MDC Partners Inc. Reports Results for the Three and Twelve Months Ended December 31, 2011

NEW YORK, Feb. 27, 2012 /CNW/ -

FOURTH QUARTER HIGHLIGHTS:

  • Revenue increased to $254.3 million versus $211.0 million in Q4 2010, an increase of 20.5%
  • Organic revenue increased 6.7% for Q4 2011
  • EBITDA decreased to $25.5 million, primarily due to $13.5 million of growth investment spending, versus $38.3 million in Q4 2010, a decrease of 33.5%,
  • Total Free Cash Flow including working capital increased to $54.7 million versus $31.2 million in Q4 2010, an increase of 75.5%

FULL YEAR 2011 HIGHLIGHTS:

  • Revenue increased to $943.3 million versus $689.1 million in 2010, an increase of 36.9%
  • Organic revenue increased 17.0% for 2011
  • EBITDA increased to $90.7 million versus $88.4 million in 2010, an increase of 2.6% and impacted by $35 million of growth investment spending
  • Total Free Cash Flow including working capital of $54.3 million decreased 29.9% from $77.4 million in 2010

BUSINESS GROWTH HIGHLIGHTS:

  • Net new business wins of $29 million for Q4 2011 brings the year to date total to $104 million
  • Invested approximately $35 million in international expansion, build out of production facilities, transformative talent, digital technology and other growth initiatives in 2012

MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and twelve months ended December 31, 2011.

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "2011 was another solid year of growth for MDC Partners. Our financial performance - 37% revenue growth, organic revenue growth of 17%, and 3% EBITDA growth – as well as meaningful market share gains are proof that our partner companies continue to execute very well and are delivering results on behalf of their clients. In the fourth quarter, we invested significantly in our business, which along with the previous investments and acquisitions we made over the last 18 months, enabled us to create a $1 billion platform with significant infrastructure built for growth, brilliant talent across our partner companies, a global perspective, and marketing solutions that are social, analytically based, and insight driven. We are confident that our investments will pay off and that we will deliver market leading organic revenue results and a meaningful improvement in margins and profitability in 2012 and beyond."

Guidance for 2012 is as follows:





Implied



2012


Year over Year



Guidance


Change

Revenue


$1,000 - $1,025 million


+6.0% to +8.7%

EBITDA


$102 - $107 million


+12.4% to +18.0%

Free Cash Flow


$28 - $33 million


+20.6% to +42.2%

+ Change in Working Capital and Other


+$25 million



Total Free Cash Flow


$53 - $58 million


-2.3% to +6.9%



Consolidated revenue for the fourth quarter of 2011 was $254.3 million, an increase of 20.5% compared to $211.0 million in the fourth quarter of 2010. EBITDA (as defined) for the fourth quarter of 2011 was $25.5 million compared to $38.3 million in the fourth quarter of 2010. Loss attributable to MDC Partners in the fourth quarter was ($57.7) million compared to income of $11.5 million in the fourth quarter of 2010. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the fourth quarter of 2011 was ($1.95) compared with income of $0.39 per share in the same period of 2010. Free cash flow from operations (as defined) was $8.6 million in the fourth quarter of 2011, compared with $20.9 million in the fourth quarter of 2010.

For the twelve months ended December 31, 2011 consolidated revenue was $943.3 million, an increase of 36.9% compared to $689.1 million in the same period of 2010. EBITDA (as defined) for 2011 was $90.7 million, an increase of 2.6% compared to $88.4 million in 2010. Net loss attributable to MDC Partners for the full year 2011 was a loss of ($84.7) million compared to a loss of ($15.4) million in 2010. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the twelve months ended December 31, 2011 was a loss of ($2.86) compared with a loss of ($0.41) per share in the same period of 2010. Total free cash flow (including changes in working capital) decreased 29.9% to $54.3 million for the full year 2011 from $77.4 million in the same period last year.

"2011 was our best year ever in terms of net new business and we expect to continue to gain market share in the coming year as our pipeline remains robust," said David Doft, Chief Financial Officer. "While our business is growing at a healthy pace, we are being diligent in our analysis of investments and are implementing a leaner operating structure across our network, aimed at expanding margins. In addition, we remain focused on improving our balance sheet as we look to decrease our leverage and minimize our cost of capital. Our work in these areas, in addition to our expanding client base, is paving a clear path to our long-term expectations of 5% to 7% organic revenue growth with margin expansion targeted to reach at least 15% over the next few years."

