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Press release from CNW Group

MDC Partners Inc. Reports Results For The Three And Six Months Ended June 30, 2012

Monday, July 30, 2012

MDC Partners Inc. Reports Results For The Three And Six Months Ended June 30, 201216:08 EDT Monday, July 30, 2012NEW YORK, July 30, 2012 /CNW/ -SECOND QUARTER HIGHLIGHTS: Revenue increased to $274.1 million versus $238.0 million in Q2 2011, an increase of 15.2% Organic revenue increased 8.3% for Q2 2012 EBITDA decreased to $31.3 million versus $33.0 million in Q2 2011, impacted by increased costs related to investments made in prior quarters Total Free Cash Flow including working capital declined to $16.6 million versus $20.1 million in Q2 2011 Net new business wins of $30.3 million for Q2 2012FIRST SIX MONTHS HIGHLIGHTS: Revenue increased to $509.8 million versus $453.1 million in the first six months of 2011, an increase of 12.5% Organic revenue increased 6.9% year to date for 2012 EBITDA decreased to $39.2 million versus $48.7 million in the first six months of 2011, impacted by increased costs related to investments made in prior quarters Total Free Cash Flow including working capital improved to $84.8 million versus an outflow of ($9.1) million in the first six months of 2011 Net new business wins of $79.8 million in the first six months of 2012, an increase of 70.5%MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and six months ended June 30, 2012. Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "Our business performed very well in the first half of the year and we are on a good trajectory to achieve our 2012 financial targets. During the second quarter, organic revenue increased 8.3%, and EBITDA was in line with last year despite the continued impact of historical investment spending. In addition, cumulative net new business wins for the first half of the year were $80 million, a 71% increase from the $47 million we had in the first half of last year. Given the strong trends we are seeing across our business, we like where we stand heading into the second half of the year, especially as our strategic investments increasingly show benefits in the form of new business wins, quality of work, performance for clients and improved profitability. We remain focused on cost efficiency and on de-levering the balance sheet, which will result in a material amount of incremental EBITDA flowing through to free cash flow. As we move into the third and fourth quarters, we expect both EBITDA and margins to outperform 2011 levels."Guidance for 2012 is maintained as follows:Implied2012Year over YearGuidanceChangeRevenue $1,050 - $1,075 million +11.3% to +14.0% EBITDA $110 - $115 million +21.2% to +26.7% Free Cash Flow $35 - $40 million +50.8% to +72.3% + Change in Working Capital and Other +$25 million Total Free Cash Flow $60 - $65 million +10.6% to +19.8% Implied EBITDA Margin10.5% - 10.7%+90 to +110 basis pointsConsolidated revenue for the second quarter of 2012 was $274.1 million, an increase of 15.2% compared to $238.0 million in the second quarter of 2011. EBITDA (as defined) for the second quarter of 2012 was $31.3 million compared to $33.0 million in the second quarter of 2011, due to the impact of investment activity in the second half of 2011. Loss attributable to MDC Partners in the second quarter was ($20.1) million compared to income of $1.3 million in the second quarter of 2011. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the second quarter of 2012 was ($0.60) compared to income of $0.05 per share in the same period of 2011. Free cash flow from operations (as defined) was $14.2 million in the second quarter of 2012, compared with $17.1 million in the second quarter of 2011. For the six month period ended June 30, 2012, consolidated revenue was $509.8 million, an increase of 12.5% compared to $453.1 million in the first six months of 2011. EBITDA (as defined) for the first half of 2012 was $39.2 million compared to $48.7 million in the same period of 2011, due to the impact of investment activity in the second half of 2011. Loss attributable to MDC Partners in the first six months of 2012 was ($46.4) million compared to a loss of ($7.4) million in the first six months of 2011. