MDC Partners Inc. Reports Results For The Three And Six Months Ended June 30, 2015

NEW YORK, Aug. 6, 2015 /CNW/ --

SECOND QUARTER HIGHLIGHTS:

  • Revenue increased to $336.6 million from $299.4 million, an increase of 12.4%
  • Net income attributable to MDC Partners of $29.6 million versus $16.5 million in the same period last year
  • Organic revenue increased 8.3%
  • Adjusted EBITDA of $47.5 million versus $48.9 million in the same period last year (see Schedules 2 and 3)
  • Adjusted EBITDA margin of 14.1% versus 16.3% in the same period last year (see Schedules 2 and 3)
  • Adjusted EBITDA Available for General Capital Purposes of $27.7 million versus $31.8 million in the same period last year (see Schedule 6)
  • Net New Business wins totaled $27.3 million
  • Declared cash dividend of $0.21 per share

YEAR-TO-DATE HIGHLIGHTS:

  • Revenue increased to $638.8 million from $574.2 million, an increase of 11.3%
  • Net loss attributable to MDC Partners of ($2.5) million versus income of $7.6 million in the same period last year
  • Organic revenue increased 7.8%
  • Adjusted EBITDA of $78.6 million versus $84.7 million in the same period last year (see Schedules 4 and 5)
  • Adjusted EBITDA margin of 12.3% versus 14.7% in the same period last year (see Schedules 4 and 5)
  • Adjusted EBITDA Available for General Capital Purposes of $38.0 million versus $52.3 million in the same period last year (see Schedule 6)
  • Net New Business wins totaled $55.3 million

(NASDAQ: MDCA; TSX: MDZ.A) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and six months ended June 30, 2015.

Scott Kauffman, Chairman and Chief Executive Officer of MDC Partners, said, "We delivered strong results in the second quarter with exceptional organic growth of 8%, total revenue growth of 12% and solid cash generation. Adjusted EBITDA, while down modestly year over year due to the timing of revenue recognition associated with certain accounts, is tracking as predicted to our annual growth forecast.  Our partner companies continue to consistently deliver best in class results on behalf of their clients, we are winning new business on a larger and increasingly global scale, and importantly, our unique culture is fostering talent and innovation. In the short-term we are on track to achieve our annual financial guidance, and in the long-term, we have never been in a better strategic position to continue posting industry leading operational and financial results.  I am very excited about the future of MDC."

Guidance for 2015 is reaffirmed 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














 

Consolidated revenue for the second quarter of 2015 was $336.6 million, an increase of 12.4%, compared to $299.4 million in the second quarter of 2014.  Adjusted EBITDA for the second quarter of 2015 was $47.5 million compared to $48.9 million in the second quarter of 2014.  Net income attributable to MDC Partners in the second quarter was $29.6 million compared to $16.5 million in the second quarter of 2014.  Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the second quarter of 2015 was $0.56 compared to $0.35 per share in the second quarter of 2014.  Adjusted EBITDA Available for General Capital Purposes was $27.7 million in the second quarter of 2015 compared to $31.8 million in the second quarter of 2014.

For the six month period ended June 30, 2015, consolidated revenue was $638.8 million, an increase of 11.3% compared to $574.2 million in the six months ended June 30, 2014.  Adjusted EBITDA for the six months ended June 30, 2015 was $78.6 million compared to $84.7 million in the same period of 2014.  Net loss attributable to MDC Partners in the six months ended June 30, 2015 was ($2.5) million compared to income of $7.6 million in the same period of 2014.  Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the six months ended June 30, 2015 was $0.05 compared to $0.18 per share in the same period of 2014.  Adjusted EBITDA Available for General Capital Purposes was $38.0 million in the six months ended June 30, 2015, compared to $52.3 million in the same period of 2014.

David Doft, CFO of MDC Partners, said, "The fundamental performance of our business this quarter was strong and consistent with our expectations.  We remain firmly on track for a successful second half of the year and to achieving our 17-19% mid-term margin outlook. We are particularly pleased with how we performed from a cash standpoint, despite $95.9 million of deferred acquisition consideration and step-up closing payments in the quarter.  Our liquidity position is strong and affords us the flexibility to continue to build our business while also de-levering the balance sheet.  We are exceptionally encouraged by where we stand heading into the back half of the year."

