NEW YORK, May 7, 2019 /CNW/ --
FIRST QUARTER HIGHLIGHTS:
- Revenue of $328.8 million versus
$327.0 million a year ago, an
increase of 0.6%.
- Organic revenue decrease of 0.9%
- Net loss attributable to MDC Partners common shareholders of
$2.5 million in the first quarter of
2019 versus a loss of $31.4
million a year ago. Net loss attributable to MDC Partners
common shareholders for the last twelve months (LTM) of
$103.3 million as of March 31, 2019 versus $132.3 million loss as of December 31, 2018.
- Adjusted EBITDA of $21.5 million
versus $7.8 million a year ago, an
increase of 175%. Adjusted EBITDA Margin of 6.5%, an increase of
410 basis points compared to prior year quarter.
- Covenant EBITDA (LTM) of $183.8
million versus $172.6 million
at year end 2018, an increase of 6.5%. (Refer to Schedule
5)
(NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the
"Company") today announced financial results for the three months
ended March 31, 2019.
"In a time of continued disruption in the advertising industry,
MDC Partners is off to a solid start in 2019 with Adjusted EBITDA
significantly ahead of the first quarter of last year as a result
of our cost-savings initiatives," said Mark
Penn, Chairman and CEO of MDC Partners. "The 175% increase
in Adjusted EBITDA puts us on a path to return to both bottom and
top-line growth and achieve significant positive cash flow by year
end, as we expect new measures to further increase efficiencies,
encourage intra-agency cooperation and expand the offerings of our
lead agencies.
We are implementing a two-year plan designed to transform MDC to
the model of a modern marketing services company, combining top
creative talent with leading data, research, strategy, digital and
media offerings. The talent in the network is already impressive in
its ability to work for the top clients in the world and we plan to
enhance our capabilities to deliver more impactful results for
those same clients. In addition to facilitating revenue growth, we
will bring comp to revenue ratio, real estate and other key costs
in line to create meaningfully improved margins and cash flow
through 2020. We plan to issue two-year guidance for this
plan."
David Doft, Chief Financial
Officer, added, "The impact of our cost savings initiatives in 2018
are clear, with reductions in staff, real estate and corporate
expense during the quarter, helping to drive Adjusted EBITDA
growth. We see continued opportunity for efficiency in 2019 and
remain focused on optimizing our profit margin while reinvigorating
the business."
First Quarter Financial Results
Revenue for the first quarter of 2019 was $328.8 million versus $327.0 million for the first quarter of 2018, an
increase of 0.6%. The effect of foreign exchange due to the strong
US Dollar was negative 1.6%, the impact of non-GAAP acquisitions
(dispositions), net was positive 3.0%, and the organic revenue
decrease was 0.9%. Organic revenue was favorably impacted by 242
basis points from increased billable pass-through costs incurred on
clients' behalf from certain of our partner firms acting as
principal.
Net New Business wins in the first quarter of 2019 totaled a
decline of $11.7 million due to
client losses at one core agency within the Global Integrated
Agencies segment and in the Media Services segment. Excluding
these, the remainder of the business delivered net new business
wins of $21.9 million.
Net loss attributable to MDC Partners common shareholders for
the first quarter of 2019 was $2.5
million, an improvement versus net loss of $31.4 million for the first quarter of 2018.
This change is primarily due to a decline in expenses driven by
lower staff costs and a reduction in deferred acquisition costs as
well as foreign exchange gain in the first quarter of 2019 as
compared to a foreign exchange loss in the first quarter in 2018.
Diluted loss per share attributable to MDC Partners common
shareholders for the first quarter of 2019 was a loss of
$0.04 versus diluted loss per share
of $0.56 for the first quarter
of 2018.
Adjusted EBITDA for the first quarter of 2019 was $21.5 million versus $7.8
million for the first quarter of 2018, an increase of 175%.
The improvement was driven by reduced staff and occupancy costs and
lower corporate costs following cost reduction initiatives taken in
2018. This led to a 410 basis-point improvement in Adjusted EBITDA
margin in the first quarter of 2019 to 6.5% from 2.4% in the first
quarter of 2018.
Net loss attributable to MDC Partners common shareholders for
the last twelve months (LTM) was $103.3
million as of March 31, 2019
versus a $132.3 million loss as of
December 31, 2018.
Covenant EBITDA for the last twelve months (LTM) was
$183.8 million at March 31, 2019 versus $172.6 million at December
31, 2018, an increase of 6.5%. The change was primarily
driven by the increase in Adjusted EBITDA, partially offset by the
impact of the Kingsdale sale and a reduction in severance and one
time professional fees.
Financial Outlook
2019 financial guidance is revised as follows:
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2019 Outlook
Commentary *
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Organic Revenue
Growth
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We expect
approximately 0% to 2% growth in organic revenue.
