NEW YORK, Oct. 29, 2018 /CNW/ --
THIRD QUARTER HIGHLIGHTS:
- Revenue of $375.8 million versus
$375.8 million a year ago; excluding
the impact of ASC 606 (see details below), revenue was $384.0 million, an increase of 2.2% versus a year
ago.
- Organic revenue increase of 1.5%
- Net loss attributable to MDC Partners common shareholders of
($18.2) million versus income of
$14.1 million a year ago; excluding
the impact of ASC 606, Net loss attributable to MDC Partners common
shareholders was ($22.9) million
- Adjusted EBITDA of $59.8 million
versus $53.8 million a year ago;
excluding the impact of ASC 606, Adjusted EBITDA was $53.9 million
- Net New Business wins totaled $12.7
million
(NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the
"Company") today announced financial results for the three and nine
months ended September 30, 2018.
David Doft, Chief Financial
Officer of MDC Partners, said, "Our businesses delivered a strong
quarter, highlighted by improved growth in organic revenue and
Adjusted EBITDA, respectively. Our results are driven by the
actions we are taking to optimize our cost structure and improve
financial performance by selectively investing behind our
world-class talent, while focusing on our strategic offering in
high-priority growth areas. We continue to see strong demand for
our agencies' services in the marketplace. We believe this, plus
the expected incremental $29 million
of savings in 2019 from already-actioned headcount reductions and
real estate consolidation, will position MDC Partners for improved
profitability next year and beyond."
"Our ongoing strategic review process, led by LionTree Advisors and JPMorgan, and CEO search,
led by SpencerStuart, are proceeding. The Company will
provide further updates on both the strategic review and CEO search
process at the appropriate time."
Adoption of ASC 606
Effective January 1, 2018, we
adopted ASC Topic 606, "Revenue from Contracts with Customers" (ASC
606). In accordance with the new revenue accounting standard, we
were required to change certain aspects of our accounting policy as
it relates to performance incentives, non-refundable retainer fees,
and certain third-party pass-through and out-of-pocket costs. ASC
606 was applied using the modified retrospective method, with the
cumulative effect of the initial adoption being recognized as an
adjustment to opening retained earnings at January 1, 2018 for contracts that were not
completed as of that date, and with all subsequent periods reported
under the new policy. Comparative prior periods have not been
restated and continue to be reported under the historical
accounting standards and policies in effect for those periods.
As a result of the adoption of ASC 606, our third quarter and
year-to-date 2018 financial performance is not directly comparable
with last year. We have therefore provided additional disclosure to
assist investors in reconciling the two accounting standards,
including updating the definition of the Non-GAAP metric Organic
Revenue to exclude the impact of the change in accounting standard
and providing additional schedules which show the impact of the
adoption of ASC 606 on our GAAP and Non-GAAP performance metrics.
See schedules 2 and 3.
Third Quarter and Year-to-Date 2018 Financial Results
Revenue for the third quarter of each of 2018 and 2017 was
$375.8 million. The flat
revenue was primarily due to the
adoption of ASC 606, which reduced revenue by $8.2 million, or 2.2%. The effect of foreign
exchange was negative 1.1%, the impact of non-GAAP acquisitions
(dispositions), net was positive 1.8%, and organic revenue increase
was 1.5%. There was a positive 190 basis-point impact on organic
revenue growth from billable pass-through costs incurred on
clients' behalf from certain of our partner firms acting as
principal.
Net loss attributable to MDC Partners common shareholders for
the third quarter of 2018 was $18.2
million versus net income of $14.1
million for the third quarter of 2017. The net loss is
largely attributable to a goodwill and other asset impairment
charge of $21.0 million. Diluted loss
per share attributable to MDC Partners common shareholders for the
third quarter of 2018 was a loss of $0.32 versus diluted income per share of
$0.24 for the third quarter of 2017.
The impact of the adoption of ASC 606 was a reduction in net loss
attributable to MDC Partners common shareholders of $4.7 million, or $0.08 per share.
Adjusted EBITDA for the third quarter of 2018 was $59.8 million versus $53.8
million for the third quarter of 2017. The impact of the
adoption of ASC 606 was an increase of $5.9
million. Excluding the impact of the adoption of ASC 606,
Adjusted EBITDA was $53.9 million
with margins of 14.0%. Adjusted EBITDA
excludes corporate severance and other restructuring expenses taken
in the quarter. (see schedules 4 and 10)
Revenue for the first nine months of 2018 was $1.08 billion versus $1.11
billion for the first nine months of 2017. The decline
in revenue was primarily due to the adoption of ASC 606, which
reduced revenue by $39.2 million, or
3.5%. The effect of foreign exchange was positive 0.4%, the impact
of non-GAAP acquisitions (dispositions), net was positive 0.4%, and
organic revenue increase was 0.2%. Organic revenue growth was
favorably impacted by 165 basis points from increased billable
pass-through costs incurred on clients' behalf from certain of our
partner firms acting as principal.
