MDC Partners Inc. Reports Results for the Three and Six Months Ended June 30, 2019

Date : 08/07/2019 @ 11:30AM
Source : PR Newswire (Canada)
Stock : MDC Partners Inc (MDCA)
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MDC Partners Inc. Reports Results for the Three and Six Months Ended June 30, 2019

MDC Partners (NASDAQ:MDCA)
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Executing on Strategic Plan

Company Reaffirms Financial Guidance

NEW YORK, Aug. 7, 2019 /CNW/ --

SECOND QUARTER HIGHLIGHTS:

  • Revenue of $362.1 million versus $379.7 million a year ago, a decline of 4.6%.
  • Organic revenue decrease of 2.4%.
  • Net income attributable to MDC Partners common shareholders of $0.8 million in the second quarter of 2019 versus $1.1 million a year ago. Net loss attributable to MDC Partners common shareholders for the last twelve months (LTM) of $103.7 million as of June 30, 2019 versus $103.3 million loss as of March 31, 2019.
  • Adjusted EBITDA of $46.4 million versus $43.0 million a year ago, an increase of 7.9%. Adjusted EBITDA Margin of 12.8%, an increase of 150 basis points compared to prior year quarter.
  • Covenant EBITDA (LTM) of $187.9 million versus $183.8 million for the first quarter of 2019, an increase of 2.2%. (Refer to Schedule 7)
  • Net new business wins totaled a positive $43.0 million in the second quarter versus a decline of $11.7 million in the first quarter of 2019.

(NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and six months ended June 30, 2019.

"Our solid execution in the second quarter delivered year-over-year growth in margins and adjusted EBITDA -- plus 20% Adjusted EBITDA growth, excluding the sale of Kingsdale -- along with strong cash generation," said Mark Penn, Chairman and CEO and MDC Partners. "Net new business also rebounded from a decline of $11.7 million in the first quarter to a positive $43 million in the second quarter, as our agencies took advantage of the continued strength of our pipeline.  We began aggressively executing against a comprehensive two year plan that will create a more nimble organization and return this business to consistent revenue growth. The plan is built around agency cooperation and network collaboration, with digital-first thinking and media and creative integration across agencies. Our recent move to align MDC Media Partners with GALE is just one example of one of many initiatives we are pursuing to create a more cohesive network. We believe this plan will create a more efficient organization that delivers consistent financial returns and allows partner agencies to thrive in a rapidly changing and increasingly competitive marketplace."

Frank Lanuto, Chief Financial Officer, added, "Aided by continued cost-savings initiatives, Adjusted EBITDA was up 8% versus the prior year, while margins improved over 150 basis points year-over-year. We continue to manage costs tightly while taking the appropriate steps to optimize our business for growth. Based on our performance in the quarter, we reiterate our 2019 financial guidance."

Second Quarter and Year-to-Date 2019 Financial Results

Revenue for second quarter of 2019 was $362.1 million versus $379.7 million for the second quarter of 2018, a decline of 4.6%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 1.1%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.1%, and the organic revenue decrease was 2.4%. Organic revenue was favorably impacted by 200 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 second quarter of 2019 totaled $43.0 million.

Net income attributable to MDC Partners common shareholders for the second quarter of 2019 was $0.8 million versus $1.1 million for the second quarter of 2018. This change results from lower expenses primarily driven by a reduction in staff costs and a foreign exchange gain in the second quarter of 2019 versus the prior year second quarter loss, offset by the decline in revenues. Diluted income per share attributable to MDC Partners common shareholders for the second quarter of 2019 was $0.01 versus diluted income per share of $0.02 for the second quarter of 2018.

Adjusted EBITDA for the second quarter of 2019 was $46.4 million versus $43.0 million for the second quarter of 2018, an increase of 7.9%. The improvement was primarily driven by reduced staff costs at Partner agencies and lower staff costs and professional fees at corporate. This led to a 150 basis-point improvement in Adjusted EBITDA margin in the second quarter of 2019 to 12.8% from 11.3% in the second quarter of 2018.

Net loss attributable to MDC Partners common shareholders for the last twelve months (LTM) was $103.7 million as of June 30, 2019 versus a $103.3 million loss as of March 31,  2019.