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Foreign Exchange
Impact, net
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Assuming currency
rates remain where they are, and based on our most recent
projections, the net impact of foreign exchange is expected to
decrease revenue by 1%.
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Impact of Non-GAAP
Acquisitions (Dispositions), net
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Our current
expectations are that the impact of acquisitions, net of
disposition activity, will decrease revenue by approximately 90
basis points.
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Covenant EBITDA
and Adjustments
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The Company expects
to complete fiscal year 2019 with approximately $175 million to
$185 million of Covenant EBITDA. The Company has applied
certain pro forma and other adjustments, as expressly provided
under the credit facility to derive its 2019E Covenant EBITDA
forecast.
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* The Company has
excluded a quantitative reconciliation with respect to the
Company's 2019 guidance under the "unreasonable efforts" exception
in item 10(e)(1)(i)(B) of Regulation S-K See "Non-GAAP Financial
Measures" below for additional information
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Conference Call
Management will host a conference call on Tuesday, May 7, 2019, at 8:30 a.m. (ET) to discuss results. The
conference call will be accessible by dialing 1-412-902-4266 or
toll free 1-888-346-6216. An investor presentation has been
posted on our website at 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 12:00 a.m. (ET),
May 14, 2019, by dialing
1-412-317-0088 or toll free 1-877-344-7529 (passcode 10131220), or
by visiting our website at www.mdc-partners.com.
About MDC Partners Inc.
MDC Partners is one of the most influential marketing and
communications networks in the world. As "The Place Where Great
Talent Lives," MDC Partners is celebrated for its innovative
advertising, public relations, branding, digital, social and event
marketing agency partners, which are responsible for some of the
most memorable and effective campaigns for the world's most
respected brands. By leveraging technology, data analytics,
insights and strategic consulting solutions, MDC Partners drives
creative excellence, business growth and measurable return on
marketing investment for over 1,700 clients worldwide. For more
information about MDC Partners and its partner firms, visit our
website at www.mdc-partners.com and follow us on Twitter at
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.
Such non-GAAP financial measures include the following:
(1) Organic Revenue: "Organic revenue growth" and "organic
revenue decline" refer to the positive or negative results,
respectively, of subtracting both the foreign exchange and
acquisition (disposition) components from total revenue growth. The
acquisition (disposition) component is calculated by aggregating
prior period revenue for any acquired businesses, less the prior
period revenue of any businesses that were disposed of during the
current period. The organic revenue growth (decline) component
reflects the constant currency impact of (a) the change in revenue
of the partner firms which the Company has held throughout each of
the comparable periods presented, and (b) "non-GAAP acquisitions
(dispositions), net". Non-GAAP acquisitions (dispositions), net
consists of (i) for acquisitions during the current year, the
revenue effect from such acquisition as if the acquisition had been
owned during the equivalent period in the prior year and (ii) for
acquisitions during the previous year, the revenue effect from such
acquisitions as if they had been owned during that entire year (or
same period as the current reportable period), taking into account
their respective pre-acquisition revenues for the applicable
periods, and (iii) for dispositions, the revenue effect from such
disposition as if they had been disposed of during the equivalent
period in the prior year.
(2) Net New Business: Estimate of annualized revenue for new
wins less annualized revenue for losses incurred in the period.
(3) Adjusted EBITDA: Adjusted EBITDA is a non-GAAP measure that
represents operating profit plus depreciation and amortization,
stock-based compensation, deferred acquisition consideration
adjustments, distributions from non-consolidated affiliates, and
other items.
(4) Covenant EBITDA: Covenant EBITDA is a measure that includes
pro forma adjustments for acquisitions, one-time charges, and other
items, as defined in the Credit Agreement. We believe that the
presentation of Covenant EBITDA is appropriate as it eliminates the
effect of certain non-cash and other items not necessarily
indicative of a company's underlying operating performance. In
addition, the presentation of Covenant EBITDA provides additional
information to investors about the calculation of, and compliance
with, certain financial covenants in the Credit Agreement.
Included in this earnings release are tables reconciling MDC
Partners' reported results to arrive at certain of these non-GAAP
financial measures. We are unable to reconcile our projected 2019
Organic Revenue Growth to the corresponding GAAP measure because we
are unable to predict the 2019 impact of foreign exchange due to
the unpredictability of future changes in foreign exchange rates
and because we are unable to predict the occurrence or impact of
any acquisitions, dispositions, or other potential changes. We are
unable to reconcile our projected 2019 Covenant EBITDA to the
corresponding GAAP measure because the amount and timing of many
future charges that impact these measures (such as amortization of
future acquired intangible assets, foreign exchange transaction
gains or losses, impairment charges, provision or benefit for
income taxes, and certain assumptions used in the calculation of
deferred acquisition consideration) are variable, uncertain, or out
of our control and therefore cannot be reasonably predicted without
unreasonable effort, if at all. As a result, we are unable to
provide reconciliations of these measures. In addition, we
believe such reconciliations could imply a degree of precision that
might be confusing or misleading to investors. For the same
reasons, we are unable to address the probable significance of the
unavailable information, which could have a potentially
unpredictable, and potentially significant, impact on future GAAP
financial results.
