MDC Partners Inc. Reports Strong Results For The Three And Twelve Months Ended December 31, 2014

2014 ORGANIC REVENUE GROWTH OF 10.8%, ADJUSTED EBITDA GROWTH OF 17.0%, AND ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL PURPOSES GROWTH OF 11.8%

QUARTERLY DIVIDEND INCREASED 10.5% FROM $0.19 TO $0.21 PER SHARE

NEW YORK, Feb. 23, 2015 /PRNewswire/ --

FULL YEAR HIGHLIGHTS:

  • Revenue increased to $1.22 billion from $1.06 billion, an increase of 15.2%
  • Net loss attributable to MDC Partners improved by $124.8 million to ($24.1) million from ($148.9) million
  • Organic revenue increased 10.8%
  • Adjusted EBITDA increased to $179.4 million from $153.3 million, an increase of 17.0% (see Schedules 4 and 5)
  • Adjusted EBITDA margin of 14.7% versus 14.4% in the same period last year (see Schedules 4 and 5)
  • Adjusted EBITDA Available for General Capital Purposes increased to $98.8 million from $88.4 million, an increase of 11.8% (see Schedule 6)
  • Net New Business wins totaled $162.7 million, an increase of 27.9% from $127.2 million in 2013

FOURTH QUARTER HIGHLIGHTS:

  • Revenue increased to $339.9 million from $289.2 million, an increase of 17.5%
  • Net loss attributable to MDC Partners improved by $67.6 million to ($26.8) million from ($94.3) million
  • Organic revenue increased 12.5%
  • Adjusted EBITDA increased to $51.8 million from $45.2 million, an increase of 14.6% (see Schedules 2 and 3)
  • Adjusted EBITDA margin of 15.2% versus 15.6% in the same period last year (see Schedules 2 and 3)
  • Adjusted EBITDA Available for General Capital Purposes increased to $31.1 million from $27.0 million, an increase of 15.1% (see Schedule 6)
  • Net New Business wins totaled $56.7 million

(NASDAQ: MDCA; TSX: MDZ.A) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and twelve months ended December 31, 2014.

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "Our business performed very well in 2014, highlighted by industry-leading organic revenue growth, strong EBITDA growth and operating leverage, and robust overall cash generation. Our partner firms continue to outperform their competition, as demonstrated by the record amount of net new business won during the year, and we made solid progress on the areas of our targeted growth, including Media and International. In addition, our strong track record of strategically allocating capital, whether through internal investments, acquisitions, or dividends continues to deliver meaningful and measurable returns for our stakeholders.

"Looking ahead, we expect to achieve 7-9% organic growth in 2015, and combined with margin expansion and an efficient capital structure, our financial framework should result in steady, significant cash generation. The future is bright for MDC."

Guidance for 2015 is established as follows:







Implied




2014


2015


Year over Year




Actuals


Guidance


Change










Revenue


 $1.22 billion 


 $1.300 - $1.330 billion 


 +6.5% to +8.5% 










Adjusted EBITDA


 $179.4 million 


 $195 - $205 million 


 +8.7% to +14.3% 


Implied Adjusted EBITDA Margin


14.7%


15.0% to 15.4%


+35 to 75 basis points










Adjusted EBITDA Available for


 $98.8 million 


 $109 - $119 million 


 +10.3% to +20.4% 


General Capital Purposes
































For the twelve month period ended December 31, 2014, consolidated revenue was $1.22 billion, an increase of 15.2%, compared to $1.06 billion in the twelve months ended December 31, 2013.  Adjusted EBITDA for the twelve months ended December 31, 2014 was $179.4 million, an increase of 17.0% compared to $153.3 million in the same period of 2013.  Net loss attributable to MDC Partners in the twelve months ended December 31, 2014 was ($24.1) million compared to a loss of ($148.9) million in 2013.  Loss per share from continuing operations attributable to MDC Partners common shareholders for the twelve months ended December 31, 2014 was ($0.49) compared to a loss of ($3.16) per share in the same period of 2013.  Adjusted EBITDA Available for General Capital Purposes was $98.8 million in the twelve months ended December 31, 2014, compared to $88.4 million in the same period of 2013.

