MDC Partners Inc. Reports Record Results for the Three and Twelve Months Ended December 31, 2012

NEW YORK, Feb. 21, 2013 /PRNewswire/ --

FOURTH QUARTER HIGHLIGHTS:   

  • Material acceleration of financial performance across all metrics
  • Revenue increased to $294.6 million versus $254.1 million in Q4 2011, an increase of 16.0%
  • Organic revenue increased 11.9% for Q4 2012
  • EBITDA increased to $43.6 million versus $26.3 million in Q4 2011, an increase of 66.1%
  • EBITDA margin increased 450 basis points to 14.8% versus 10.3% in Q4 2011, reflecting an increase of 44%
  • Free Cash Flow increased to $24.0 million versus $9.2 million in Q4 2011
  • Net new business wins of $33.7 million for Q4 2012

FULL YEAR HIGHLIGHTS:   

  • Revenue increased to $1.07 billion versus $940.4 million in the twelve months ended December 31, 2011, an increase of 13.9%
  • Organic revenue increased 8.4% for 2012 on top of a 16.6% organic revenue increase in 2011
  • EBITDA increased to $118.4 million versus $93.1 million in the twelve months ended December 31, 2011, an increase of 27.2%
  • EBITDA margin increased 120 basis points to 11.1% versus 9.9% in 2011
  • Free Cash Flow improved to $49.6 million versus $25.0 million in the twelve months ended December 31, 2011, an increase of 98.4%
  • Net new business wins of $136.9 million in the twelve months ended December 31, 2012, an increase of 31.5%
  • Net debt-to-EBITDA reduced significantly from 4.0 times EBITDA to 3.0 times EBITDA, an improvement of 25%

MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and twelve months ended December 31, 2012. 

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "2012 was a record year for MDC Partners as we exceeded guidance and delivered exceptional revenue, EBITDA, free cash flow and EBITDA margin growth.  Our organic revenue growth accelerated to 11.9% for the fourth quarter and 8.4% for 2012, far outpacing the industry and we materially improved our net debt-to-EBITDA leverage ratio, putting our balance sheet in a very strong position.

"It's clear from our results that our strategy of creating a truly transformational business where the most talented people in the industry are dedicated to enhancing the sustainable profitable growth of their clients is working.  We are winning incremental share of wallet and gaining market share.  We have received exceptional industry recognition, including 2012 Agency of the Year for 72andSunny, Anomaly and kbs+ celebrated as two of only 10 'Standout Agencies,' and TargetCast and Vitro both named 'Agencies to Watch'.  Looking ahead, we are even more excited about 2013.   Our new business pipeline is at an all-time high and we are seeing larger opportunities across more agencies, and more disciplines.  As a result, we have an outstanding foundation for continued accelerated financial performance in 2013 and in the years to come."

Guidance for 2013 is established as follows:







Implied



2012


2013


Year over Year



Actual


Guidance


Change

Revenue


$1,070.7 million


$1,125 - $1,150 million


+5.1% to +7.4%

EBITDA


$118.4 million


$132 - $135 million


+11.5% to +14.0%

Free Cash Flow 


$49.6 million


$55 - $60 million


+10.8% to +20.9%








EBITDA Margin


11.1%


11.7%


+60 basis points








Consolidated revenue for the fourth quarter of 2012 was $294.6 million, an increase of 16.0% compared to $254.1 million in the fourth quarter of 2011.  EBITDA (as defined) for the fourth quarter of 2012 was $43.6 million, an increase of 66.1% compared to $26.3 million in the fourth quarter of 2011, as the company realized 450 basis points of EBITDA margin expansion from its previous growth initiatives.  Loss attributable to MDC Partners in the fourth quarter was ($24.5) million compared to a loss of ($57.7) million in the fourth quarter of 2011.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the fourth quarter of 2012 was ($0.76) compared to ($1.93) per share in the same period of 2011.  Free cash flow from operations (as defined) was $24.0 million in the fourth quarter of 2012, compared with $9.2 million in the fourth quarter of 2011. 

For the twelve month period ended December 31, 2012, consolidated revenue was $1.07 billion, an increase of 13.9% compared to $940.4 million in the twelve months ended December 31, 2011.  EBITDA for the twelve months ended December 31, 2012 increased 27.2% to $118.4 million compared to $93.1 million in the same period of 2011.  Loss attributable to MDC Partners in the twelve months ended December 31, 2012 was ($85.4) million compared to a loss of ($84.7) million in 2011.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the twelve months ended December 31, 2012 was ($2.60) compared to a loss of ($2.80) per share in the same period of 2011.  Cash flows provided by continuing operating activities for the twelve months ended December 31, 2012 was $78.2 million compared to $7.2 million in the same period of 2011.  Free cash flow from operations was $49.6 million in the twelve months ended December 31, 2012, compared with $25.0 million in the same period of 2011. 