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the first six months of 2012 was ($1.45) compared to a loss of ($0.22) per share in the same period of 2011. Free cash flow from operations (as defined) was $6.5 million in the first six months of 2012, compared with $19.0 million in the same period of 2011. "Our plans to improve our balance sheet remain on track," said David Doft, CFO of MDC Partners. "While leverage increased as expected in the second quarter due to a substantial amount of deferred acquisition consideration as well as the timing of working capital, we remain confident that we will achieve our target net-debt to EBITDA ratio of between 3.0-3.5 times by the end of the year, and below 2.5 times over the long-term."Conference CallManagement will host a conference call on Monday, July 30, 2012 at 4:30 p.m. (EDT) 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 until Monday, August 13, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10016791) 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, Europe, Latin America and the Caribbean. 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 MeasuresIn 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, 2012 and 2011; and (2) presenting Total Free Cash Flow, Free Cash Flow and Free Cash Flow per Share (as defined) for the three and six months ended June 30, 2012 and 2011. 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; andforeign 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 1MDC PARTNERS INC.CONSOLIDATED STATEMENTS OF OPERATIONS(US$ in 000s, except share and per share amounts)Three Months Ended June 30,Six Months Ended June 30,2012201120122011Revenue$274,102$238,020$509,758$453,111Operating Expenses:Cost of services sold188,929161,078365,889318,631Office and general expenses74,24552,508134,27996,932Depreciation and amortization13,6459,56923,64419,872276,819223,155523,812435,435Operating profit (loss)(2,717)14,865(14,054)17,676Other Income (Expenses):Other income (expense), net214448(809)762Interest expense (11,830)(10,666)(22,826)(20,230)Interest income21337071Income (Loss) from continuing operations before income taxes and equity in affiliates(14,312)4,680(37,619)(1,721)Income tax expense2,5445883,807946Income (Loss) from continuing operations before equity in affiliates(16,856)4,092(41,426)(2,667)Equity in earnings of non-consolidated affiliates3479306334Income (Loss) from continuing operations(16,822)4,171(41,120)(2,333)Loss from discontinued operations, net of taxes(1,687)(321)(2,240)(895)Net income (loss)(18,509)3,850(43,360)(3,228)Net income attributable to the noncontrolling interests(1,605)(2,527)(3,035)(4,132)Net income (loss) attributable to MDC Partners Inc.($20,114)$1,323($46,395)($7,360)Income (Loss) Per Common Share:Basic:Income (Loss) from continuing operations attributable to MDC Partners Inc. common shareholders($0.60)$0.06($1.45)($0.22)Discontinued operations attributable to MDC Partners Inc. common shareholders($0.05)($0.01)($0.07)($0.03)Income (Loss) attributable to MDC Partners Inc. common shareholders($0.65)$0.05($1.52)($0.25)Income (Loss) Per Common Share:Diluted:Income (Loss) from continuing operations attributable to MDC Partners Inc. common shareholders($0.60)$0.05($1.45)($0.22)Discontinued operations ($0.05)($0.01)($0.07)($0.03)Net Income (Loss) attributable to MDC Partners Inc. common shareholders($0.65)$0.04($1.52)($0.25)Weighted Average Number of Common Shares:Basic30,872,05029,016,38430,380,99128,952,182Diluted30,872,05032,301,72230,380,99128,952,182SCHEDULE 2MDC PARTNERS INC.RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA(US$ in 000s, except percentages)For the Three Months Ended June 30, 2012Strategic PerformanceMarketingMarketingServicesServicesCorporateTotalRevenue$183,750$90,352-$274,102Operating income (loss) as reported$13,080$1,507($17,304)($2,717)margin7.1%1.7%-1.0%Add:Depreciation and amortization8,8284,48832913,645Stock-based compensation1,9671,88711,49915,353Acquisition deal costs567201162930Deferred acquisition consideration adjustments to P&L4,430(463)-3,967Profit distributions from affiliates--166166EBITDA *$28,872$7,620($5,148)$31,344margin15.7%8.4%11.4%* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.MDC PARTNERS INC.RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA(US$ in 000s, except percentages)For the Three Months Ended June 30, 2011Strategic PerformanceMarketingMarketingServicesServicesCorporateTotalRevenue$154,957$83,063-$238,020Operating income (loss) as reported$23,051$2,534($10,720)14,865margin14.9%3.1%6.2%Add:Depreciation and amortization5,1824,2701179,569Stock-based compensation1764785,1215,775Acquisition deal costs112103429644Deferred acquisition consideration adjustments to P&L9541,046-2,000Profit distributions from affiliates--181181EBITDA*$29,475$8,431($4,872)$33,034margin19.0%10.2%13.9%* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.SCHEDULE 3MDC PARTNERS INC.RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA(US$ in 000s, except percentages)For the Six Months Ended June 30, 2012Strategic PerformanceMarketingMarketingServicesServicesCorporateTotalRevenue$343,846$165,912-$509,758Operating