Consolidated revenue for the fourth quarter of 2014 was $339.9 million, an increase of 17.5%, compared to $289.2 million in the fourth quarter of 2013.  Adjusted EBITDA for the fourth quarter of 2014 was $51.8 million, an increase of 14.6%, compared to $45.2 million in the fourth quarter of 2013.  Net loss attributable to MDC Partners in the fourth quarter was ($26.8) million compared to a loss of ($94.3) million in the fourth quarter of 2013.  Loss per share from continuing operations attributable to MDC Partners common shareholders for the fourth quarter of 2014 was ($0.54) compared to a loss of ($2.00) per share in the same period of 2013.  Adjusted EBITDA Available for General Capital Purposes was $31.1 million in the fourth quarter of 2014 compared to $27.0 million in the fourth quarter of 2013.

David Doft, CFO of MDC Partners, said, "We are particularly pleased that we delivered this solid performance in 2014 despite a significant strengthening of the US dollar, which resulted in currency headwinds of over 1% in the fourth quarter. As we enter 2015, maintaining a disciplined approach to managing investment and allocating capital remains a top priority.  In terms of our financial outlook for the year, our recent new business performance bolsters our confidence, but we do have to account for some expected volatility of foreign currency movements as well as the timing associated with the ramp-up of recent new business. As such, we expect revenue to increase 6.5% to 8.5%, consisting of 7% to 9% organic growth and net of an approximate 200 basis point negative impact from foreign currency assuming that FX rates remain unchanged. We expect Adjusted EBITDA to increase 8.7% to 14.3%, implying margin expansion of 35 to 75 basis points, and keeping us on track to achieve our margin target of 17-19% within 3 to 5 years. Adjusted EBITDA growth and margin expansion in 2015 is despite an expected 3% impact from unfavorable foreign currency rate movements.  With the capital efficiency of our model, Adjusted EBITDA Available for General Capital Purposes is expected to increase 10.3% to 20.4%."

MDC Partners Announces $0.21 per Share Quarterly Cash Dividend, Up 10.5% from Prior Dividend

MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.21 per share on all of its outstanding Class A shares and Class B shares.  The quarterly dividend will be payable on or about March 19, 2015, to shareholders of record at the close of business on March 5, 2015.

Conference Call

Management will host a conference call on Monday, February 23, 2015, at 4:30 p.m. (ET) to discuss results.  Access the conference call by dialing 1-412-902-4266 or toll free 1-888-346-6216.  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), March 10, 2015, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10060211), or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC Partners 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, Europe, Asia and Latin America. 

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 the Company'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 twelve months ended December 31, 2014, and 2013; and (2) presenting Adjusted EBITDA Available for General Capital Purposes for the three and twelve months ended December 31, 2014, and 2013.  Included in this earnings release are tables reconciling MDC Partners' 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 December 31, 


Year Ended December 31, 



2014

2013


2014

2013















Revenue


$339,911

$289,229


$1,223,512

$1,062,478








Operating Expenses:







Cost of services sold


222,626

187,431


798,518

704,969

Office and general expenses


76,486

161,658


290,073

355,964

Depreciation and amortization


15,089

10,272


47,172

36,139



314,201

359,361


1,135,763

1,097,072








Operating profit (loss)


25,710

(70,132)


87,749

(34,594)








Other Income (Expenses):







Other, net


(9,145)

(4,590)


(17,793)

(2,985)

Interest expense and finance charges


(14,602)

(11,718)


(55,265)

(45,110)

Loss on redemption of Notes


-

-


-

(55,588)

Interest income


131

59


418

427








Income (loss) from continuing operations before income taxes







  and equity in non-consolidated affiliates


2,094

(86,381)


15,109

(137,850)








Income tax expense (benefit)


9,658

3,822


12,422

(4,367)








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


(7,564)

(90,203)


2,687

(133,483)

Equity in earnings of non-consolidated affiliates


1,183

85


1,406

281








Income (loss) from continuing operations


(6,381)

(90,118)


4,093

(133,202)

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


(18,284)

(2,149)


(21,260)

(9,200)

Net loss


(24,665)

(92,267)


(17,167)

(142,402)

Net income attributable to the noncontrolling interests


(2,094)

(2,054)


(6,890)

(6,461)

Net loss attributable to MDC Partners Inc.