Covenant EBITDA for the last twelve months (LTM) was $187.9 million at June 30, 2019 versus $183.8 million at March 31, 2019, an increase of 2.2%. The change was primarily driven by the increase in Adjusted EBITDA.

Revenue for the first six months of 2019 was $690.9 million versus $706.7 million for the first six months of 2018,   a decrease of 2.2%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 1.3%, the impact of non-GAAP acquisitions (dispositions), net was positive 0.8%, and the organic revenue decrease was 1.7%. Organic revenue was favorably impacted by 209 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 for the first six months of 2019 totaled $31.3 million. Net loss attributable to MDC Partners common shareholders for the first six months of 2019 was $1.4 million, an improvement versus a net loss of $30.1 million for the first six months of 2018. This change is a result of lower expenses primarily driven by a reduction in staff and deferred acquisition costs and a foreign exchange gain in the second quarter of 2019, versus the prior year second quarter loss, partially offset by the decline in revenue. Diluted loss per share attributable to MDC Partners common shareholders for the six months of 2019 was $0.02 versus a diluted loss per share of $0.53 for the first six months of 2018.

Adjusted EBITDA for the first six months of 2019 was $67.9 million versus $50.8 million for the first six months of 2018, an increase of 33.7%. The improvement was primarily driven by reduced staff costs at Partner agencies and lower staff costs and professional fees at corporate.  This led to a 260 basis-point improvement in Adjusted EBITDA margin in the first six months of 2019 to 9.8% from 7.2% in the first six months of 2018.

 

Financial Outlook


2019 financial guidance is maintained as follows:



2019 Outlook Commentary *







Organic Revenue Growth

We expect approximately 0% to 2% growth in organic revenue.










Foreign Exchange Impact, net

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%.










Impact of Non-GAAP Acquisitions (Dispositions), net

Our current expectations are that the impact of acquisitions, net of disposition activity, will decrease revenue by approximately 90 basis points.










Covenant EBITDA and Adjustments

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.






















* 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


 

Conference Call

Management will host a conference call on Wednesday, August 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), August 14, 2019, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10133745), 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

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ in 000s, Except per Share Amounts)










Three Months Ended June 30,


Six Months Ended June 30,


2019


2018


2019


2018

Revenue:








Services

$     362,130


379,743


690,921


$     706,711

Operating Expenses:








Cost of services sold

240,749


253,390


477,903


496,420

Office and general expenses

87,276


83,878


154,394


167,757

Depreciation and amortization

10,663


11,703


19,501


24,078

Other asset impairment




2,317


338,688


348,971


651,798


690,572

Operating income 

23,442


30,772


39,123


16,139

Other Income (Expenses):








Interest expense and finance charges, net

(16,413)


(16,859)


(33,174)


(32,942)

Foreign exchange gain (loss)

2,932


(6,549)


8,374


(13,209)

Other, net

(746)


592


(4,128)


1,033


(14,227)


(22,816)


(28,928)


(45,118)

Income (loss) before income taxes and equity in earnings of non-
consolidated affiliates

9,215


7,956


10,195


(28,979)

Income tax expense (benefit)

2,088


1,977


2,835


(6,353)

Income (loss) before equity in earnings of non-consolidated affiliates

7,127


5,979


7,360


(22,626)

Equity in earnings (losses) of non-consolidated affiliates

206


(28)


289


58

Net income (loss)

7,333


5,951


7,649


(22,568)

Net income attributable to the noncontrolling interest

(3,043)


(2,545)


(3,472)


(3,442)

Net income (loss) attributable to MDC Partners Inc. 

4,290


3,406


4,177


(26,010)

Accretion on and net income allocated to convertible preference
shares

(3,515)


(2,273)


(5,625)


(4,095)

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

775


1,133


(1,448)


(30,105)

Income (loss) Per Common Share:








Basic








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

$           0.01


$           0.02


$          (0.02)


$          (0.53)

Diluted








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

$           0.01


$           0.02


$          (0.02)


$          (0.53)

Weighted Average Number of Common Shares Outstanding:








Basic

71,915,832


57,439,823


66,118,749


56,924,208

Diluted

72,024,689


57,802,872


66,118,749


56,924,208

 