This press release contains forward-looking statements.
Statements in this press release that are not historical facts,
including without limitation statements about the Company's beliefs
and expectations, earnings guidance, recent business and economic
trends, potential acquisitions, and estimates of amounts for
redeemable noncontrolling interests and deferred acquisition
consideration, constitute forward-looking statements. Words such as
"estimates", "expects", "contemplates", "will", "anticipates",
"projects", "plans", "intends", "believes", "forecasts", "may",
"should", and variations of such words or similar expressions are
intended to identify 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 conditions;
- 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 redeemable noncontrolling interests and
deferred acquisition consideration;
- the successful completion and integration of acquisitions
which complement and expand the Company's business capabilities;
and
- foreign currency fluctuations
Investors should carefully consider these risk factors and
the additional risk factors outlined in more detail in the
Company's Annual Report on Form 10-K under the caption "Risk
Factors" and in the Company's other SEC filings.
SCHEDULE
1
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MDC PARTNERS
INC.
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UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
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(US$ in 000s,
Except per Share Amounts)
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Three Months Ended
March 31,
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2019
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2018
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Revenue:
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Services
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$
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328,791
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$
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326,968
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Operating
expenses:
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Cost of services
sold
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237,153
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243,030
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Office and general
expenses
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67,118
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83,879
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Depreciation and
amortization
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8,838
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|
12,375
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Other asset
impairment
|
—
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2,317
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313,109
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341,601
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Operating income
(loss)
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15,682
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|
(14,633)
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Other Income
(Expenses):
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Interest expense and
finance charges, net
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(16,760)
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(16,083)
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Foreign exchange gain
(loss)
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5,442
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(6,660)
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Other, net
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(3,383)
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441
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(14,701)
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(22,302)
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Income (loss) before
income taxes and equity in earnings of non-consolidated
affiliates
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981
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(36,935)
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Income tax expense
(benefit)
|
748
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(8,330)
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Income (loss) before
equity in earnings of non-consolidated affiliates
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233
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(28,605)
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Equity in earnings of
non-consolidated affiliates
|
83
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|
|
86
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Net income
(loss)
|
316
|
|
|
(28,519)
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Net income
attributable to the noncontrolling interests
|
(429)
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(897)
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Net loss attributable
to MDC Partners Inc.
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(113)
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(29,416)
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Accretion on
convertible preference shares
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(2,383)
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|
|
(2,027)
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Net loss attributable
to MDC Partners Inc. common shareholders
|
$
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(2,496)
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$
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(31,443)
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Loss Per Common
Share:
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Basic
|
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|
Net loss attributable
to MDC Partners Inc. common shareholders
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$
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(0.04)
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|
$
|
(0.56)
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|
Diluted
|
|
|
|
Net loss attributable
to MDC Partners Inc. common shareholders
|
$
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(0.04)
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|
|
$
|
(0.56)
|
|
Weighted Average
Number of Common Shares Outstanding:
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|
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Basic
|
60,258,102
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|
56,415,042
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Diluted
|
60,258,102
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56,415,042
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SCHEDULE
2
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MDC PARTNERS
INC.
|
UNAUDITED REVENUE
RECONCILIATION
|
(US$ in 000s,
except percentages)
|
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Three Months
Ended
|
|
|
Revenue
$
|
%
Change
|
|
March 31,
2018
|
$
|
326,968
|
|
|
|
|
|
|
|
Organic revenue
growth (decline) (1)
|
(2,890)
|
|
(0.9)
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%
|
|
Non-GAAP acquisitions
(dispositions), net
|
9,852
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3.0
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%
|
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Foreign exchange
impact
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(5,139)
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(1.6)
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%
|
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Total
change
|
1,823
|
|
0.6
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%
|
|
March 31,
2019
|
$
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328,791
|
|
|
|
|
(1) "Organic revenue growth" and
"organic revenue decline" refer to the positive or negative
results, respectively, of subtracting both the foreign exchange and
acquisition (disposition) components from total revenue growth. The
acquisition (disposition) component is calculated by aggregating
prior period revenue for any acquired businesses, less the prior
period revenue of any businesses that were disposed of during the
current period. The organic revenue growth (decline) component
reflects the constant currency impact of (a) the change in revenue
of the partner firms which the Company has held throughout each of
the comparable periods presented, and (b) "non-GAAP acquisitions
(dispositions), net". Non-GAAP acquisitions (dispositions), net
consists of (i) for acquisitions during the current year, the
revenue effect from such acquisition as if the acquisition had been
owned during the equivalent period in the prior year and (ii) for
acquisitions during the previous year, the revenue effect from such
acquisitions as if they had been owned during that entire year (or
same period as the current reportable period), taking into account
their respective pre-acquisition revenues for the applicable
periods, and (iii) for dispositions, the revenue effect from such
disposition as if they had been disposed of during the equivalent
period in the prior year.
