MDC Partners Inc. Reports Strong Results For The Three And Six Months Ended June 30, 2014

INCREASED 2014 GUIDANCE FOR ADJUSTED EBITDA OF $184 TO $188 MILLION IMPLIES YEAR-OVER-YEAR GROWTH OF +15.4% TO +17.9% AND MARGIN IMPROVEMENT OF 90 BASIS POINTS

INCREASED 2014 GUIDANCE FOR ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL PURPOSES OF $108 TO $112 MILLION IMPLIES YEAR-OVER-YEAR GROWTH OF +18.0% TO +22.3%

QUARTERLY DIVIDEND INCREASED 5.6% TO $0.19

Jul 24, 2014, 16:01 ET from MDC Partners Inc.

NEW YORK, July 24, 2014 /PRNewswire/ -- 

SECOND QUARTER HIGHLIGHTS:

  • Revenue increased to $317.7 million from $287.5 million, an increase of 10.5%
  • Organic revenue increased 7.0%
  • Net Income attributable to MDC Partners increased to $16.5 million from $9.8 million, an increase of 67.8%
  • Adjusted EBITDA increased to $48.8 million from $44.6 million, an increase of 9.5% (see Schedules 2 and 3)
  • Adjusted EBITDA margin of 15.4% versus 15.5%
  • Adjusted EBITDA Available for General Capital Purposes increased to $31.0 million from $27.1 million, an increase of 14.6% (see Schedule 6)
  • Net New Business wins totaled a record $53.7 million

YEAR-TO-DATE HIGHLIGHTS:

  • Revenue increased to $610.3 million from $553.1 million, an increase of 10.3%
  • Organic revenue increased 7.3%
  • Net Income attributable to MDC Partners increased $41.0 million to $7.6 million from a loss of $33.3 million
  • Adjusted EBITDA increased to $85.3 million from $75.4 million, an increase of 13.0% (see Schedules 4 and 5)
  • Adjusted EBITDA margin increased 40 basis points to 14.0% from 13.6%
  • Adjusted EBITDA Available for General Capital Purposes increased to $51.7 million from $42.5 million, an increase of 21.6% (see Schedule 6)
  • Net New Business wins totaled $78.3 million

MDC Partners Inc. (NASDAQ: MDCA; TSX: MDZ.A) today announced financial results for the three and six months ended June 30, 2014. 

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "We delivered very strong results in the second quarter. It's clear that our business model is unique and increasing the return on marketing investment for clients, and increasing the sustainable profitable growth rate of our business.  Organic revenue grew 7.0% and Adjusted EBITDA increased 9.5%, representing a 15.4% margin.  Adjusted EBITDA Available for General Capital Purposes increased 14.6% to $31.0 million and net new business wins were $53.7 million during the quarter.  The business pipeline is full of increasingly large and global opportunities as our agencies scale their capabilities.  Our partner agencies are performing ahead of our expectations and we are executing well against a number of our growth initiatives.  Our prospects for 2014 are even more encouraging than what we detailed in the first quarter and as a result, we are once again raising our 2014 guidance for Adjusted EBITDA and Adjusted EBITDA Available for General Capital Purposes."

Guidance for 2014 is revised as follows:

2014

2014

2014

Implied

2013

Initial Guidance

Revised Guidance 1Q

Revised Guidance 2Q

Year over Year

Actuals

February 20, 2014

April 24, 2014

July 24, 2014

Change

Revenue

 $1.15 billion 

 $1.230 - $1.255 billion 

 $1.245 - $1.270 billion 

 $1.245 - $1.270 billion 

 +8.4% to +10.5% 

Adjusted EBITDA

 $159.4 million 

 $177 - $181 million 

 $181 - $185 million 

 $184 - $188 million 

 +15.4% to +17.9% 

Adjusted EBITDA Margin

13.9%

14.4%

14.5% to 14.6%

14.8%

+90 basis points

Adjusted EBITDA Available for

 $91.6 million 

 $104 - $108 million 

 $106 - $110 million 

 $108 - $112 million 

 +18.0% to +22.3% 

General Capital Purposes

Consolidated revenue for the second quarter of 2014 was $317.7 million, an increase of 10.5% compared to $287.5 million in the second quarter of 2013.  Adjusted EBITDA for the second quarter of 2014 was $48.8 million, an increase of 9.5% compared to $44.6 million in the second quarter of 2013.  Net income attributable to MDC Partners in the second quarter was $16.5 million compared to $9.8 million in the second quarter of 2013.  Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the second quarter of 2014 was $0.33 compared to $0.22 per share in the same period of 2013.  Adjusted EBITDA Available for General Capital Purposes was $31.0 million in the second quarter of 2014, an increase of 14.6% compared to $27.1 million in the second quarter of 2013.