SCHEDULE 2
MDC PARTNERS INC.
UNAUDITED REVENUE RECONCILIATION
(US$ in 000s, except percentages)










Three Months Ended


Six Months Ended


Revenue $


% Change


Revenue $


% Change









June 30, 2018 

$            379,743




$            706,711











Organic revenue growth (decline)(1)

(9,219)


(2.4%)


(12,109)


(1.7%)

Non-GAAP acquisitions (dispositions), net

(4,218)


(1.1%)


5,635


0.8%

Foreign exchange impact

(4,176)


(1.1%)


(9,316)


(1.3%)

Total change

(17,613)


(4.6%)


(15,790)


(2.2%)

June 30, 2019

$            362,130




$            690,921




(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

 

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, 2019



















Global


Domestic












Advertising and


Integrated


Creative


Specialized


Media


All






Communications


Agencies


Agencies


Communications


Services


Other


Corporate


Total

Revenue

$             362,130


$   154,368


$     65,193


$            47,170


$      21,331


$     74,068


$           —


$     362,130

















Net income attributable to
MDC Partners Inc. common
shareholders














775

Adjustments to reconcile to
operating profit (loss):
















Accretion on convertible
preference shares















3,515

Net income attributable to
the noncontrolling
interests















3,043

Equity in earning of non-
consolidated affiliates















(206)

Income tax benefit















2,088

Interest expense and
finance charges, net















16,413

Foreign exchange income















(2,932)

Other income, net















746

Operating income (loss)

$               40,073


$     20,720


$       8,730


$              6,683


$           991


$       2,949


$     (16,631)


$       23,442

margin

11.1%


13.4%


13.4%


14.2%


4.6%


4.0%




6.5%

















Additional adjustments to
reconcile to Adjusted
EBITDA:
















Depreciation and
amortization

10,442


4,437


1,547


698


794


2,966


221


10,663

Stock-based
compensation

2,442


1,232


522


52


(16)


652


1,192


3,634

Deferred acquisition
consideration adjustments

2,073


1,811


(166)


745


(615)


298



2,073

Distributions from non-
consolidated affiliates (2)







31


31

Other items, net (3)







6,594


6,594

Adjusted EBITDA (1)

$             55,030


$   28,200


$   10,633


$             8,178


$       1,154


$     6,865


$     (8,593)


$     46,437

margin

15.2%


18.3%


16.3%


17.3%


5.4%


9.3%




12.8%


(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, 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. See Schedule 10 for a reconciliation of amounts.

 

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, 2019



















Global


Domestic












Advertising and


Integrated


Creative


Specialized


Media


All






Communications


Agencies


Agencies


Communications


Services


Other


Corporate


Total

Revenue

$             690,921


$   284,087


$   132,201


$            86,123


$      41,510


$   147,000


$          —


$     690,921

















Net loss attributable to
MDC Partners Inc.
common shareholders















(1,448)

Adjustments to reconcile to
operating profit (loss):
















Accretion on convertible
preference shares















5,625

Net income attributable
to the noncontrolling
interests















3,472

Equity in earning of non-
consolidated affiliates















(289)

Income tax benefit















2,835

Interest expense and
finance charges, net















33,174

Foreign exchange income















(8,374)

Other income, net















4,128

Operating income (loss)

$               60,577


$      24,491


$      14,207


$             13,760


$         (843)


$       8,962


$      (21,454)


$       39,123

margin

8.8%


8.6%


10.7%


16.0%


(2.0%)


6.1%




5.7%

















Additional adjustments to
reconcile to Adjusted
EBITDA:
















Depreciation and
amortization

19,063


8,502


2,786


1,265


1,485


5,025


438


19,501

Stock-based
compensation

6,987


4,999


986


78


(16)


940


(381)


6,606

Deferred acquisition
consideration
adjustments

(5,570)


(3,154)


(769)


(1,049)


73


(671)



(5,570)

Distributions from non-
consolidated affiliates (2)







31


31

Other items, net (3)







8,220


8,220

Adjusted EBITDA (1)

$             81,057


$      34,838


$     17,210


$           14,054


$          699


$     14,256


$      (13,146)


$       67,911

margin

11.7%


12.3%


13.0%


16.3%


1.7%


9.7%




9.8%


(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, 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. See Schedule 10 for a reconciliation of amounts.