($26,759)

($94,321)


($24,057)

($148,863)








Loss Per Common Share:







Basic and Diluted







Loss from continuing operations attributable to MDC







   Partners Inc. common shareholders


($0.17)

($1.95)


($0.06)

($2.96)

Discontinued operations attributable to MDC







   Partners Inc. common shareholders


($0.37)

($0.05)


($0.43)

($0.20)

Net loss attributable to MDC Partners Inc.







   common shareholders


($0.54)

($2.00)


($0.49)

($3.16)















Weighted Average Number of Common Shares Outstanding:







Basic and Diluted


49,683,864

47,272,986


49,545,350

47,108,406















SCHEDULE 2










MDC PARTNERS INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended December 31, 2014




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$270,871


$69,040


-


$339,911




























Net loss attributable to MDC Partners Inc.








($26,759)

Adjustments to reconcile to Operating profit (loss):









   Net income attributable to the noncontrolling interests








2,094

   Loss from discontinued operations attributable to  









MDC Partners Inc., net of taxes








18,284

   Equity in earnings of non-consolidated affiliates








(1,183)

   Income tax expense








9,658

   Interest expense and finance charges, net








14,471

   Other, net








9,145

Operating profit (loss)


$25,093


$12,154


($11,537)


$25,710

margin


9.3%


17.6%




7.6%










Additional adjustments to reconcile to Adjusted EBITDA:









Depreciation and amortization


6,976


7,684


429


15,089

Stock-based compensation


3,549


869


1,045


5,463

Acquisition deal costs


1,733


282


405


2,420

Deferred acquisition consideration adjustments to P&L


13,798


(12,047)


-


1,751

Profit distributions from non-consolidated affiliates


-


616


720


1,336










Adjusted EBITDA *


$51,149


$9,558


($8,938)


$   51,769

margin


18.9%


13.8%




15.2%




























* 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 NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended December 31, 2013




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$227,976


$61,253


-


$289,229




























Net loss attributable to MDC Partners Inc.








($94,321)

Adjustments to reconcile to Operating profit (loss):









   Net income attributable to the noncontrolling interests








2,054

   Loss from discontinued operations attributable to 









MDC Partners Inc., net of taxes








2,149

   Equity in earnings of non-consolidated affiliates








(85)

   Income tax expense








3,822

   Interest expense and finance charges, net








11,659

   Other, net








4,590

Operating profit (loss)


$7,957


$1,114


($79,203)


($70,132)

margin


3.5%


1.8%




-24.2%










Additional adjustments to reconcile to Adjusted EBITDA:









Depreciation and amortization


6,489


3,378


405


10,272

Stock-based compensation


2,434


920


60,361


63,715

Acquisition deal costs


123


88


425


636

Deferred acquisition consideration adjustments to P&L


27,666


2,848


-


30,514

One time incentive


-


-


9,649


9,649

Profit distributions from non-consolidated affiliates


-


-


517


517










Adjusted EBITDA *


$44,669


$8,348


($7,846)


$45,171

margin


19.6%


13.6%




15.6%




























*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,one time incentive and profit distributions from affiliates.

SCHEDULE 4










MDC PARTNERS INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)










For the Year Ended December 31, 2014




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$954,211


$269,301


-


$1,223,512




























Net loss attributable to MDC Partners Inc.








($24,057)

Adjustments to reconcile to Operating profit (loss):









   Net income attributable to the noncontrolling interests








6,890

   Loss from discontinued operations attributable to 









MDC Partners Inc., net of taxes








21,260

   Equity in earnings of non-consolidated affiliates








(1,406)

   Income tax expense








12,422

   Interest expense and finance charges, net








54,847

   Other, net








17,793

Operating profit (loss)


$111,423


$22,244


($45,918)


87,749

margin


11.7%


8.3%




7.2%










Additional adjustments to reconcile to Adjusted EBITDA:









Depreciation and amortization


24,158


21,229


1,785


47,172

Stock-based compensation


9,616


3,553


4,527


17,696

Acquisition deal costs


3,071


1,260


1,802


6,133

Deferred acquisition consideration adjustments to P&L


23,238


(6,771)


-


16,467

Profit distributions from non-consolidated affiliates


-


937


3,201


4,138










Adjusted EBITDA *


$171,506


$42,452


($34,603)


$179,355

margin


18.0%


15.8%




14.7%




























* 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 NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)










For the Year Ended December 31, 2013




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$836,936


$225,542


-


$1,062,478




























Net loss attributable to MDC Partners Inc.