For the six month period ended June 30, 2014, consolidated revenue was $610.3 million, an increase of 10.3% compared to $553.1 million in the six months ended June 30, 2013.  Adjusted EBITDA for the six months ended June 30, 2014 increased 13.0% to $85.3 million compared to $75.4 million in the same period of 2013.  Net income attributable to MDC Partners in the six months ended June 30, 2014 was $7.6 million compared to a loss of $33.3 million in 2013.  Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the six months ended June 30, 2014 was $0.16 compared to a loss of ($0.64) per share in the same period of 2013.  Adjusted EBITDA Available for General Capital Purposes was $51.7 million in the six months ended June 30, 2014, an increase of 21.6% compared to $42.5 million in the same period of 2013.

David Doft, CFO of MDC Partners, said, "Given the superior performance we delivered in the first half of the year, and our growing expectations for the third and fourth quarters, we believe that it is prudent to provide updated financial targets for the year.  While our revenue guidance is maintained at $1.245 to $1.270 billion, implying 8.4% to 10.5% year over year growth, we are increasing our Adjusted EBITDA guidance for the year to $184 million to $188 million, or year over year growth of 15.4% to 17.9% and Adjusted EBITDA margins of 14.8%, up 90 basis points year over year.  We are also increasing guidance for Adjusted EBITDA Available for General Capital Purposes to $108 to $112 million, representing an increase of 18.0% to 22.3%, despite the incremental interest expense from our debt financings.  Our increased margin forecast indicates that we are on pace to achieving our long-term target margins of 15% to 17% well ahead of schedule."

MDC Partners Announces $0.19 per Share Quarterly Cash Dividend

MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.19 per share on all of its outstanding Class A shares and Class B shares.  The quarterly dividend represents an increase of 5.6% from our prior quarterly dividend of $0.18, and will be payable on or about August 19, 2014, to shareholders of record at the close of business on August 5, 2014.

Conference Call

Management will host a conference call on Thursday, July 24, 2014 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 may 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. (ET) August 8, 2014, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10049255) 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".

Please visit us: www.mdc-partners.com  Follow us on Twitter: http://www.twitter.com/mdcpartners  Join us on LinkedIn: http://www.linkedin.com/company/mdc-partners  Find us on Instagram: http://www.instagram.com/mdcpartners

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 Adjusted EBITDA and EBITDA margin (as defined) for the three and six months ended June 30, 2014, and 2013; and (2) presenting Adjusted EBITDA Available for General Capital Purposes for the three and six months ended June 30, 2014, and 2013.  Included in this earnings release are tables reconciling MDC's reported results to arrive at these non-GAAP financial measures.

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, 

2014

2013

2014

2013

Revenue

$317,719

$287,499

$610,288

$553,135

Operating Expenses:

Cost of services sold

200,182

189,677

391,875

367,535

Office and general expenses

78,558

60,845

156,732

128,205

Depreciation and amortization

10,730

9,488

22,025

18,967

289,470

260,010

570,632

514,707

Operating profit

28,249

27,489

39,656

38,428

Other Income (Expenses):

Other, net

7,302

(2,880)

765

(191)

Interest expense and finance charges

(13,882)

(10,375)

(26,636)

(22,803)

Loss on Redemption of Notes

-

-

-

(55,588)

Interest income

1

62

110

165

Income (Loss) from continuing operations before income taxes

  and equity in non-consolidated affiliates

21,670

14,296

13,895

(39,989)

Income tax expense (benefit)

3,378

1,727

3,044

(12,523)

Income (Loss) from continuing operations before equity in non-consolidated affiliates

18,292

12,569

10,851

(27,466)

Equity in earnings of non-consolidated affiliates

79

82

142

123

Income (Loss) from continuing operations

18,371

12,651

10,993

(27,343)

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

(152)

(1,321)

(258)

(3,503)

Net Income (loss)

18,219

11,330

10,735

(30,846)

Net income attributable to the noncontrolling interests

(1,749)

(1,514)

(3,111)

(2,496)

Net income (loss) attributable to MDC Partners Inc.

$16,470

$9,816

$7,624

($33,342)

Income (Loss) Per Common Share:

Basic

Income (Loss) from continuing operations attributable to MDC

   Partners Inc. common shareholders

$0.34

$0.24

$0.16

($0.64)

Discontinued operations attributable to MDC

   Partners Inc. common shareholders

($0.00)

($0.03)

($0.01)

($0.07)

Net Income (Loss) attributable to MDC Partners Inc.

   common shareholders

$0.34

$0.21

$0.15

($0.71)

Income (loss) Per Common Share:

Diluted:

Income (loss) from continuing operations attributable to MDC 

   Partners Inc. common shareholders

$0.33

$0.22

$0.16

($0.64)

Discontinued operations attributable to MDC

   Partners Inc. common shareholders

($0.00)

($0.03)

($0.01)

($0.07)

Net Income (loss) attributable to MDC Partners Inc.

   common shareholders

$0.33

$0.19

$0.15

($0.71)

Weighted Average Number of Common Shares:

Basic

49,546,062

47,098,392

49,442,770

46,975,299

Diluted

50,195,321

51,174,437

50,106,545

46,975,299

 

SCHEDULE 2

MDC PARTNERS INC.