 

SCHEDULE 5
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)


For the Three Months Ended June 30, 2018



















Global


Domestic












Advertising and


Integrated


Creative


Specialized


Media


All






Communications


Agencies


Agencies


Communications


Services


Other


Corporate


Total

Revenue

$             379,743


$    158,163


$     72,971


$            40,304


$      21,398


$     86,907


$            —


$     379,743

















Net income attributable to MDC
Partners Inc. common
shareholders














1,133

Adjustments to reconcile to
operating profit (loss):
















Accretion on convertible
preference shares















2,273

Net income attributable to the
noncontrolling interests















2,545

Equity in losses of non-
consolidated affiliates















28

Income tax benefit















1,977

Interest expense and finance
charges, net















16,859

Foreign exchange loss















6,549

Other income, net















(592)

Operating income (loss)

$               43,912


$     18,352


$       5,077


$              6,216


$       (1,719)


$     15,986


$     (13,140)


$       30,772

margin

11.6%


11.6%


7.0%


15.4%


(8.0%)


18.4%




8.1%

















Additional adjustments to
reconcile to Adjusted EBITDA:
















Depreciation and amortization

11,543


4,743


1,281


992


635


3,892


160


11,703

Stock-based compensation

4,382


2,475


1,097


52


74


684


1,221


5,603

Deferred acquisition
consideration adjustments

(5,067)


(2,609)


1,233


257


90


(4,038)



(5,067)

Distributions from non-
consolidated affiliates(2)







11


11

Other items, net(3)







(68)


(68)

Adjusted EBITDA (1)

$              54,770


$     22,961


$       8,688


$              7,517


$        (920)


$     16,524


$      (11,816)


$      42,954

margin

14.4%


14.5%


11.9%


18.7%


-4.3%


19.0%




11.3%


(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, 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. See Schedule 10 for a reconciliation of amounts.

 

SCHEDULE 6
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)



For the Six Months Ended June 30, 2018



















Global


Domestic












Advertising and


Integrated


Creative


Specialized


Media


All






Communications


Agencies


Agencies


Communications


Services


Other


Corporate


Total

Revenue

$             706,711


$      287,686


$      139,625


$            79,128


$       46,082


$      154,190


$            —


$     706,711

















Net loss attributable to MDC
Partners Inc.
common shareholders















(30,105)

Adjustments to reconcile to
operating profit (loss):
















Accretion on convertible
preference shares















4,095

Net income attributable to the
noncontrolling interests















3,442

Equity in earning of non-
consolidated affiliates















(58)

Income tax benefit















(6,353)

Interest expense and finance charges, net















32,942

Foreign exchange loss















13,209

Other income, net















(1,033)

Operating income (loss)

$               43,351


$        4,760


$         7,955


$              9,944


$        (1,738)


$       22,430


$     (27,212)


$       16,139

margin

6.1%


1.7%


5.7%


12.6%


(3.8%)


14.5%




2.3%

















Additional adjustments to
reconcile to Adjusted EBITDA:
































Depreciation and amortization

23,694


12,152


2,574


1,959


1,273


5,736


384


24,078

Stock-based compensation

8,171


4,935


1,507


239


149


1,341


2,469


10,640

Deferred acquisition
consideration adjustments

(2,481)


(1,174)


1,463


765


172


(3,707)



(2,481)

Distributions from non-
consolidated affiliates (2)







31


31

Other items, net (3)







54


54

Adjusted EBITDA (1)

$             72,735


$      20,673


$        13,499


$           12,907


$         (144)


$       25,800


$   (21,957)


$     50,778

margin

10.3%


7.2%


9.7%


16.3%


-0.3%


16.7%




7.2%


(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. See Schedule 10 for a reconciliation of amounts.