David Doft, CFO of MDC Partners, said, "Our disciplined approach to operating efficiency enabled us to increase EBITDA margins by 44% in the quarter to 14.8% and by 12% for the fiscal year to 11.1%.  Our work to improve our balance sheet is paying off as our leverage was 3.0 times net debt-to-EBITDA at year end, well ahead of our long-term plan.  This is a 25% improvement over the 4.0 times we reported at year-end 2011.  The combination of our superior growth profile, scalability of our model, expected continued margin expansion, strong free cash flow generation, and efforts to optimize our balance sheet, we believe have positioned the company well for strong equity returns in the near and long-term."

Conference Call

Management will host a conference call on Thursday, February 21, 2013 at 4:30 p.m. (EST) to discuss results.  The conference call will be accessible by dialing 1-412-858-4600 or toll free 1-800-860-2442.  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. March 8, 2013, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10024176) or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC is a Business Transformation Organization that utilizes technology, marketing communications, data analytics and 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's 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 twelve months ended December 31, 2012 and 2011; and (2) presenting Total Free Cash Flow (as defined) and Free Cash Flow for the three and twelve months ended December 31, 2012 and 2011.  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.

CONSOLIDATED STATEMENTS OF OPERATIONS

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










Three Months Ended December 31, 


Year Ended December 31,



2012

2011


2012

2011















Revenue


$294,648

$254,068


$1,070,711

$940,403








Operating Expenses:







Cost of services sold


195,156

180,862


739,121

669,990

Office and general expenses


96,229

66,436


303,084

218,514

Depreciation and amortization


10,370

10,576


46,414

40,220



301,755

257,874


1,088,619

928,724








Operating profit (loss)


(7,107)

(3,806)


(17,908)

11,679








Other Income (Expenses):







Other income (expense), net


383

789


(859)

(1,561)

Interest expense 


(12,151)

(10,892)


(46,571)

(41,922)

Interest income


76

54


259

206








Loss from continuing operations before income taxes







  and equity in affiliates


(18,799)

(13,855)


(65,079)

(31,598)








Income tax expense (recovery)


3,539

40,831


9,553

41,735








Loss from continuing operations before equity in affiliates


(22,338)

(54,686)


(74,632)

(73,333)

Equity in earnings (loss) of non-consolidated affiliates


234

(1)


633

213








Loss from continuing operations


(22,104)

(54,687)


(73,999)

(73,120)

Loss from discontinued operations, net of taxes


(860)

(1,203)


(5,428)

(3,167)

Net loss


(22,964)

(55,890)


(79,427)

(76,287)

Net income attributable to the noncontrolling interests


(1,584)

(1,850)


(6,012)

(8,387)

Net loss attributable to MDC Partners Inc.


($24,548)

($57,740)


($85,439)

($84,674)








Loss Per Common Share:







Basic and Diluted:







Loss from continuing operations attributable to MDC







   Partners Inc. common shareholders


($0.76)

($1.93)


($2.60)

($2.80)

Discontinued operations attributable to MDC







   Partners Inc. common shareholders


($0.03)

($0.04)


($0.18)

($0.11)

Loss attributable to MDC Partners Inc.







   common shareholders


($0.79)

($1.97)


($2.78)

($2.91)















Weighted Average Number of Common Shares:







Basic and Diluted


31,086,033

29,258,049


30,726,773

29,120,373

 

SCHEDULE 2










MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended December 31, 2012















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$200,710


$93,938


-


$294,648



















Operating income (loss) as reported


$667


$212


($7,986)


($7,107)

margin


0.3%


0.2%




-2.4%










Add:









Depreciation and amortization


5,717


4,318


335


10,370

Stock-based compensation


2,584


2,640


603


5,827

Acquisition deal costs


88


34


761


883

Deferred acquisition consideration adjustments to P&L


29,882


3,019


-


32,901

Profit distributions from affiliates


-


-


746


746










EBITDA *


$38,938


$10,223


($5,541)


$43,620

margin


19.4%


10.9%




14.8%




























* 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.



















MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended December 31, 2011















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$165,442


$88,626


-


$254,068




























Operating income (loss) as reported


($8,336)


$13,744


($9,214)


(3,806)

margin


-5.0%


15.5%




-1.5%










Add:









Depreciation and amortization


6,036


4,160


380


10,576

Stock-based compensation


1,253


1,104


3,480


5,837

Acquisition deal costs


660


190


531


1,381

Deferred acquisition consideration adjustments to P&L


19,990


(8,233)


-


11,757

Profit distributions from affiliates


-


-


517


517










EBITDA*


$19,603


$10,965


($4,306)


$26,262

margin


11.8%


12.4%




10.3%




























* 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.