RECONCILIATION OF OPERATING PROFIT (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Three Months Ended June 30, 2014

Strategic 

Performance

Marketing

Marketing

Services

Services

Corporate

Total

Revenue

$221,017

$96,702

-

$317,719

Net income attributable to MDC Partners Inc.

$16,470

Adjustments to reconcile to Operating Profit:

   Net income attributable to the noncontrolling interests

1,749

   Loss from discontinued operations attributable to  

MDC Partners Inc., net of taxes

152

   Equity in earnings of non-consolidated affiliates

(79)

   Income tax Expense

3,378

   Interest expense and finance charges, net

13,881

   Other, net

(7,302)

Operating profit (loss)

$35,497

$5,298

($12,546)

$28,249

margin

16.1%

5.5%

8.9%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

5,038

5,259

433

10,730

Stock-based compensation

2,112

930

1,386

4,428

Acquisition deal costs

441

202

341

984

Deferred acquisition consideration adjustments to P&L

1,123

2,948

-

4,071

Profit distributions from affiliates

-

45

311

356

Adjusted EBITDA *

$44,211

$14,682

($10,075)

$   48,818

margin

20.0%

15.2%

15.4%

* Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (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 PROFIT (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Three Months Ended June 30, 2013

Strategic 

Performance

Marketing

Marketing

Services

Services

Corporate

Total

Revenue

$200,670

$86,829

-

$287,499

Net income attributable to MDC Partners Inc.

$9,816

Adjustments to reconcile to Operating Profit:

   Net income attributable to the noncontrolling interests

1,514

   Loss from discontinued operations attributable to 

MDC Partners Inc., net of taxes

1,321

   Equity in earnings of non-consolidated affiliates

(82)

   Income tax Expense

1,727

   Interest expense and finance charges, net

10,313

   Other, net

2,880

Operating profit (loss)

$27,771

$4,742

($5,024)

$27,489

margin

13.8%

5.5%

9.6%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

5,753

3,408

327

9,488

Stock-based compensation

1,839

1,030

1,885

4,754

Acquisition deal costs

39

99

337

475

Deferred acquisition consideration adjustments to P&L

3,549

(1,162)

-

2,387

Profit distributions from affiliates

-

-

-

-

Adjusted EBITDA *

$38,951

$8,117

($2,475)

$44,593

margin

19.4%

9.3%

15.5%

*Adjusted EBITDA is a non-GAAP measure, but as shown above it represents operating profit (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.

RECONCILIATION OF OPERATING PROFIT (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Six Months Ended June 30, 2014

Strategic 

Performance

Marketing

Marketing

Services

Services

Corporate

Total

Revenue

$426,965

$183,323

-

$610,288

Net income attributable to MDC Partners Inc.

$7,624

Adjustments to reconcile to Operating Profit:

   Net income attributable to the noncontrolling interests

3,111

   Loss from discontinued operations attributable to 

MDC Partners Inc., net of taxes

258

   Equity in earnings of non-consolidated affiliates

(142)

   Income tax Expense

3,044

   Interest expense and finance charges, net

26,526

   Other, net

(765)

Operating profit (loss)

$59,100

$3,579

($23,023)

39,656

margin

13.8%

2.0%

6.5%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

10,084

11,006

935

22,025

Stock-based compensation

4,251

2,207

2,338

8,796

Acquisition deal costs

596

786

673

2,055

Deferred acquisition consideration adjustments to P&L

5,554

6,539

-

12,093

Profit distributions from affiliates

-

283

354

637

Adjusted EBITDA *

79,585

24,400

(18,723)

85,262

margin

18.6%

13.3%

14.0%

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

 

SCHEDULE 5

MDC PARTNERS INC.

RECONCILIATION OF OPERATING PROFIT (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)

For the Six Months Ended June 30, 2013

Strategic 

Performance

Marketing

Marketing

Services

Services

Corporate

Total

Revenue

$384,100

$169,035

-

$553,135

Net income attributable to MDC Partners Inc.