|
|
Note: Actuals may not
foot due to rounding
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SCHEDULE
3
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MDC PARTNERS
INC.
|
UNAUDITED
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
(US$ in 000s,
except percentages)
|
|
For the Three
Months Ended March 31, 2019
|
|
|
Advertising and
Communication
|
Global
Integrated
Agencies
|
Domestic
Creative
Agencies
|
Specialist
Communications
|
Media
Services
|
All
Other
|
Corporate
|
Total
|
Revenue
|
$
|
328,791
|
|
$
|
129,719
|
|
$
|
67,007
|
|
$
|
38,953
|
|
$
|
20,179
|
|
$
|
72,933
|
|
$
|
—
|
|
$
|
328,791
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to MDC
Partners Inc. common shareholders
|
|
|
|
|
|
|
|
(2,496)
|
|
Adjustments to
reconcile to
operating profit (loss):
|
|
|
|
|
|
|
|
|
Accretion on
convertible
preference shares
|
|
|
|
|
|
|
|
2,383
|
|
Net income
attributable to the
noncontrolling interests
|
|
|
|
|
|
|
|
429
|
|
Equity in earning of
non-
consolidated affiliates
|
|
|
|
|
|
|
|
(83)
|
|
Income tax
expense
|
|
|
|
|
|
|
|
748
|
|
Interest expense and
finance
charges, net
|
|
|
|
|
|
|
|
16,760
|
|
Foreign exchange
gain
|
|
|
|
|
|
|
|
(5,442)
|
|
Other income,
net
|
|
|
|
|
|
|
|
3,383
|
|
Operating income
(loss)
|
$
|
20,504
|
|
$
|
3,770
|
|
$
|
5,477
|
|
$
|
7,077
|
|
$
|
(1,834)
|
|
$
|
6,014
|
|
$
|
(4,822)
|
|
$
|
15,682
|
|
margin
|
6.2
|
%
|
2.9
|
%
|
8.2
|
%
|
18.2
|
%
|
(9.1)
|
%
|
8.2
|
%
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile
to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
8,621
|
|
4,065
|
|
$
|
1,239
|
|
$
|
567
|
|
$
|
691
|
|
$
|
2,059
|
|
217
|
|
8,838
|
|
Stock-based
compensation
|
4,545
|
|
3,767
|
|
$
|
464
|
|
$
|
26
|
|
$
|
—
|
|
$
|
288
|
|
(1,573)
|
|
2,972
|
|
Deferred
acquisition
consideration adjustments
|
(7,643)
|
|
(4,964)
|
|
$
|
(603)
|
|
$
|
(1,794)
|
|
$
|
687
|
|
$
|
(969)
|
|
—
|
|
(7,643)
|
|
Other items, net
(2)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,626
|
|
1,626
|
|
Adjusted EBITDA
(1)
|
$
|
26,027
|
|
$
|
6,638
|
|
$
|
6,577
|
|
$
|
5,876
|
|
$
|
(456)
|
|
$
|
7,392
|
|
$
|
(4,552)
|
|
21,475
|
|
margin
|
7.9
|
%
|
5.1
|
%
|
9.8
|
%
|
15.1
|
%
|
(2.3)
|
%
|
10.1
|
%
|
|
6.5
|
%
|
|
(1)
Adjusted EBITDA is a non-GAAP measure, but as shown above it
represents operating profit (loss) plus depreciation and
amortization, stock-based compensation, deferred acquisition
consideration adjustments, and other items.
|
(2) Other items, net includes items
such as severance expense and other restructuring expenses and
costs associated with the company's strategic review process. See
Schedule 8 for a reconciliation of amounts.