 

SCHEDULE 3










MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Year Ended December 31, 2012















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$721,228


$349,483


-


$1,070,711



















Operating income (loss) as reported


$22,711


($430)


($40,189)


($17,908)

margin


3.1%


-0.1%




-1.7%










Add:









Depreciation and amortization


27,455


17,617


1,342


46,414

Stock-based compensation


9,186


8,227


14,784


32,197

Acquisition deal costs


951


482


1,931


3,364

Deferred acquisition consideration adjustments to P&L


47,702


5,325


-


53,027

Profit distributions from affiliates


-


-


1,288


1,288










EBITDA *


$108,005


$31,221


($20,844)


$118,382

margin


15.0%


8.9%




11.1%




























* 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 Year Ended December 31, 2011
















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$608,022


$332,381


-


$940,403



















Operating income (loss) as reported


$22,504


$25,433


($36,258)


$11,679

margin


3.7%


7.7%




1.2%










Add:









Depreciation and amortization


22,378


17,016


826


40,220

Stock-based compensation


5,149


3,695


14,813


23,657

Acquisition deal costs


1,111


825


1,883


3,819

Deferred acquisition consideration adjustments to P&L


23,418


(10,795)


-


12,623

Profit distributions from affiliates


-


-


1,065


1,065










EBITDA*


$74,560


$36,174


($17,671)


$93,063

margin


12.3%


10.9%




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 December 31,


For the Year Ended December 31,


2012

2011


2012

2011

Cash Flows Provided by Continuing Operating Activities

$60,104

$11,000


$78,223

$7,230

Distributions

746

517


1,288

1,065

Cash Taxes

317

76


1,236

240

Cash Interest, net

20,185

19,897


40,835

37,291

Changes in Working Capital

(36,855)

(449)


(17,350)

37,898

Changes in Non-Current Assets & Liabilities

9,064

2,842


7,954

1,961

Other

(11,525)

(9,471)


184

(1,009)

Net Income Attributable to the Noncontrolling Interests

1,584

1,850


6,012

8,387







EBITDA

$43,620

$26,262


$118,382

$93,063

Net Income Attributable to Noncontrolling Interests

(1,584)

(1,850)


(6,012)

(8,387)

Capital Expenditures, net (1)

(5,553)

(4,943)


(19,232)

(21,111)

Cash Taxes

(317)

(76)


(1,236)

(240)

Cash Interest, net & Other (2)

(12,118)

(10,158)


(42,256)

(38,300)







Free Cash Flow (3)

$24,048

$9,235


$49,646

$25,025







Cash Acquired from Acquisitions

-

14,893


54,624

14,893

Total Free Cash Flow (3)

$24,048

$24,128


$104,270

$39,918







(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 and Total Free Cash Flow are 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)













December 31,



2012


2011






Assets





Current Assets:





Cash and cash equivalents


$60,330


$8,096

Accounts receivable, net


326,087


238,592

Expenditures billable to clients


58,842


39,067

Other current assets


16,892


12,657

Total Current Assets


462,151


298,412






Fixed assets, net


52,914


47,737

Investment in affiliates


-


99

Goodwill


720,071


605,244

Other intangible assets, net


63,243


57,980

Deferred tax assets


9,332


15,380

Other assets


37,234


30,893

Total Assets


$1,344,945


$1,055,745











Liabilities and Shareholders' Deficit





Current Liabilities:





Accounts payable


$356,847


$178,282

Accrued and other liabilities


93,895


72,930

Advance billings


131,908


122,021

Current portion of long term debt


1,858


1,238

Current portion of deferred acquisition consideration

104,325


51,829

Total Current Liabilities


688,833


426,300






Long-term debt


429,845


383,936

Long-term portion of deferred acquisition consideration

92,121


85,394

Other liabilities


47,985


14,900

Deferred tax liabilities


53,018


50,724

Total Liabilities


1,311,802


961,254






Redeemable Noncontrolling Interests


117,953


107,432






Shareholders' Deficit





Common shares


253,870


228,209

Shares to be issued


424


424

Charges in excess of capital


(72,913)


(45,102)

Accumulated deficit


(316,713)


(231,274)

Stock subscription receivable


(55)


(55)

Accumulated other comprehensive loss


(7,445)


(4,658)

MDC Partners Inc. Shareholders' Deficit


(142,832)


(52,456)

Noncontrolling Interests


58,022


39,515

Total Deficit


(84,810)


(12,941)






Total Liabilities, Redeemable Noncontrolling 





   Interests and Deficit


$1,344,945


$1,055,745





















 

SCHEDULE 6





MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)











Year Ended December 31,



2012

2011





Cash flows provided by continuing operating activities


$78,223

$7,230

Discontinued operations


(1,919)

(2,682)

Net cash provided by operating activities


76,304

4,548





Net cash provided by (used in) continuing investing activities


7,830

(29,774)

Discontinued operations


(19)

(662)

Net cash provided by (used in) investing activities


7,811

(30,436)





Net cash provided by (used in) continuing financing activities


(31,858)

23,299





Effect of exchange rate changes on cash and cash equivalents


(23)

(264)





Net increase (decrease) in cash and cash equivalents


$52,234

($2,853)









 

CONTACT:

David Doft


Chief Financial Officer


646-429-1818


ddoft@mdc-partners.com  

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

 

SOURCE MDC Partners Inc.



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