NEW YORK, July 30, 2012 /PRNewswire/ --

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 2012

FIRST 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:

									Implied
						2012			Year over Year
						Guidance			Change
	Revenue					$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 Margin					10.5% - 10.7%			+90 to +110 basis points

Consolidated 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 Call

Management 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 Measures

In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures."  Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to: (1) presenting EBITDA and EBITDA margin (as defined) for the three and six months ended June 30, 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; 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 June 30,			Six Months Ended June 30,
		2012	2011		2012	2011
Revenue		$274,102	$238,020		$509,758	$453,111
Operating Expenses:
Cost of services sold		188,929	161,078		365,889	318,631
Office and general expenses		74,245	52,508		134,279	96,932
Depreciation and amortization		13,645	9,569		23,644	19,872
		276,819	223,155		523,812	435,435
Operating profit (loss)		(2,717)	14,865		(14,054)	17,676
Other Income (Expenses):
Other income (expense), net		214	448		(809)	762
Interest expense		(11,830)	(10,666)		(22,826)	(20,230)
Interest income		21	33		70	71
Income (Loss) from continuing operations before income taxes
and equity in affiliates		(14,312)	4,680		(37,619)	(1,721)
Income tax expense		2,544	588		3,807	946
Income (Loss) from continuing operations before equity in affiliates		(16,856)	4,092		(41,426)	(2,667)
Equity in earnings of non-consolidated affiliates		34	79		306	334
Income (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:
Basic		30,872,050	29,016,384		30,380,991	28,952,182
Diluted		30,872,050	32,301,722		30,380,991	28,952,182

 

SCHEDULE 2
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended June 30, 2012
		Strategic		Performance
		Marketing		Marketing
		Services		Services		Corporate		Total
Revenue		$183,750		$90,352		-		$274,102
Operating income (loss) as reported		$13,080		$1,507		($17,304)		($2,717)
margin		7.1%		1.7%				-1.0%
Add:
Depreciation and amortization		8,828		4,488		329		13,645
Stock-based compensation		1,967		1,887		11,499		15,353
Acquisition deal costs		567		201		162		930
Deferred acquisition consideration adjustments to P&L		4,430		(463)		-		3,967
Profit distributions from affiliates		-		-		166		166
EBITDA *		$28,872		$7,620		($5,148)		$31,344
margin		15.7%		8.4%				11.4%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,
stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended June 30, 2011
		Strategic		Performance
		Marketing		Marketing
		Services		Services		Corporate		Total
Revenue		$154,957		$83,063		-		$238,020
Operating income (loss) as reported		$23,051		$2,534		($10,720)		14,865
margin		14.9%		3.1%				6.2%
Add:
Depreciation and amortization		5,182		4,270		117		9,569
Stock-based compensation		176		478		5,121		5,775
Acquisition deal costs		112		103		429		644
Deferred acquisition consideration adjustments to P&L		954		1,046		-		2,000
Profit distributions from affiliates		-		-		181		181
EBITDA*		$29,475		$8,431		($4,872)		$33,034
margin		19.0%		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 3
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Six Months Ended June 30, 2012
		Strategic		Performance
		Marketing		Marketing
		Services		Services		Corporate		Total
Revenue		$343,846		$165,912		-		$509,758
Operating income (loss) as reported		$13,886		($2,355)		($25,585)		($14,054)
margin		4.0%		-1.4%				-2.8%
Add:
Depreciation and amortization		13,925		9,042		677		23,644
Stock-based compensation		3,833		3,578		13,826		21,237
Acquisition deal costs		650		288		732		1,670
Deferred acquisition consideration adjustments to P&L		6,856		(361)		-		6,495
Profit distributions from affiliates		-		-		166		166
EBITDA *		$39,150		$10,192		($10,184)		$39,158
margin		11.4%		6.1%				7.7%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,
stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Six Months Ended June 30, 2011
		Strategic		Performance
		Marketing		Marketing
		Services		Services		Corporate		Total
Revenue		$296,450		$156,661		-		$453,111
Operating income (loss) as reported		$31,023		$4,183		($17,530)		$17,676
margin		10.5%		2.7%				3.9%
Add:
Depreciation and amortization		10,989		8,662		221		19,872
Stock-based compensation		1,723		983		7,343		10,049
Acquisition deal costs		399		384		858		1,641
Deferred acquisition consideration adjustments to P&L		558		(1,535)		-		(977)
Profit distributions from affiliates		-		-		448		448
EBITDA*		$44,692		$12,677		($8,660)		$48,709
margin		15.1%		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 4
MDC PARTNERS INC
FREE CASH FLOW
(US$ in 000s, except share and per share amounts)
	Three Months Ended June 30,			Six Months Ended June 31,
	2012	2011		2012	2011
EBITDA	$31,344	$33,034		$39,158	$48,709
Net 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	$18,990
Changes in Working Capital (3)	2,384	2,969		78,245	(28,053)
Total Free Cash Flow (2)	$16,580	$20,053		$84,768	($9,063)
Diluted Common Shares Outstanding	30,872,050	32,301,722		30,380,991	28,952,182
Total 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 5
MDC PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
		June 30,		December 31,
		2012		2011
Assets
Current Assets:
Cash and cash equivalents		$71,696		$8,096
Accounts receivable, net		334,375		238,592
Expenditures billable to clients		70,553		39,067
Other current assets		16,669		12,657
Total Current Assets		493,293		298,412
Fixed assets, net		51,775		47,737
Investment in affiliates		124		99
Goodwill		736,886		605,244
Other intangible assets, net		65,116		57,980
Deferred tax assets		15,422		15,380
Other assets		30,821		30,893
Total Assets		$1,393,437		$1,055,745
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable		$322,970		$178,282
Accrued and other liabilities		78,834		72,930
Advance billings		157,373		122,021
Current portion of long term debt		1,267		1,238
Current portion of deferred acquisition consideration		90,686		51,829
Total Current Liabilities		651,130		426,300
Long-term debt		470,128		383,936
Long-term portion of deferred acquisition consideration		82,638		85,394
Other liabilities		47,922		14,900
Deferred tax liabilities		53,467		50,724
Total Liabilities		1,305,285		961,254
Redeemable Noncontrolling Interests		102,794		107,432
Shareholders' Equity (Deficit)
Common shares		253,217		228,209
Shares to be issued		424		424
Charges 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 Interests		77,406		39,515
Total Equity (Deficit)		(14,642)		(12,941)
Total Liabilities, Redeemable Noncontrolling
Interests and Equity		$1,393,437		$1,055,745

SCHEDULE 6
MDC PARTNERS INC.
SUMMARY CASH FLOW DATA
(US$ in 000s)
		Six Months Ended June 31,
		2012	2011
Cash 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 activities		26,328	(18,744)
Discontinued operations		22	(161)
Net cash provided by (used in) investing activities		26,350	(18,905)
Net cash provided by continuing financing activities		44,187	39,534
Effect 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.com

 

SOURCE MDC Partners Inc.