Net loss attributable to MDC Partners common shareholders for
the first nine months of 2018 was $48.3
million versus income of $13.0
million for the first nine months of 2017. The net loss is
largely attributable to a goodwill and other asset impairment
charge of $23.3 million and a foreign
exchange loss of $9.9 million.
Diluted loss per share attributable to MDC Partners common
shareholders for the first nine months of 2018 was $0.85 versus diluted income per share of
$0.24 for the first nine months of
2017. The impact of the adoption of ASC 606 was a reduction in net
loss attributable to MDC Partners common shareholders of
$6.1 million, or $0.10 per share.
Adjusted EBITDA for the first nine months of 2018 was
$110.6 million versus $136.6 million for the first nine months of 2017.
The impact of the adoption of ASC 606 was an increase of
$8.9 million. Excluding the impact of
the adoption of ASC 606, Adjusted EBITDA was $101.7 million with margins of 9.1%. Adjusted EBITDA excludes corporate severance and
other restructuring expenses taken in the quarter. (see schedules 5
and 10)
Financial Outlook
In an effort to increase our operating
efficiency, profitability and cash generation in 2019 and beyond,
we have accelerated actions to improve our cost structure. Although
the ongoing cost savings arising from these actions are expected to
improve our long-term financial position, the increased costs we
anticipate incurring in 2018 to secure these savings is expected to
have an adverse impact on our Adjusted EBITDA Margin for the
balance of this year. As a result, the Company is withdrawing its
Adjusted EBITDA Margin guidance for the remainder of 2018. In lieu
of Adjusted EBITDA Margin guidance, the Company is providing
additional commentary below with respect to "EBITDA" as defined
under the Company's senior secured credit facility ("Covenant
EBITDA").
2018 financial guidance is revised as follows:
|
2018 Outlook
Commentary *
|
|
|
Organic Revenue
Growth
|
We expect
approximately 1% growth in organic revenue, whose definition
excludes the impact of the adoption of ASC 606 in the
reconciliation of
reported revenue.
|
|
|
Pass-through and
Out-of-Pocket Costs
|
The adoption of ASC
606 resulted in certain client contracts previously being accounted
for as principal, now being accounted for as agent. This results in
a reduction in full year gross revenue of approximately $65 million
with a corresponding reduction in direct costs, with no impact on
profit.
|
|
|
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 be
neutral.
|
|
|
Impact of Non-GAAP
Acquisitions (Dispositions), net
|
Our current
expectations are that the impact of acquisitions, net of
disposition activity, will increase revenue by approximately 80
basis points.
|
|
|
Covenant EBITDA
and Adjustments
|
The Company expects
to complete fiscal year 2018 with approximately
$200 million of Covenant EBITDA. The Company has applied
certain pro
forma and other adjustments, as expressly provided under the credit
facility,
of approximately $19 million in the aggregate to derive its 2018E
Covenant
EBITDA forecast. The adjustments included pro forma
acquisition
earnings ($2m); certain agency-level severance ($11m); professional
fees
primarily related to the Company's adoption of ASC 606 ($4m); and
one-
time office lease breakage costs ($2m).
|
|
|
* The Company has
excluded a quantitative reconciliation with respect to the
Company's 2018 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 Monday, October 29, 2018, 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),
November 5, 2018, by dialing
1-412-317-0088 or toll free 1-877-344-7529 (passcode 10125891), 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,
excluding the impact of adopting ASC 606. 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 2018
organic revenue growth to the corresponding GAAP measure because we
are unable to predict the 2018 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 2018 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:
- uncertainty as to whether any strategic alternative will be
pursued or, if pursued, consummated; uncertainty as to the terms,
value and timing of any such strategic alternative; and the impact
of any actions related to the strategic review process and/or any
strategic alternative on the Company's securities or its
business;
- 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 the potential impact of one or more asset sales;
- foreign currency fluctuations; and
- risks associated with the ongoing DOJ investigation of the
historical production bidding practices at one of the Company's
subsidiaries.