($33,342)

Adjustments to reconcile to Operating Profit:

   Net income attributable to the noncontrolling interests

2,496

   Loss from discontinued operations attributable to 

MDC Partners Inc., net of taxes

3,503

   Equity in earnings of non-consolidated affiliates

(123)

   Income tax Benefit

(12,523)

   Interest expense, finance charges, and loss on redemption of notes, net

78,226

   Other, net

191

Operating profit (loss)

$50,428

$3,534

($15,534)

$38,428

margin

13.1%

2.1%

6.9%

Additional adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization

11,527

6,748

692

18,967

Stock-based compensation

2,980

1,859

4,416

9,255

Acquisition deal costs

165

194

652

1,011

Deferred acquisition consideration adjustments to P&L

4,048

635

-

4,683

Profit distributions from affiliates

-

-

3,096

3,096

Adjusted EBITDA *

$69,148

$12,970

($6,678)

$75,440

margin

18.0%

7.7%

13.6%

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

 

SCHEDULE 6

MDC PARTNERS INC.

ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL PURPOSES

(US$ in 000s)

Three Months Ended June 30,

Six Months Ended June 30,

2014

2013

2014

2013

Adjusted EBITDA (1)

$48,818

$44,593

$85,262

$75,440

Net Income Attributable to Noncontrolling Interests

(1,749)

(1,514)

(3,111)

(2,496)

Capital Expenditures, net (2)

(3,229)

(6,589)

(6,245)

(9,237)

Cash Taxes

(35)

(132)

(118)

(199)

Cash Interest, net & Other (3)

(12,763)

(9,262)

(24,126)

(21,025)

Adjusted EBITDA Available for General Capital Purposes (4)

$31,042

$27,096

$51,662

$42,483

(1) Adjusted EBITDA is a non GAAP measure.  See schedules 2 through 5 for a reconciliation of Net Income (loss) to Adjusted EBITDA.  

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

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

(4) Adjusted EBITDA Available for General Capital Purposes is a non-GAAP measure, and represents funds available for repayment of debt, acquisitions, deferred acquisition consideration, dividends, and other general corporate initiatives

 

SCHEDULE 7

MDC PARTNERS INC.

CONSOLIDATED BALANCE SHEETS

(US$ in 000s)

June 30,

December 31,

2014

2013

Assets

Current Assets:

Cash and cash equivalents

$72,339

$102,007

Accounts receivable, net

394,342

309,796

Expenditures billable to clients

91,880

63,246

Other current assets

31,733

25,458

Total Current Assets

590,294

500,507

Fixed assets, net

50,709

52,071

Investment in non-consolidated affiliates

412

275

Goodwill

882,667

744,333

Other intangible assets, net

68,817

56,262

Deferred tax assets

21,363

21,131

Other assets

70,756

50,648

Total Assets

$1,685,018

$1,425,227

Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit

Current Liabilities:

Accounts payable

$289,505

$246,694

Accruals and other liabilities

267,048

240,580

Advance billings

192,906

149,540

Current portion of long term debt

617

467

Current portion of deferred acquisition consideration

69,138

53,041

Total Current Liabilities

819,214

690,322

Long-term debt

743,599

664,661

Long-term portion of deferred acquisition consideration

111,668

100,872

Other liabilities

32,635

34,430

Deferred tax liabilities

65,413

63,020

Total Liabilities

1,772,529

1,553,305

Redeemable Noncontrolling Interests

164,508

148,534

Shareholders' Deficit

Common shares

265,615

262,656

Shares to be issued

-

424

Charges in excess of capital

(170,068)

(126,352)

Accumulated deficit

(457,952)

(465,576)

Stock subscription receivable

(55)

(55)

Accumulated other comprehensive loss

(1,143)

(797)

MDC Partners Inc. Shareholders' Deficit

(363,603)

(329,700)

Noncontrolling Interests

111,584

53,088

Total Shareholders' Deficit

(252,019)

(276,612)

Total Liabilities, Redeemable Noncontrolling 

   Interests and Shareholders' Deficit

$1,685,018

$1,425,227

 

SCHEDULE 8

MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)

Six Months Ended June 30,

2014

2013

Cash flows provided by continuing operating activities

$33,099

$55,773

Discontinued operations

(258)

(1,702)

Net cash provided by operating activities

32,841

54,071

Cash flows used in continuing investing activities

(58,331)

(9,028)

Discontinued operations

-

(11)

Net cash used in investing activities

(58,331)

(9,039)

Net cash used in continuing financing activities

(3,848)

(28,408)

Effect of exchange rate changes on cash and cash equivalents

(330)

382

Net increase (decrease) in cash and cash equivalents

($29,668)

$17,006

 

CONTACT: Matt Chesler, CFA VP, Investor Relations 646-412-6877 mchesler@mdc-partners.com

 

 

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SOURCE MDC Partners Inc.



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