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SCHEDULE
4
|
MDC PARTNERS
INC.
|
UNAUDITED
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
(US$ in 000s,
except percentages)
|
|
For the Three
Months Ended March 31, 2018
|
|
|
Advertising and
Communication
|
Global
Integrated
Agencies
|
Domestic
Creative
Agencies
|
Specialist
Communications
|
Media
Services
|
All
Other
|
Corporate
|
Total
|
Revenue
|
$
|
326,968
|
|
$
|
129,524
|
|
$
|
66,654
|
|
$
|
38,824
|
|
$
|
24,684
|
|
$
|
67,282
|
|
$
|
—
|
|
$
|
326,968
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to MDC Partners
Inc. common shareholders
|
|
|
|
|
|
|
|
(31,443)
|
|
Adjustments to
reconcile to operating
profit (loss):
|
|
|
|
|
|
|
|
|
Accretion on
convertible preference
shares
|
|
|
|
|
|
|
|
2,027
|
|
Net income
attributable to the
noncontrolling interests
|
|
|
|
|
|
|
|
897
|
|
Equity in earning of
non-
consolidated affiliates
|
|
|
|
|
|
|
|
(86)
|
|
Income tax
benefit
|
|
|
|
|
|
|
|
(8,330)
|
|
Interest expense and
finance
charges, net
|
|
|
|
|
|
|
|
16,083
|
|
Foreign exchange
loss
|
|
|
|
|
|
|
|
6,660
|
|
Other income,
net
|
|
|
|
|
|
|
|
(441)
|
|
Operating income
(loss)
|
$
|
(561)
|
|
$
|
(13,593)
|
|
$
|
2,878
|
|
$
|
3,728
|
|
$
|
(19)
|
|
$
|
6,445
|
|
$
|
(14,072)
|
|
$
|
(14,633)
|
|
margin
|
(0.2)
|
%
|
(10.5)
|
%
|
4.3
|
%
|
9.6
|
%
|
(0.1)
|
%
|
9.6
|
%
|
|
(4.5)
|
%
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile
to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
12,151
|
|
7,410
|
|
1,293
|
|
966
|
|
637
|
|
1,845
|
|
224
|
|
12,375
|
|
Other asset
impairment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,317
|
|
2,317
|
|
Stock-based
compensation
|
3,789
|
|
2,460
|
|
410
|
|
187
|
|
74
|
|
658
|
|
1,248
|
|
5,037
|
|
Deferred acquisition
consideration
adjustments
|
2,585
|
|
1,434
|
|
229
|
|
$
|
508
|
|
82
|
|
332
|
|
—
|
|
2,585
|
|
Distributions from
non-
consolidated affiliates (2)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20
|
|
20
|
|
Other items, net
(3)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
122
|
|
122
|
|
Adjusted EBITDA
(1)
|
$
|
17,964
|
|
$
|
(2,289)
|
|
$
|
4,810
|
|
$
|
5,389
|
|
$
|
774
|
|
$
|
9,280
|
|
$
|
(10,141)
|
|
7,823
|
|
margin
|
5.5
|
%
|
(1.8)
|
%
|
7.2
|
%
|
13.9
|
%
|
3.1
|
%
|
13.8
|
%
|
|
2.4
|
%
|
|
(1)
Adjusted EBITDA is a non-GAAP measure, but as shown above it
represents operating profit (loss) plus depreciation and
amortization, other asset impairment, stock-based compensation,
deferred acquisition consideration adjustments, distributions from
non-consolidated affiliates, and other items.
|
(2) Distributions from
non-consolidated affiliates includes (i) cash received for profit
distributions from non-consolidated affiliates, and (ii)
consideration from the sale of ownership interests in
non-consolidated affiliates less contributions to date plus
undistributed earnings (losses).
|
(3) Other items, net includes items
such as severance expense and other restructuring expenses and
costs associated with the company's strategic review process. See
Schedule 8 for a reconciliation of amounts.
|
SCHEDULE
5
|
|
|
|
|
MDC PARTNERS
INC.
|
|
|
|
|
UNAUDITED
RECONCILIATION OF NET INCOME (LOSS) TO COVENANT
EBITDA
|
|
|
|
|
(US$ in
000s)
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
Covenant EBITDA
(LTM) (1)
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q1
|
|
Q4-2018 -
LTM
|
|
Q1-2019 -
LTM
|
Net income (loss)
attributable to MDC Partners Inc.