Conference Call

Management will host a conference call on Monday, February 27, 2012 at 4:30 p.m. (EST) to discuss results. The conference call will be accessible by dialing 1-412-317-6760 or toll free 1-866-524-3160. 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 Tuesday, March 13, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10009786) 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, 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 twelve months ended December 31, 2011 and 2010; and (2) presenting Total Free Cash Flow, Free Cash Flow and Free Cash Flow per Share (as defined) for the three and twelve months ended December 31, 2011 and 2010. 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 December 31,


Twelve Months Ended December 31,



2011

2010


2011

2010















Revenue


$254,338

$211,008


$943,274

$689,146








Operating Expenses:







Cost of services sold


181,511

140,690


674,460

473,371

Office and general expenses


66,855

36,899


219,271

151,296

Depreciation and amortization


10,584

11,197


40,236

34,164



258,950

188,786


933,967

658,831








Operating profit (loss)


(4,612)

22,222


9,307

30,315








Other Income (Expenses):







Other income (expense), net


788

873


(1,561)

450

Interest expense


(10,892)

(9,147)


(41,922)

(33,487)

Interest income


33

89


139

274








(Loss) Income from continuing operations before income taxes







and equity in affiliates


(14,683)

14,037


(34,037)

(2,448)








Income tax expense (recovery)


40,831

(1,373)


41,735

(165)








(Loss) Income from continuing operations before equity in affiliates


(55,514)

15,410


(75,772)

(2,283)

Equity in earnings (loss) of non-consolidated affiliates


(1)

2,505


213

866








(Loss) Income from continuing operations


(55,515)

17,915


(75,559)

(1,417)

Loss from discontinued operations, net of taxes


(561)

(875)


(1,361)

(3,949)

Net Income (Loss)


(56,076)

17,040


(76,920)

(5,366)

Net income attributable to the noncontrolling interests


(1,666)

(5,571)


(7,754)

(10,074)

Net Income (Loss) attributable to MDC Partners Inc.


($57,742)

$11,469


($84,674)

($15,440)








Loss Per Common Share:







Basic:







Loss (Income) from continuing operations attributable to MDC







Partners Inc. common shareholders


($1.95)

$0.43


($2.86)

($0.41)

Discontinued operations attributable to MDC







Partners Inc. common shareholders


($0.02)

($0.03)


($0.05)

($0.14)

Loss (Income) attributable to MDC Partners Inc.







common shareholders


($1.97)

$0.40


($2.91)

($0.55)








Loss Per Common Share:







Diluted:







Loss (Income) from continuing operations attributable to MDC







Partners Inc. common shareholders


($1.95)

$0.39


($2.86)

($0.41)

Discontinued operations


($0.02)

($0.03)


($0.05)

($0.14)

Net Loss (Income) attributable to MDC Partners Inc.







common shareholders


($1.97)

$0.36


($2.91)

($0.55)








Weighted Average Number of Common Shares:







Basic


29,258,049

28,707,220


29,120,373

28,161,144

Diluted


29,258,049

31,898,887


29,120,373

28,161,144



SCHEDULE 2


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


$165,499


$88,839


-


$254,338










Operating income (loss) as reported


($8,825)


$13,427


($9,214)


($4,612)

margin


-5.3%


15.1%




-1.8%










Add:









Depreciation and amortization


6,037


4,167


380


10,584

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 *


$19,115


$10,655


($4,306)


$25,464

margin


11.5%


12.0%




10.0%




























* 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, 2010




















Strategic


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$130,219


$80,789


-


$211,008










Operating income (loss) as reported


$15,570


$11,188


($4,536)


22,222

margin


12.0%


13.8%




10.5%










Add:









Depreciation and amortization


6,129


4,971


97


11,197

Stock-based compensation


2,075


744


384


3,203

Acquisition deal costs


703


657


181


1,541

Deferred acquisition consideration adjustments to P&L


427


(4,180)


-


(3,753)

Profit distributions from affiliates


-


-


3,908


3,908










EBITDA*


$24,904


$13,380


$34


$38,318

margin


19.1%


16.6%




18.2%




























* 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 Twelve Months Ended December 31, 2011




















Strategic


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$608,079


$335,195


-


$943,274










Operating income (loss) as reported


$21,344


$24,221


($36,258)


$9,307

margin


3.5%


7.2%




1.0%










Add:









Depreciation and amortization


22,379


17,031


826


40,236

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 *


$73,401


$34,977


($17,671)


$90,707

margin


12.1%


10.4%




9.6%




























* 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 Twelve Months Ended December 31, 2010




















Strategic


Performance







Marketing


Marketing







Services


Services


Corporate


Total










Revenue


$438,941


$250,205


-


$689,146










Operating income (loss) as reported


$40,993


$11,981


($22,659)


$30,315

margin


9.3%


4.8%




4.4%










Add:









Depreciation and amortization


17,917


15,879


368


34,164

Stock-based compensation


7,282


1,992


7,233


16,507

Acquisition deal costs


1,442


1,498


1,085


4,025

Deferred acquisition consideration adjustments to P&L


1,362


(2,140)


-


(778)

Profit distributions from affiliates


-


-


4,157


4,157










EBITDA*


$68,996


$29,210


($9,816)


$88,390

margin


15.7%


11.7%




12.8%




























* 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.