Investors should carefully consider these risk factors and
the additional risk factors outlined in more detail in the
Company's 2017 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
(1)
|
2017
|
|
2018
(1)
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
375,830
|
$
375,800
|
|
$
1,082,541
|
$
1,111,032
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Cost of services
sold
|
|
238,690
|
249,418
|
|
735,110
|
754,803
|
Office and general
expenses
|
|
102,380
|
77,910
|
|
270,137
|
251,313
|
Depreciation and
amortization
|
|
11,134
|
11,252
|
|
35,212
|
32,916
|
Goodwill and other
asset impairment
|
|
21,008
|
-
|
|
23,325
|
-
|
|
|
373,212
|
338,580
|
|
1,063,784
|
1,039,032
|
Operating
profit
|
|
2,618
|
37,220
|
|
18,757
|
72,000
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Interest expense and
finance charges, net
|
|
(17,063)
|
(16,258)
|
|
(50,005)
|
(48,309)
|
Foreign exchange
income (loss)
|
|
3,275
|
9,913
|
|
(9,934)
|
18,798
|
Other, net
|
|
189
|
(1,264)
|
|
1,222
|
(986)
|
|
|
(13,599)
|
(7,609)
|
|
(58,717)
|
(30,497)
|
Income (loss) before
income taxes and equity in earnings of non-consolidated
affiliates
|
|
(10,981)
|
29,611
|
|
(39,960)
|
41,503
|
Income tax expense
(benefit)
|
|
2,986
|
9,049
|
|
(3,367)
|
17,659
|
Income (loss) before
equity in earnings of non-consolidated affiliates
|
|
(13,967)
|
20,562
|
|
(36,593)
|
23,844
|
Equity in earnings of
non-consolidated affiliates
|
|
300
|
1,422
|
|
358
|
1,924
|
Net income
(loss)
|
|
(13,667)
|
21,984
|
|
(36,235)
|
25,768
|
Net income
attributable to the noncontrolling interests
|
|
(2,458)
|
(3,491)
|
|
(5,900)
|
(6,588)
|
Net income (loss)
attributable to MDC Partners Inc.
|
|
(16,125)
|
18,493
|
|
(42,135)
|
19,180
|
Accretion on and net
income allocated to convertible preference shares
|
|
(2,109)
|
(4,356)
|
|
(6,204)
|
(6,147)
|
Net income (loss)
attributable to MDC Partners Inc. common shareholders
|
|
$
(18,234)
|
$
14,137
|
|
$
(48,339)
|
$
13,033
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
|
Net income (loss)
attributable to MDC Partners Inc. common shareholders
|
|
$
(0.32)
|
$
0.25
|
|
$
(0.85)
|
$
0.24
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
Net income (loss)
attributable to MDC Partners Inc. common shareholders
|
|
$
(0.32)
|
$
0.24
|
|
$
(0.85)
|
$
0.24
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
57,498,661
|
57,566,707
|
|
57,117,797
|
53,915,536
|
Diluted
|
|
57,498,661
|
57,943,080
|
|
57,117,797
|
54,228,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Effective January
1, 2018, we adopted ASC Topic 606, "Revenue from Contracts with
Customers" (ASC 606). ASC 606 was applied using the modified
retrospective method, with the cumulative effect of the initial
adoption being recognized as an adjustment to opening retained
earnings at January 1, 2018. As a result, comparative prior periods
have not been adjusted and continue to be reported under ASC 605
"Revenue Recognition" (ASC 605). See Schedule 2 in this
release, for the impact of the adoption of ASC 606, as required, on
the condensed consolidated statement of operations for the three
and nine months ended September 30, 2018.
|
SCHEDULE
2
|
|
|
|
|
|
|
|
|
MDC PARTNERS
INC.
|
UNAUDITED
RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
|
(US$ in 000s,
except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2018
|
|
For the Nine
Months Ended September 30, 2018
|
|
As
Reported
|
Adjustments
|
Adjusted to
Exclude
the Impact of
Adoption of ASC 606
|
|
As
Reported
|
Adjustments
|
Adjusted to
Exclude
the Impact of
Adoption of ASC 606
|
|
|
|
|
|
|
|
|
Revenue
|
$
375,830
|
$
8,172
|
$
384,002
|
|
$
1,082,541
|
$
39,176
|
$
1,121,717
|
Cost of services
sold
|
238,690
|
14,122
|
252,812
|
|
735,110
|
48,083
|
783,193
|
Operating profit
(loss)
|
2,618
|
(5,950)
|
(3,332)
|
|
18,757
|
(8,907)
|
9,850
|
Net loss attributable
to MDC Partners Inc. common shareholders
|
(18,234)
|
(4,700)
|
(22,934)
|
|
(48,339)
|
(6,085)
|
(54,424)
|
Loss per common share
- basic and diluted
|
(0.32)
|
(0.08)
|
(0.40)
|
|
(0.85)
|
(0.10)
|
(0.95)
|
|
|
|
|
|
|
|
|
Organic revenue
growth
|
1.5%
|
-
|
1.5%
|
|
0.2%
|
-
|
0.2%
|
Adjusted
EBITDA
|
$
59,829
|
$
(5,950)
|
$
53,879
|
|
$
110,607
|
$
(8,907)
|
$
101,700
|
margin
|
15.9%
|
|
14.0%
|
|
10.2%
|
|
9.1%
|
|
|
|
|
|
|
|
|
*
The table above summarizes the impact of the adoption of ASC 606 on
our US GAAP and non-GAAP performance metrics.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Actuals may not
foot due to rounding.