 

SCHEDULE 7
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA
(US$ in 000s)



2018


2019


Covenant EBITDA
(LTM) (1)


Q2


Q3


Q4


 Q1 


Q2


Q1-2019 -
LTM


Q2-2019 -
LTM

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

$               1,133


$           (18,234)


$           (83,749)


$             (2,496)


$                  775


$         (103,346)


$         (103,704)

Adjustments to reconcile to operating profit
(loss):














Accretion on and net income allocated to
convertible preference shares

2,273


2,109


2,151


2,383


3,515


8,916


10,158

Net income attributable to the noncontrolling
interests

2,545


2,458


5,885


429


3,043


11,317


11,815

Equity in earnings (losses) of non-consolidated
affiliates

28


(300)


296


(83)


(206)


(59)


(293)

Income tax expense

1,977


2,986


34,970


748


2,088


40,681


40,792

Interest expense and finance charges, net

16,859


17,063


17,070


16,761


16,413


67,753


67,307

Foreign exchange loss (gain)

6,549


(3,275)


13,324


(5,442)


(2,932)


11,156


1,675

Other income, net

(592)


(189)


992


3,383


746


3,594


4,932

Operating income (loss)

30,772


2,618


(9,061)


15,683


23,442


40,012


32,682















Adjustments to reconcile to Adjusted EBITDA:














Depreciation and amortization

11,703


11,134


10,984


8,838


10,663


42,659


41,619

Goodwill and other asset impairment


21,008


56,732




77,740


77,740

Stock-based compensation

5,603


6,242


1,534


2,972


3,634


16,351


14,382

Deferred acquisition consideration adjustments

(5,067)


11,003


(8,980)


(7,643)


2,073


(10,687)


(3,547)

Distributions from non- consolidated affiliates

11


478


270



31


759


779

Other items, net (2)

(68)


7,347


478


1,626


6,594


9,383


16,045

Adjusted EBITDA

42,954


59,830


51,957


21,476


46,437


176,217


179,700















Adjustments to reconcile to Covenant EBITDA:














Proforma acquisitions/dispositions

(3,558)


(1,195)


(2,148)


(1,965)



(8,866)


(5,308)

Severance due to eliminated positions

4,169


1,155


3,615


1,534


2,346


10,473


8,650

Other adjustments, net (3)

2,067


600


1,877


1,412


989


5,956


4,878


$           45,632


$           60,390


$           55,301


$           22,457


$           49,772


$        183,780


$        187,920


(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 10 for a reconciliation of amounts.

(3) Other adjustments, net primarily includes one time professional fees and costs associated with real estate consolidation.
























































 

SCHEDULE 8
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in 000s)



June 30,
2019


December 31,
2018


(Unaudited)



ASSETS




Current Assets:




Cash and cash equivalents

$                    27,304


$                    30,873

Accounts receivable, less allowance for doubtful accounts of $2,792 and $1,879

434,512


395,200

Expenditures billable to clients

40,605


42,369

Assets held for sale


78,913

Other current assets

44,815


42,499

Total Current Assets

547,236


589,854

Fixed assets, at cost, less accumulated depreciation of $141,167 and $128,546

83,950


88,189

Right of use assets - operating leases

237,418


Investments in non-consolidated affiliates

6,761


6,556

Goodwill

743,582


740,955

Other intangible assets, net, less accumulated amortization of $168,748 and $161,868

60,848


67,765

Deferred tax assets

92,439


92,741

Other assets

26,415


25,513

Total Assets

1,798,649


1,611,573

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND
SHAREHOLDERS' DEFICIT




Current Liabilities:




Accounts payable

228,069


221,995

Accruals and other liabilities

253,868


313,141

Liabilities held for sale


35,967

Advance billings

168,142


138,505

Current portion of lease liabilities - operating leases

46,338


Current portion of deferred acquisition consideration

35,439


32,928

Total Current Liabilities

731,856


742,536

Long-term portion of deferred acquisition consideration

22,804


50,767

Long-term lease liabilities - operating leases

233,165


Other liabilities

19,503


54,255

Deferred tax liabilities

6,571


5,329

Total Liabilities

1,927,991


1,806,994

Redeemable Noncontrolling Interests

42,635


51,546

Commitments, Contingencies, and Guarantees




Shareholders' Deficit:




Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2019 and
95,000 at December 31, 2018

152,746


90,123

Common stock and other paid-in capital

97,455


58,579

Accumulated deficit

(460,726)


(464,903)

Accumulated other comprehensive loss (income)

(1,713)


4,720

MDC Partners Inc. Shareholders' Deficit

(212,238)


(311,481)