common shareholders
|
$
|
(31,443)
|
|
|
$
|
1,133
|
|
|
$
|
(18,234)
|
|
|
$
|
(83,749)
|
|
|
$
|
(2,497)
|
|
|
$
|
(132,293)
|
|
$
|
(103,347)
|
Adjustments to
reconcile to operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on and net
income allocated to convertible
preference shares
|
2,027
|
|
|
2,273
|
|
|
2,109
|
|
|
2,151
|
|
|
2,383
|
|
|
8,560
|
|
8,916
|
Net income
attributable to the noncontrolling interests
|
897
|
|
|
2,545
|
|
|
2,458
|
|
|
5,885
|
|
|
429
|
|
|
11,785
|
|
11,317
|
Equity in earning of
non-consolidated affiliates
|
(86)
|
|
|
28
|
|
|
(300)
|
|
|
296
|
|
|
(83)
|
|
|
(62)
|
|
(59)
|
Income tax expense
(benefit)
|
(8,330)
|
|
|
1,977
|
|
|
2,986
|
|
|
34,970
|
|
|
748
|
|
|
31,603
|
|
40,681
|
Interest expense and
finance charges, net
|
16,083
|
|
|
16,859
|
|
|
17,063
|
|
|
17,070
|
|
|
16,760
|
|
|
67,075
|
|
67,752
|
Foreign exchange loss
(gain)
|
6,660
|
|
|
6,549
|
|
|
(3,275)
|
|
|
13,324
|
|
|
(5,442)
|
|
|
23,258
|
|
11,156
|
Other income,
net
|
(441)
|
|
|
(592)
|
|
|
(189)
|
|
|
992
|
|
|
3,383
|
|
|
(230)
|
|
3,594
|
Operating income
(loss)
|
(14,633)
|
|
|
30,772
|
|
|
2,618
|
|
|
(9,061)
|
|
|
15,682
|
|
|
9,696
|
|
40,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
12,375
|
|
|
11,703
|
|
|
11,134
|
|
|
10,984
|
|
|
8,838
|
|
|
46,196
|
|
42,659
|
Goodwill and other
asset impairment
|
2,317
|
|
|
—
|
|
|
21,008
|
|
|
56,732
|
|
|
—
|
|
|
80,057
|
|
77,740
|
Stock-based
compensation
|
5,037
|
|
|
5,603
|
|
|
6,242
|
|
|
1,534
|
|
|
2,972
|
|
|
18,416
|
|
16,351
|
Deferred acquisition
consideration adjustments
|
2,587
|
|
|
(5,067)
|
|
|
11,003
|
|
|
(8,980)
|
|
|
(7,643)
|
|
|
(457)
|
|
(10,687)
|
Distributions from
non- consolidated affiliates
|
20
|
|
|
11
|
|
|
478
|
|
|
270
|
|
|
—
|
|
|
779
|
|
759
|
Other items, net
(2)
|
122
|
|
|
(68)
|
|
|
7,347
|
|
|
478
|
|
|
1,626
|
|
|
7,879
|
|
9,383
|
Adjusted
EBITDA
|
7,825
|
|
|
42,954
|
|
|
59,830
|
|
|
51,957
|
|
|
21,475
|
|
|
162,566
|
|
176,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile to Covenant EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma
acquisitions/dispositions
|
(1,189)
|
|
|
(3,558)
|
|
|
(1,195)
|
|
|
(2,148)
|
|
|
(1,965)
|
|
|
(8,090)
|
|
(8,866)
|
Severance due to
eliminated positions
|
2,955
|
|
|
4,169
|
|
|
1,155
|
|
|
3,615
|
|
|
2,747
|
|
|
11,894
|
|
11,686
|
Other adjustments,
net (3)
|
1,706
|
|
|
2,067
|
|
|
600
|
|
|
1,877
|
|
|
199
|
|
|
6,250
|
|
4,743
|
|
$
|
11,297
|
|
|
$
|
45,632
|
|
|
$
|
60,390
|
|
|
$
|
55,301
|
|
|
$
|
22,456
|
|
|
$
|
172,620
|
|
$
|
183,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Covenant EBITDA is a measure that includes pro forma adjustments
for acquisitions, one-time charges, and other adjustments, as
defined in the Credit Agreement. Covenant EBITDA is calculated as
the aggregate of operating results for the rolling last twelve
months (LTM). Each quarter is presented to provide the information
utilized to calculate Covenant EBITDA. Historical Covenant EBITDA
may be recasted in the current period for any proforma adjustments
related to acquisitions and/or dispositions in the current
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Other items, net includes items
such as severance expense and other restructuring expenses and
costs associated with the company's strategic review process. See
Schedule 8 for a reconciliation of amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Other adjustments, net primarily
includes one time professional fees and costs associated with real
estate consolidation.
|
|
|
|
|
SCHEDULE
6
|
MDC PARTNERS
INC.
