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

NEW 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 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 Doft
Chief Financial Officer
646-429-1818
ddoft@mdc-partners.com

SOURCE: MDC Partners Inc.

For further information:

http://www.mdc-partners.com

http://photos.prnewswire.com/prnh/20120221/NY57031LOGO


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