MDC Partners Announces $0.21 per Share Quarterly Cash 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 September 1, 2015, to shareholders of record at the close of business on August 18, 2015.

Conference Call

Management will host a conference call on Thursday, August 6, 2015, at 5:00 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), August 14, 2015, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10070129), or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC Partners is one of the fastest-growing and most influential marketing and communications networks in the world.  Its 50+ advertising, public relations, branding, digital, social and event marketing agencies are responsible for some of the most memorable and engaging campaigns for the world's most respected brands.  By leveraging technology, data analytics, insights, and strategic consulting solutions, MDC Partners drives measurable results and optimizes return on marketing investment for over 1,500 clients worldwide. 

As "The Place Where Great Talent Lives," MDC Partners is known for its unique partnership model, empowering the most entrepreneurial and innovative talent to drive competitive advantage and business growth for clients.  For more information about MDC Partners and its partner firms, visit www.mdc-partners.com and follow us on Twitter: http://www.twitter.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 six months ended June 30, 2015, and 2014; and (2) presenting Adjusted EBITDA Available for General Capital Purposes for the three and six months ended June 30, 2015, and 2014.  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 the Subpoena and ongoing SEC investigation and related securities litigation claims;
  • 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 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 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 June 30,


Six Months Ended June 30, 


2015

2014


2015

2014













Revenue

$336,606

$299,356


$638,828

$574,210







Operating Expenses:






Cost of services sold

225,042

188,875


435,461

370,343

Office and general expenses

53,075

71,436


127,383

142,772

Depreciation and amortization

14,007

9,917


26,307

20,399


292,124

270,228


589,151

533,514







Operating profit

$44,482

29,128


49,677

40,696







Other Income (Expenses):






Other, net

4,348

7,564


(13,692)

993

Interest expense and finance charges

(13,288)

(13,882)


(28,384)

(26,641)

Interest income

105

42


224

182







Income from continuing operations before income taxes and equity in non-consolidated affiliates






35,647

22,852


7,825

15,230







Income tax expense

4,679

3,376


625

3,030







Income from continuing operations before equity in non-consolidated affiliates

30,968

19,476


7,200

12,200

Equity in earnings of non-consolidated affiliates

104

79


455

142







Income from continuing operations

31,072

19,555


7,655

12,342

Income (loss) from discontinued operations attributable to MDC Partners Inc., net of taxes

1,329

(1,336)


(4,965)

(1,607)

Net income

32,401

18,219


2,690

10,735

Net income attributable to the noncontrolling interests

(2,841)

(1,749)


(5,221)

(3,111)

Net income (loss) attributable to MDC Partners Inc.

$29,560

$16,470


($2,531)

$7,624







Income (loss) Per Common Share:






Basic:






Income from continuing operations attributable to MDC Partners Inc. common shareholders






$0.57

$0.36


$0.05

$0.19

Discontinued operations attributable to MDC Partners Inc. common shareholders






$0.03

($0.03)


($0.10)

($0.03)

Net income (loss) attributable to MDC Partners Inc. common shareholders






$0.60

$0.33


($0.05)

$0.16













Diluted:






Income from continuing operations attributable to MDC Partners Inc. common shareholders






$0.56

$0.35


$0.05

$0.18

Discontinued operations attributable to MDC Partners Inc. common shareholders






$0.03

($0.03)


($0.10)

($0.03)

Net Income (loss) attributable to MDC Partners Inc. common shareholders






$0.59

$0.32


($0.05)

$0.15







Weighted Average Number of Common Shares Outstanding:






Basic

49,859,300

49,546,062


49,807,419

49,442,770

Diluted

50,399,936

50,195,321


50,365,119

50,106,545

 

 

SCHEDULE 2









MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)









For the Three Months Ended June 30, 2015














Strategic 


Performance






Marketing


Marketing






Services


Services


Corporate


Total

































Revenue

$270,091


$66,515


$                -


$336,606

























Net income attributable to MDC Partners Inc.