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
(US$ in
000s)
|
|
|
March 31,
2019
|
|
December 31,
2018
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
26,372
|
|
|
$
|
30,873
|
|
Accounts receivable,
less allowance for doubtful accounts of $2,066 and
$1,879
|
438,648
|
|
|
395,200
|
|
Expenditures billable
to clients
|
46,663
|
|
|
42,369
|
|
Assets held for
sale
|
11,861
|
|
|
78,913
|
|
Other current
assets
|
44,689
|
|
|
42,499
|
|
Total Current
Assets
|
568,233
|
|
|
589,854
|
|
Fixed assets, at
cost, less accumulated depreciation of $134,905 and
$128,546
|
85,456
|
|
|
88,189
|
|
Right of use assets -
operating leases
|
246,643
|
|
|
—
|
|
Investment in
non-consolidated affiliates
|
6,586
|
|
|
6,556
|
|
Goodwill
|
742,775
|
|
|
740,955
|
|
Other intangible
assets, net, less accumulated amortization of $164,347 and
$161,868
|
64,858
|
|
|
67,765
|
|
Deferred tax
assets
|
92,439
|
|
|
92,741
|
|
Other
assets
|
26,129
|
|
|
25,513
|
|
Total
Assets
|
$
|
1,833,119
|
|
|
$
|
1,611,573
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS'
DEFICIT
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
214,694
|
|
|
$
|
221,995
|
|
Accruals and other
liabilities
|
251,300
|
|
|
313,141
|
|
Liabilities held for
sale
|
11,218
|
|
|
35,967
|
|
Advance
billings
|
171,151
|
|
|
138,505
|
|
Current portion of
lease liabilities - operating leases
|
44,129
|
|
|
—
|
|
Current portion of
deferred acquisition consideration
|
36,521
|
|
|
32,928
|
|
Total Current
Liabilities
|
729,013
|
|
|
742,536
|
|
Long-term
debt
|
919,050
|
|
|
954,229
|
|
Long-term portion of
deferred acquisition consideration
|
39,862
|
|
|
50,767
|
|
Long-term lease
liabilities - operating leases
|
248,609
|
|
|
—
|
|
Other
Liabilities
|
17,523
|
|
|
54,255
|
|
Deferred tax
liabilities
|
5,329
|
|
|
5,329
|
|
Total
Liabilities
|
1,959,386
|
|
|
1,806,994
|
|
Redeemable
Noncontrolling Interests
|
48,006
|
|
|
51,546
|
|
Commitments,
Contingencies and Guarantees
|
|
|
|
Shareholders'
Deficit:
|
|
|
|
Convertible
preference shares, 145,000 authorized, issued and outstanding at
March 31, 2019 and
95,000 at December 31, 2018
|
152,117
|
|
|
90,123
|
|
Common stock and
other paid in capital
|
98,693
|
|
|
58,579
|
|
Accumulated
deficit
|
(465,016)
|
|
|
(464,903)
|
|
Accumulated other
comprehensive (loss) income
|
(290)
|
|
|
4,720
|
|
MDC Partners Inc.
Shareholders' Deficit
|
(214,496)
|
|
|
(311,481)
|
|
Noncontrolling
Interests
|
40,223
|
|
|
64,514
|
|
Total Shareholders'
Deficit
|
(174,273)
|
|
|
(246,967)
|
|
Total Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Deficit
|
$
|
1,833,119
|
|
|
$
|
1,611,573
|
|
SCHEDULE
7
|
MDC PARTNERS
INC.
|
UNAUDITED SUMMARY
CASH FLOW DATA
|
(US$ in
000s)
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Net cash used in
operating activities
|
$
|
(81,200)
|
|
|
$
|
(61,033)
|
|
Net cash provided by
(used in) investing activities
|
18,101
|
|
|
(3,868)
|
|
Net cash provided by
financing activities
|
60,753
|
|
|
47,618
|
|
Effect of exchange
rate changes on cash, cash equivalents, and cash held in
trusts
|
(576)
|
|
—
|
|
306
|
|
Net decrease in cash,
cash equivalents, and cash held in trusts including cash
classified within assets held for sale
|
$
|
(2,922)
|
|
—
|
|
$
|
(16,977)
|
|
Change in cash and
cash equivalents held in trusts classified within held for
sale
|
(3,307)
|
|
|
(165)
|
|
Change in cash and
cash equivalents classified within assets held for sale
|
1,728
|
|
|
—
|
|
Net decrease in cash
and cash equivalents
|
$
|
(4,501)
|
|
|
$
|
(17,142)
|
|
SCHEDULE
8
|
MDC PARTNERS
INC.