Noncontrolling interests

40,261


64,514

Total Shareholders' Deficit

(171,977)


(246,967)

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit

$                1,798,649


$                1,611,573

 

SCHEDULE 9
MDC PARTNERS INC.
UNAUDITED SUMMARY CASH FLOW DATA
(US$ in 000s)



Six Months Ended June 30,


2019


2018

Net cash used in operating activities

$         (40,237)


$         (61,713)

Net cash provided by (used in) investing activities

9,818


(36,121)

Net cash provided by financing activities

25,712


76,343

Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts

4


311

Net decrease in cash, cash equivalents, and cash held in trusts including cash
classified within assets held for sale

$           (4,703)


$         (21,180)

Change in cash and cash equivalents held in trusts classified within held for sale

(3,307)


Change in cash and cash equivalents classified within assets held for sale

4,441


Net decrease in cash and cash equivalents

$           (3,569)


$         (21,180)

 

SCHEDULE 10
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF COMPONENTS OF NON- GAAP MEASURES
(US$ in 000s)



2018


2019


Q1

Q2

Q3

Q4

FY


Q1

Q2

YTD

NON-GAAP ACQUISITIONS (DISPOSITIONS), NET










GAAP revenue from current year acquisitions

$            —

$    11,066

$    12,734

$   12,317

$   36,117


$             —

$         698

$         698

GAAP revenue from prior year acquisitions (1)


15,685

1,519

17,204

Impact of adoption of ASC 606 exclusion

450

(1,122)

504

(168)


Foreign exchange impact


Contribution to organic revenue (growth) decline(2)

(3,417)

(945)

(3,243)

(7,605)


(4,008)

(440)

(4,448)

Prior year revenue from dispositions (3)

(5,261)

(5,592)

(3,847)

(14,700)


(1,825)

(5,995)

(7,820)

Non-GAAP acquisitions (dispositions), net

$     (5,261)

$     2,507

$     6,820

$     9,578

$   13,644


$       9,852

$     (4,218)

$     5,634












2018


2019


Q1

Q2

Q3

Q4

FY


Q1

Q2

YTD

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


6,703

6,703

Strategic review process costs


1,626

(109)

1,517

Total other items, net

$        122

$         (68)

$     7,346

$        479

$     7,879


$       1,626

$       6,594

$     8,220












2018


2019


Q1

Q2

Q3

Q4

FY


Q1

Q2

YTD

CASH INTEREST, NET & OTHER










Cash interest paid

$        (649)

$   (30,765)

$    (1,597)

$  (31,001)

$  (64,012)


$     (1,629)

$   (30,014)

$  (31,643)

Bond interest accrual adjustment

(14,625)

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)

(15,389)

(31,643)

Interest income

148

159

91

227

625


149

138

287

Total cash interest, net & other

$   (15,126)

$    (15,981)

$  (16,131)

$  (16,149)

$  (63,387)


$   (16,105)

$   (15,251)

$  (31,356)












2018


2019


Q1

Q2

Q3

Q4

FY


Q1

Q2

YTD

CAPITAL EXPENDITURES, NET










Capital expenditures

$    (3,799)

$    (5,890)

$    (5,543)

$    (5,032)

$  (20,264)


$     (3,606)

$     (4,317)

$    (7,923)

Landlord reimbursements

219

851

291

442

1,803


1

1

Total capital expenditures, net

$    (3,580)

$    (5,039)

$    (5,252)

$    (4,590)

$  (18,461)


$     (3,605)

$     (4,317)

$    (7,922)












2018


2019


Q1

Q2

Q3

Q4

FY


Q1

Q2

YTD

MISCELLANEOUS OTHER DISCLOSURES










Net income attributable to the noncontrolling interests

$        897

$     2,545

$     2,458

$     5,885

$   11,785


$           429

$       3,043

$     3,472

Cash taxes

$     1,333

$     1,293

$     2,196

$       (986)

$     3,836


$       1,677

$       1,817

$     3,494


(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

 

MDC Partners Logo. (PRNewsfoto/MDC Partners Inc.)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/mdc-partners-inc-reports-results-for-the-three-and-six-months-ended-june-30-2019-300897736.html

SOURCE MDC Partners Inc.

Copyright 2019 Canada NewsWire

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