income (loss) as reported$13,886($2,355)($25,585)($14,054)margin4.0%-1.4%-2.8%Add:Depreciation and amortization13,9259,04267723,644Stock-based compensation3,8333,57813,82621,237Acquisition deal costs6502887321,670Deferred acquisition consideration adjustments to P&L6,856(361)-6,495 Profit distributions from affiliates--166166EBITDA *$39,150$10,192($10,184)$39,158margin11.4%6.1%7.7%* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.MDC PARTNERS INC.RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA(US$ in 000s, except percentages)For the Six Months Ended June 30, 2011Strategic PerformanceMarketingMarketingServicesServicesCorporateTotalRevenue$296,450$156,661-$453,111Operating income (loss) as reported$31,023$4,183($17,530)$17,676margin10.5%2.7%3.9%Add:Depreciation and amortization10,9898,66222119,872Stock-based compensation1,7239837,34310,049Acquisition deal costs3993848581,641Deferred acquisition consideration adjustments to P&L558(1,535)-(977) Profit distributions from affiliates--448448EBITDA*$44,692$12,677($8,660)$48,709margin15.1%8.1%10.7%* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.SCHEDULE 4MDC PARTNERS INCFREE CASH FLOW(US$ in 000s, except share and per share amounts)Three Months Ended June 30,Six Months Ended June 31,2012201120122011EBITDA$31,344$33,034$39,158$48,709Net Income Attributable to Noncontrolling Interests(1,605)(2,527)(3,035)(4,132)Capital Expenditures, net (1)(4,349)(3,283)(8,943)(7,024)Cash Taxes(323)(71)(347)(135)Cash Interest, net & Other(10,871)(10,069)(20,310)(18,428)Free Cash Flow (2)$14,196$17,084$6,523$18,990Changes in Working Capital (3)2,3842,96978,245(28,053)Total Free Cash Flow (2)$16,580$20,053$84,768($9,063)Diluted Common Shares Outstanding30,872,05032,301,72230,380,99128,952,182Total Free Cash Flow per Share$0.54$0.62$2.79($0.31)(1) Capital Expenditures, net represents capital expenditures net of landlord reimbursements.(2) Free Cash Flow and Total Free Cash Flow are non-GAAP measures. As shown above, Free Cash Flow represents EBITDA less net income attributable to noncontrolling interests, less capital expenditures, less cash taxes, less net cash interest (including interest paid and other).(3) Changes in Working Capital includes cash acquired in acquisitions.SCHEDULE 5MDC PARTNERS INC.CONSOLIDATED BALANCE SHEETS(US$ in 000s)June 30,December 31,20122011AssetsCurrent Assets:Cash and cash equivalents$71,696$8,096Accounts receivable, net334,375238,592Expenditures billable to clients70,55339,067Other current assets16,66912,657Total Current Assets493,293298,412Fixed assets, net51,77547,737Investment in affiliates12499Goodwill736,886605,244Other intangible assets, net65,11657,980Deferred tax assets15,42215,380Other assets30,82130,893Total Assets$1,393,437$1,055,745Liabilities and Shareholders' Equity (Deficit)Current Liabilities:Accounts payable$322,970$178,282Accrued and other liabilities78,83472,930Advance billings157,373122,021Current portion of long term debt1,2671,238Current portion of deferred acquisition consideration90,68651,829Total Current Liabilities651,130426,300Long-term debt470,128383,936Long-term portion of deferred acquisition consideration82,63885,394Other liabilities47,92214,900Deferred tax liabilities53,46750,724Total Liabilities1,305,285961,254Redeemable Noncontrolling Interests102,794107,432Shareholders' Equity (Deficit)Common shares253,217228,209Shares to be issued424424Charges in excess of capital(63,835)(45,102)Accumulated deficit(277,669)(231,274)Stock subscription receivable(55)(55)Accumulated other comprehensive loss(4,130)(4,658)MDC Partners Inc. Shareholders' Equity (Deficit)(92,048)(52,456)Noncontrolling Interests77,40639,515Total Equity (Deficit)(14,642)(12,941)Total Liabilities, Redeemable Noncontrolling Interests and Equity$1,393,437$1,055,745SCHEDULE 6MDC PARTNERS INC.SUMMARY CASH FLOW DATA(US$ in 000s)Six Months Ended June 31,20122011Cash flows used in continuing operating activities($5,076)($25,520)Discontinued operations(1,485)(182)Net cash used in operating activities(6,561)(25,702)Net cash provided by (used in) continuing investing activities26,328(18,744)Discontinued operations22(161)Net cash provided by (used in) investing activities26,350(18,905)Net cash provided by continuing financing activities44,18739,534Effect of exchange rate changes on cash and cash equivalents(376)(172)Net increase (decrease) in cash and cash equivalents$63,600($5,245)(Logo: http://photos.prnewswire.com/prnh/20120221/NY57031LOGO )CONTACT: David DoftChief Financial Officer646-429-1818ddoft@mdc-partners.comSOURCE: MDC Partners Inc.For further information: http://www.mdc-partners.comhttp://photos.prnewswire.com/prnh/20120221/NY57031LOGO