|
UNAUDITED
RECONCILIATION OF COMPONENTS OF NON- GAAP MEASURES
|
(US$ in
000s)
|
|
|
2018
|
|
2019
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
NON-GAAP
ACQUISITIONS (DISPOSITIONS),
NET
|
|
|
|
|
|
|
|
GAAP revenue from
current year acquisitions
|
$
|
—
|
|
$
|
11,066
|
|
$
|
12,734
|
|
$
|
12,317
|
|
$
|
36,117
|
|
|
$
|
—
|
|
GAAP revenue from
prior year acquisitions (1)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
15,685
|
|
Impact of adoption of
ASC 606 exclusion
|
—
|
|
450
|
|
(1,122)
|
|
504
|
|
(168)
|
|
|
—
|
|
Contribution to
organic revenue (growth) decline (2)
|
—
|
|
(3,417)
|
|
(945)
|
|
(3,243)
|
|
(7,605)
|
|
|
(4,008)
|
|
Prior year revenue
from dispositions (3)
|
(5,261)
|
|
(5,592)
|
|
(3,847)
|
|
—
|
|
(14,700)
|
|
|
(1,825)
|
|
Non-GAAP acquisitions
(dispositions), net
|
$
|
(5,261)
|
|
$
|
2,507
|
|
$
|
6,820
|
|
$
|
9,578
|
|
$
|
13,644
|
|
|
$
|
9,852
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
OTHER ITEMS,
NET
|
|
|
|
|
|
|
|
SEC investigation and
class action litigation expenses
|
$
|
122
|
|
$
|
235
|
|
$
|
(88)
|
|
$
|
131
|
|
$
|
400
|
|
|
$
|
—
|
|
D&O insurance
proceeds
|
—
|
|
(303)
|
|
(231)
|
|
(24)
|
|
(558)
|
|
|
—
|
|
Severance and other
restructuring expenses
|
—
|
|
—
|
|
7,665
|
|
372
|
|
8,037
|
|
|
—
|
|
Strategic review
process costs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1,626
|
|
Total other items,
net
|
$
|
122
|
|
$
|
(68)
|
|
$
|
7,346
|
|
$
|
479
|
|
$
|
7,879
|
|
|
$
|
1,626
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
CASH INTEREST, NET
& OTHER
|
|
|
|
|
|
|
|
Cash interest
paid
|
$
|
(649)
|
|
$
|
(30,765)
|
|
$
|
(1,597)
|
|
$
|
(31,001)
|
|
$
|
(64,012)
|
|
|
$
|
(1,629)
|
|
Bond interest
accruals adjustment
|
(14,625)
|
|
14,625
|
|
(14,625)
|
|
14,625
|
|
—
|
|
|
(14,625)
|
|
Adjusted cash
interest paid
|
(15,274)
|
|
(16,140)
|
|
(16,222)
|
|
(16,376)
|
|
(64,012)
|
|
|
(16,254)
|
|
Interest
income
|
148
|
|
159
|
|
91
|
|
227
|
|
625
|
|
|
149
|
|
Total cash interest,
net & other
|
$
|
(15,126)
|
|
$
|
(15,981)
|
|
$
|
(16,131)
|
|
$
|
(16,149)
|
|
$
|
(63,387)
|
|
|
$
|
(16,105)
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
CAPITAL
EXPENDITURES, NET
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
(3,799)
|
|
$
|
(5,890)
|
|
$
|
(5,543)
|
|
$
|
(5,032)
|
|
$
|
(20,264)
|
|
|
$
|
(3,606)
|
|
Landlord
reimbursements
|
219
|
|
851
|
|
291
|
|
442
|
|
1,803
|
|
|
1
|
|
Total capital
expenditures, net
|
$
|
(3,580)
|
|
$
|
(5,039)
|
|
$
|
(5,252)
|
|
$
|
(4,590)
|
|
$
|
(18,461)
|
|
|
$
|
(3,605)
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
MISCELLANEOUS
OTHER DISCLOSURES
|
|
|
|
|
|
|
|
Net income
attributable to the noncontrolling interest
|
$
|
897
|
|
$
|
2,545
|
|
$
|
2,458
|
|
$
|
5,885
|
|
$
|
11,785
|
|
|
$
|
429
|
|
Cash taxes
|
$
|
1,333
|
|
$
|
1,293
|
|
$
|
2,196
|
|
$
|
(986)
|
|
$
|
3,836
|
|
|
$
|
1,677
|
|
|
(1)
GAAP revenue from prior year acquisitions for 2019 and 2018
relates to acquisitions which occurred in 2018 and 2017,
respectively.
|
(2)
Contributions to organic revenue growth (decline) represents the
change in revenue, measured on a constant currency basis, relative
to the comparable pre-acquisition period for acquired businesses
that is included in the Company's organic revenue growth (decline)
calculation.
|
(3) Prior year revenue from
dispositions reflects the incremental impact on revenue for the
comparable period after the Company's disposition of such disposed
business, plus revenue from each business disposed of by the
Company in the previous year through the twelve month anniversary
of the disposition.
|
|
Note: Actuals may not
foot due to rounding.
|
CONTACT:
|
Erica
Bartsch
|
|
Sloane &
Company
|
|
212-446-1875
|
|
IR@mdc-partners.com
|
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SOURCE MDC Partners Inc.