($148,863)

Adjustments to reconcile to Operating profit (loss):









   Net loss attributable to the noncontrolling interests








6,461

   Loss from discontinued operations attributable to 









MDC Partners Inc., net of taxes








9,200

   Equity in earnings of non-consolidated affiliates








(281)

   Income tax benefit








(4,367)

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








100,271

   Other, net








2,985

Operating profit (loss)


$86,942


$6,572


($128,108)


($34,594)

margin


10.4%


2.9%




-3.3%










Additional adjustments to reconcile to Adjusted EBITDA:









Depreciation and amortization


24,210


10,535


1,394


36,139

Stock-based compensation


7,657


3,017


89,731


100,405

Acquisition deal costs


323


324


1,419


2,066

Deferred acquisition consideration adjustments to P&L


35,746


168


-


35,914

One time incentive


-


-


9,649


9,649

Profit distributions from non-consolidated affiliates


-


-


3,761


3,761










Adjusted EBITDA *


$154,878


$20,616


($22,154)


$153,340

margin


18.5%


9.1%




14.4%



















*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, one time incentive, and profit distributions from affiliates.











SCHEDULE 6







MDC PARTNERS INC.

ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL PURPOSES

(US$ in 000s)














Three Months Ended December 31,


Year Ended December 31,


2014

2013


2014

2013

Adjusted EBITDA (1)

$51,769

$45,171


$179,355

$153,340

Net income attributable to noncontrolling interests

(2,094)

(2,054)


(6,890)

(6,461)

Capital expenditures, net (2)

(4,999)

(4,388)


(23,078)

(15,851)

Cash taxes

(72)

(364)


(431)

(919)

Cash interest, net & other (3)

(13,485)

(11,328)


(50,128)

(41,692)







Adjusted EBITDA Available for General Capital Purposes (4)

$31,119

$27,037


$98,828

$88,417



















(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)













December 31,


December 31,



2014


2013











Assets





Current Assets:





Cash and cash equivalents


$119,767


$102,007

Accounts receivable, net


355,295


309,796

Expenditures billable to clients


40,202


63,246

Other current assets


36,978


25,458

Total Current Assets


552,242


500,507






Fixed assets, net


60,240


52,071

Investment in non-consolidated affiliates


6,110


275

Goodwill


851,373


744,333

Other intangible assets, net


86,121


56,262

Deferred tax assets


18,758


21,131

Other assets


74,046


50,648

Total Assets


$1,648,890


$1,425,227











Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit



Current Liabilities:





Accounts payable


$316,285


$246,694

Accruals and other liabilities


271,273


240,580

Advance billings


142,608


149,540

Current portion of long term debt


534


467

Current portion of deferred acquisition consideration

90,804


53,041

Total Current Liabilities


821,504


690,322






Long-term debt, less current portion


742,593


664,661

Long-term portion of deferred acquisition consideration

114,564


100,872

Other liabilities


45,861


34,430

Deferred tax liabilities


77,997


63,020

Total Liabilities


1,802,519


1,553,305






Redeemable Noncontrolling Interests


194,951


148,534






Shareholders' Deficit





Common shares


265,818


262,656

Shares to be issued


-


424

Charges in excess of capital


(209,668)


(126,352)

Accumulated deficit


(489,633)


(465,576)

Stock subscription receivable


-


(55)

Accumulated other comprehensive loss


(7,752)


(797)

MDC Partners Inc. Shareholders' Deficit


(441,235)


(329,700)

Noncontrolling Interests


92,655


53,088

Total Shareholders' Deficit


(348,580)


(276,612)






Total Liabilities, Redeemable Noncontrolling 





   Interests and Shareholders' Deficit


$1,648,890


$1,425,227
















SCHEDULE 8





MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)











Year Ended December 31,



2014

2013





Cash flows provided by continuing operating activities


$135,769

$55,994

Discontinued operations


(1,827)

3,305

Net cash provided by operating activities


133,942

59,299





Cash flows used in continuing investing activities


(97,578)

(27,373)

Discontinued operations


(2,108)

(2,751)

Net cash used in investing activities


(99,686)

(30,124)





Net cash provided by (used in) continuing financing activities


(15,388)

11,758

  Discontinued operations


(40)

(1,266)

Net cash provided by (used in) financing activities


(15,428)

10,492





Effect of exchange rate changes on cash and cash equivalents


(1,068)

2,010





Net increase  in cash and cash equivalents


$17,760

$41,677





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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