   Loss attributable to MDC Partners Inc.







      common shareholders


($0.68)

($0.47)


($1.74)

($1.99)








Weighted Average Number of Common Shares:







Basic and Diluted


31,470,466

31,051,561


31,368,629

30,606,146

 


SCHEDULE 2










MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended September 30, 2013




















Strategic


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$203,440


$85,467


-


$288,907










Operating profit (loss) as reported


$28,338


$6,269


($33,371)


$1,236

margin


13.9%


7.3%




0.4%










Add:









Depreciation and amortization


5,807


3,372


297


9,476

Stock-based compensation


1,835


646


24,954


27,435

Acquisition deal costs


35


50


342


427

Deferred acquisition consideration adjustments to P&L


4,263


(3,545)


-


718

Profit distributions from affiliates


-


-


148


148










EBITDA *


$40,278


$6,792


($7,630)


$39,440

margin


19.8%


7.9%




13.7%




























* 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 September 30, 2012




















Strategic


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$176,209


$89,646


-


$265,855










Operating profit (loss) as reported


$8,421


$396


($6,618)


$2,199

margin


4.8%


0.4%




0.8%










Add:









Depreciation and amortization


7,754


4,161


330


12,245

Stock-based compensation


2,769


2,009


355


5,133

Acquisition deal costs


213


160


438


811

Deferred acquisition consideration adjustments to P&L


10,964


2,667


-


13,631

Profit distributions from affiliates


-


-


376


376










EBITDA*


$30,121


$9,393


($5,119)


$34,395

margin


17.1%


10.5%




12.9%




























* 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 Nine Months Ended September 30, 2013




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$587,540


$254,980


-


$842,520










Operating profit (loss) as reported


$78,766


$9,892


($48,905)


$39,753

margin


13.4%


3.9%




4.7%










Add:









Depreciation and amortization


17,334


10,132


989


28,455

Stock-based compensation


4,815


2,505


29,370


36,690

Acquisition deal costs


200


244


994


1,438

Deferred acquisition consideration adjustments to P&L


8,310


(2,910)


-


5,400

Profit distributions from affiliates


-


-


3,244


3,244










EBITDA *


$109,425


$19,863


($14,308)


$114,980

margin


18.6%


7.8%




13.6%




























* 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 Nine Months Ended September 30, 2012




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$519,209


$252,731


-


$771,940










Operating profit (loss) as reported


$23,181


$251


($32,203)


($8,771)

margin


4.5%


0.1%




-1.1%










Add:









Depreciation and amortization


21,602


13,006


1,007


35,615

Stock-based compensation


6,602


5,587


14,181


26,370

Acquisition deal costs


863


448


1,170


2,481

Deferred acquisition consideration adjustments to P&L


17,820


2,306


-


20,126

Profit distributions from affiliates


-


-


542


542










EBITDA*


$70,068


$21,598


($15,303)


$76,363

margin


13.5%


8.5%




9.9%




























* 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 September 30,


For the Nine Months Ended September 30,


2013

2012


2013

2012

Cash Flows Provided by Continuing Operating Activities

$58,558

$22,827


$113,165

$19,352

Distributions

148

376


3,244

542

Interest Expense, Net

10,552

11,485


33,190

34,163

Changes in Working Capital

(17,918)

716


(43,736)

21,441

Changes in Non-Current Assets & Liabilities

(8,221)

(118)


8,900

(1,215)

Other

(3,679)

(891)


217

2,080







EBITDA

$39,440

$34,395


$114,980

$76,363

Net Income Attributable to Noncontrolling Interests

(1,910)

(1,312)


(4,410)

(5,159)

Capital Expenditures, net (1)

(3,777)

(4,729)


(13,018)

(13,653)

Cash Taxes

(356)

(572)


(555)

(919)

Cash Interest, net & Other (2)

(9,505)

(9,833)


(30,530)

(30,064)







Free Cash Flow (3)

$23,892

$17,949


$66,467

$26,568













(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)













September 30,


December 31,



2013


2012








(Unaudited)



Assets





Current Assets:





   Cash and cash equivalents


$63,312


$60,330

   Accounts receivable, net


331,760


326,087

   Expenditures billable to clients


69,863


58,842

   Other current assets


22,629


16,892

Total Current Assets


487,564


462,151






Fixed assets, net


51,942


52,914

Investment in affiliates


196


-

Goodwill


711,336


720,071

Other intangible assets, net


50,809


63,243

Deferred tax assets


18,775


9,332

Other assets


45,065


37,234

Total Assets


$1,365,687


$1,344,945











Liabilities, Redeemable Noncontrolling Interests and Deficit




Current Liabilities:





   Accounts payable


$213,016


$356,847

   Accruals and other liabilities


286,101


93,895

   Advance billings


154,886


131,908

   Current portion of long term debt


784


1,858

   Current portion of deferred acquisition consideration

43,872


104,325

Total Current Liabilities


698,659


688,833






Long-term debt


550,489


429,845

Long-term portion of deferred acquisition consideration

58,882


92,121

Other liabilities


44,024


47,985

Deferred tax liabilities


53,730


53,018

Total Liabilities


1,405,784


1,311,802






Redeemable Noncontrolling Interests


138,623


117,953






Shareholders' Deficit





   Common shares


255,012


253,870

   Shares to be issued


424


424

   Charges in excess of capital


(96,553)


(72,913)

   Accumulated deficit


(371,255)


(316,713)

   Stock subscription receivable


(55)


(55)

   Accumulated other comprehensive loss


(8,296)


(7,445)

   MDC Partners Inc. Shareholders' Deficit


(220,723)


(142,832)

   Noncontrolling Interests


42,003


58,022

Total Deficit


(178,720)


(84,810)






Total Liabilities, Redeemable Noncontrolling 





   Interests and Deficit


$1,365,687


$1,344,945

 

SCHEDULE 6





MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)











Nine Months Ended September 30,



2013

2012





Cash flows provided by continuing operating activities


$113,165

$19,352

Discontinued operations


(7,814)

(3,546)

Net cash provided by operating activities


105,351

15,806





Cash flows provided by (used in) continuing investing activities


(13,231)

15,722

Discontinued operations


(11)

(1,949)

Net cash provided by (used in) investing activities


(13,242)

13,773





Net cash provided by (used in) continuing financing activities


(88,904)

35,143





Effect of exchange rate changes on cash and cash equivalents


(223)

(19)





Net increase in cash and cash equivalents


$2,982

$64,703





 

 

(Logo: http://photos.prnewswire.com/prnh/20120221/NY57031LOGO )

SOURCE MDC Partners Inc.



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