$29,560

Adjustments to reconcile to Operating profit (loss):








   Net income attributable to the noncontrolling interests







2,841

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














(1,329)

   Equity in earnings of non-consolidated affiliates







(104)

   Income tax expense







4,679

   Interest expense and finance charges, net







13,183

   Other, net







(4,348)

Operating profit (loss)

$33,434


$16,259


($5,211)


$44,482

margin

12.4%


24.4%




13.2%









Additional adjustments to reconcile to Adjusted EBITDA:








Depreciation and amortization

6,492


5,790


1,725


14,007

Stock-based compensation

4,087


838


389


5,314

Acquisition deal costs

215


90


537


842

Deferred acquisition consideration adjustments to P&L

(2,200)


(10,541)


-


(12,741)

Profit distributions from non-consolidated affiliates

-


176


112


288

Other items, net **

-


-


(4,718)


(4,718)









Adjusted EBITDA *

$42,028


$12,612


($7,166)


$   47,474

margin

15.6%


19.0%




14.1%

























* 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, profit distributions from affiliates, and other non-recurring items.

** Other items includes both (i) one-time gains related to the former CEO's repayment to the Company for certain perquisites and expenses ($8.6 million) and (ii) legal fees and other expenses relating to the ongoing SEC investigation ($3.9 million).

 

 

SCHEDULE 3








MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)








For the Three Months Ended June 30, 2014












Strategic 

Performance






Marketing

Marketing






Services

Services


Corporate


Total





























Revenue

$230,117

$69,239


$                -


$299,356






















Net income attributable to MDC Partners Inc.






$16,470

Adjustments to reconcile to Operating profit (loss):







   Net income attributable to the noncontrolling interests






1,749

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












1,336

   Equity in earnings of non-consolidated affiliates






(79)

   Income tax expense






3,376

   Interest expense and finance charges, net






13,840

   Other, net






(7,564)

Operating profit (loss)

$35,947

$5,727


($12,546)


$29,128

margin

15.6%

8.3%




9.7%








Additional adjustments to reconcile to Adjusted EBITDA:







Depreciation and amortization

5,139

4,345


433


9,917

Stock-based compensation

2,112

930


1,386


4,428

Acquisition deal costs

441

202


341


984

Deferred acquisition consideration adjustments to P&L

1,121

2,950


-


4,071

Profit distributions from non-consolidated affiliates

-

45


311


356








Adjusted EBITDA *

$44,760

$14,199


($10,075)


$48,884

margin

19.5%

20.5%




16.3%






















*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 4









MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)









For the Six Months Ended June 30, 2015













Strategic 


Performance






Marketing


Marketing






Services


Services


Corporate


Total

































Revenue

$510,527


$128,301


$                -


$638,828

























Net loss attributable to MDC Partners Inc.







($2,531)

Adjustments to reconcile to Operating profit (loss):








   Net income attributable to the noncontrolling interests







5,221

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














4,965

   Equity in earnings of non-consolidated affiliates







(455)

   Income tax expense







625

   Interest expense and finance charges, net







28,160

   Other, net







13,692

Operating profit (loss)

$52,265


$17,068


($19,656)


49,677

margin

10.2%


13.3%




7.8%









Additional adjustments to reconcile to Adjusted EBITDA:








Depreciation and amortization

12,915


11,220


2,172


26,307

Stock-based compensation

6,611


1,959


1,189


9,759

Acquisition deal costs

664


96


956


1,716

Deferred acquisition consideration adjustments to P&L

(652)


(9,841)


-


(10,493)

Profit distributions from non-consolidated affiliates

304


206


120


630

Other items, net **

-


-


1,044


1,044









Adjusted EBITDA *

$72,107


$20,708


($14,175)


78,640

margin

14.1%


16.1%




12.3%

























* 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, profit distributions from affiliates, and other non-recurring items.

** Other items includes both (i) one-time gains related to the former CEO's repayment to the Company for certain perquisites and expenses ($8.6 million) and (ii) legal fees and other expenses relating to the ongoing SEC investigation ($9.7 million).

 

SCHEDULE 5









MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)









For the Six Months Ended June 30, 2014














Strategic 


Performance






Marketing


Marketing






Services


Services


Corporate


Total

































Revenue

$444,921


$129,289


$                -


$574,210

























Net income attributable to MDC Partners Inc.