Schedule 4


MDC PARTNERS INC.

FREE CASH FLOW

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




Three Months Ended December 31,


Twelve Months Ended December 31,


2011

2010


2011

2010

EBITDA

$25,464

$38,318


$90,707

$88,390

Net Income Attributable to Noncontrolling Interests

(1,666)

(5,571)


(7,754)

(10,074)

Capital Expenditures, net (1)

(4,968)

(4,190)


(21,136)

(11,134)

Cash Taxes

(76)

(353)


(240)

(1,128)

Cash Interest, net & Other

(10,179)

(7,352)


(38,367)

(29,307)

Free Cash Flow (2)

$8,575

$20,852


$23,210

$36,747







Changes in Working Capital

46,123

10,323


31,060

40,660

Total Free Cash Flow (2)

$54,698

$31,175


$54,270

$77,407







Diluted Common Shares Outstanding

29,258,049

31,898,887


29,120,373

28,161,144







Total Free Cash Flow per Share

$1.87

$0.98


$1.86

$2.75







(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 net cash interest (including interest paid and to be paid on the 11% Senior Notes), less cash taxes plus realized cash foreign exchange gains. Total Free Cash Flow represents Free Cash Flow plus changes in working capital plus other changes in cash.



SCHEDULE 5


MDC PARTNERS INC.

CONSOLIDATED BALANCE SHEETS

(US$ in 000s)













December 31,


December 31,



2011


2010






Assets





Current Assets:





Cash and cash equivalents


$8,096


$10,949

Accounts receivable, net


238,592


195,306

Expenditures billable to clients


39,067


30,414

Other current assets


12,657


13,455

Total Current Assets


298,412


250,124






Fixed assets, net


47,737


41,053

Investment in affiliates


99


-

Goodwill


605,244


514,488

Other intangible assets, net


57,980


67,133

Deferred tax assets


15,380


21,603

Other assets


30,893


19,947

Total Assets


$1,055,745


$914,348











Liabilities and Shareholders' Equity





Current Liabilities:





Accounts payable


$178,282


$131,074

Accrued and other liabilities


72,930


64,050

Advance billings


122,021


124,993

Current portion of long term debt


1,238


1,667

Current portion of deferred acquisition consideration


51,829


30,887

Total Current Liabilities


426,300


352,671






Long-term debt


383,936


284,549

Long-term portion of deferred acquisition consideration


85,394


77,104

Other liabilities


14,900


10,956

Deferred tax liabilities


50,724


19,642

Total Liabilities


961,254


744,922






Redeemable Noncontrolling Interests


107,432


77,560






Shareholders' Equity





Common shares


228,209


226,753

Shares to be issued


424


-

Charges in excess of capital


(45,102)


(16,809)

Accumulated deficit


(231,274)


(146,600)

Stock subscription receivable


(55)


(135)

Accumulated other comprehensive loss


(4,658)


(4,148)

MDC Partners Inc. Shareholders' Equity


(52,456)


59,061

Noncontrolling Interests


39,515


32,805

Total Equity


(12,941)


91,866






Total Liabilities, Redeemable Noncontrolling





Interests and Equity


$1,055,745


$914,348



SCHEDULE 6


MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)





Twelve Months Ended December 31,



2011

2010





Cash flows (used in) provided by continuing operating activities


$5,453

$39,505

Discontinued operations


(905)

(2,208)

Net cash provided by operating activities


4,548

37,297





Net cash used in continuing investing activities


(29,799)

(108,504)

Discontinued operations


(637)

(2,076)

Net cash used in investing activities


(30,436)

(110,580)





Net cash provided by continuing financing activities


23,299

32,728





Effect of exchange rate changes on cash and cash equivalents


(264)

(422)





Net decrease in cash and cash equivalents


($2,853)

($40,977)



CONTACT:

David Doft


Chief Financial Officer


646-429-1818


ddoft@mdc-partners.com



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SOURCE MDC Partners Inc.

For further information:

http://www.mdc-partners.com

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