$7,624

Adjustments to reconcile to Operating profit (loss):








   Net income attributable to the noncontrolling interests







3,111

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














1,607

   Equity in earnings of non-consolidated affiliates







(142)

   Income tax expense







3,030

   Interest expense and finance charges, net







26,459

   Other, net







(993)

Operating profit (loss)

$59,997


$3,722


($23,023)


$40,696

margin

13.5%


2.9%




7.1%









Additional adjustments to reconcile to Adjusted EBITDA:








Depreciation and amortization

10,287


9,177


935


20,399

Stock-based compensation

4,251


2,207


2,338


8,796

Acquisition deal costs

596


786


673


2,055

Deferred acquisition consideration adjustments to P&L

5,566


6,527


-


12,093

Profit distributions from non-consolidated affiliates

-


283


354


637









Adjusted EBITDA *

$80,697


$22,702


($18,723)


$84,676

margin

18.1%


17.6%




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 6







MDC PARTNERS INC.

UNAUDITED ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL PURPOSES

(US$ in 000s)














Three Months Ended June 30,


Six Months Ended June 30, 


2015

2014


2015

2014

Adjusted EBITDA (1)

$47,474

$48,884


$78,640

$84,676

Net income attributable to noncontrolling interests

(2,841)

(1,749)


(5,221)

(3,111)

Capital expenditures, net (2)

(3,812)

(2,604)


(9,112)

(5,100)

Cash taxes

(175)

(35)


(715)

(118)

Cash interest, net & other (3)

(12,893)

(12,723)


(25,544)

(24,054)







Adjusted EBITDA Available for General Capital Purposes (4)

$27,753

$31,773


$38,048

$52,293































(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.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(US$ in 000s)













June 30,


December 31,



2015


2014











Assets





Current Assets:





Cash and cash equivalents


$34,851


$113,348

Cash held in trusts


206,098


6,419

Accounts receivable, net


413,964


355,295

Expenditures billable to clients


46,548


40,202

Other current assets


40,952


36,978

Total Current Assets


742,413


552,242






Fixed assets, net


59,206


60,240

Investment in non-consolidated affiliates


10,027


6,110

Goodwill


878,366


851,373

Other intangible assets, net


83,494


86,121

Deferred tax assets


19,893


18,758

Other assets


55,248


74,046

Total Assets


$1,848,647


$1,648,890











Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit



Current Liabilities:





Accounts payable


$303,152


$316,285

Trust liability


206,098


6,419

Accruals and other liabilities


364,331


264,854

Advance billings


156,658


142,608

Current portion of long term debt


515


534

Current portion of deferred acquisition consideration

106,334


90,804

Total Current Liabilities


1,137,088


821,504






Long-term debt, less current portion


741,780


742,593

Long-term portion of deferred acquisition consideration

114,533


114,564

Other liabilities


45,627


45,861

Deferred tax liabilities


83,402


77,997

Total Liabilities


2,122,430


1,802,519






Redeemable Noncontrolling Interests


148,401


194,951






Shareholders' Deficit





Common shares


268,850


265,818

Charges in excess of capital


(278,484)


(209,668)

Accumulated deficit


(492,164)


(489,633)

Accumulated other comprehensive loss


(2,152)


(7,752)

MDC Partners Inc. Shareholders' Deficit


(503,950)


(441,235)

Noncontrolling Interests


81,766


92,655

Total Shareholders' Deficit


(422,184)


(348,580)






Total Liabilities, Redeemable Noncontrolling 





   Interests and Shareholders' Deficit


$1,848,647


$1,648,890

 

 

SCHEDULE 8





MDC PARTNERS INC.

UNAUDITED SUMMARY CASH FLOW DATA

(US$ in 000s)











Six Months Ended June 30, 



2015

2014





Cash flows provided by continuing operating activities


$69,478

$25,255

Discontinued operations


(995)

894

Net cash provided by operating activities


68,483

26,149





Cash flows used in continuing investing activities


(36,073)

(57,186)

Discontinued operations


18,070

(1,145)

Net cash used in investing activities


(18,003)

(58,331)





Net cash used in continuing financing activities


(129,105)

(3,808)

  Discontinued operations


(40)

(40)

Net cash used in financing activities


(129,145)

(3,848)





Effect of exchange rate changes on cash and cash equivalents


168

(330)





Net decrease in cash and cash equivalents


($78,497)

($36,360)

 

 

FOR: 

MDC Partners Inc.      

CONTACT: 

Matt Chesler, CFA


745 Fifth Avenue, 19th Floor           


VP, Investor Relations


New York, NY 10151                     


646-412-6877




mchesler@mdc-partners.com

 

 

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SOURCE MDC Partners Inc.


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