|
|
|
|
|
|
|
|
SCHEDULE
3
|
MDC PARTNERS
INC.
|
|
UNAUDITED REVENUE
RECONCILIATION
|
(US$ in 000s,
except percentages)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
Revenue
$
|
%
Change
|
|
|
Revenue
$
|
%
Change
|
September 30, 2017
as reported under ASC 605
|
$
375,800
|
|
|
|
$
1,111,032
|
|
|
|
|
|
|
|
|
Organic revenue
growth (1)
|
5,546
|
1.5%
|
|
|
2,161
|
0.2%
|
Non-GAAP acquisitions
(dispositions), net
|
6,820
|
1.8%
|
|
|
4,066
|
0.4%
|
Foreign exchange
impact
|
(4,164)
|
(1.1%)
|
|
|
4,458
|
0.4%
|
Impact of adoption of
ASC 606 (2)
|
(8,172)
|
(2.2%)
|
|
|
(39,176)
|
(3.5%)
|
Total
change
|
30
|
0.0%
|
|
|
(28,491)
|
(2.6%)
|
|
|
|
|
|
|
|
September 30, 2018
as reported under ASC 606
|
$
375,830
|
|
|
|
$
1,082,541
|
|
|
|
(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, excluding the impact of
adopting ASC 606. 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) In
accordance with the adoption of ASC 606, we were required to change
certain aspects of our revenue recognition accounting policy as it
relates to performance incentives,
|
retainer fees, and
certain third-party pass-through and out-of-pocket costs. Under the
prior guidelines, performance incentives were recognized in revenue
when specific
|
quantitative goals
were achieved, or when the Company's performance against
qualitative goals was determined by the client. Under ASC 606, the
Company now estimates the
|
amount of the
incentive that will be earned at the inception of the contract and
recognizes such incentive over the term of the contract.
Additionally, previously, fees for
|
non-refundable
retainers were generally recognized on a straight-line basis over
the term of the specific customer arrangement. Under ASC 606, an
input method is typically
|
used to measure
progress and recognize revenue for these types of arrangements.
Finally, the adoption of ASC 606 resulted in certain client
arrangements previously being
|
accounted for as
principal, now being accounted for as agent. In these instances,
certain third-party pass-through and out-of-pocket costs which were
billed to clients in
|
connection with
services being provided, are no longer included in revenue and
therefore the revenue recorded is equal to the net amount
retained.
|
|
Note: Actuals may not
foot due to rounding.
|
SCHEDULE
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS
INC.
|
|
|
UNAUDITED
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
|
|
(US$ in 000s,
except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended September 30, 2018, as reported under ASC
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and
|
|
Integrated
|
|
Creative
|
|
Specialized
|
|
Media
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
Agencies
|
|
Agencies
|
|
Communications
|
|
Services
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
375,830
|
|
$
177,398
|
|
$
24,798
|
|
$
42,636
|
|
$
35,022
|
|
$
95,976
|
|
$
-
|
|
$
375,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(18,234)
|
|
|
Adjustments to
reconcile to operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on and net income allocated to
convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preference
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,109
|
|
|
Net
income attributable to the noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,458
|
|
|
Equity
in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300)
|
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,986
|
|
|
Interest
expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,063
|
|
|
Foreign exchange
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,275)
|
|
|
Other,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(189)
|
|
|
Operating profit
(loss)
|
|
$
20,642
|
|
$
2,633
|
|
$
5,532
|
|
$
4,677
|
|
$
1,387
|
|
$
6,413
|
|
$
(18,024)
|
|
$
2,618
|
|
|
margin
|
|
5.5%
|
|
1.5%
|
|
22.3%
|
|
11.0%
|
|
4.0%
|
|
6.7%
|
|
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
10,935
|
|
5,154
|
|
396
|
|
1,134
|
|
781
|
|
3,470
|
|
199
|
|
11,134
|
|
|
Goodwill and other
asset impairment
|
|
21,008
|
|
21,008
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
21,008
|
|
|
Stock-based
compensation
|
|
4,622
|
|
3,360
|
|
175
|
|
43
|
|
112
|
|
932
|
|
1,620
|
|
6,242
|
|
|
Deferred acquisition
consideration adjustments
|
|
11,003
|
|
3,953
|
|
-
|
|
529
|
|
(27)
|
|
6,548
|
|
-
|
|
11,003
|
|
|
Distributions from
non-consolidated affiliates **
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
478
|
|
478
|
|
|
Other items, net
***
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
7,346
|
|
7,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
*
|
|
$
68,210
|
|
$
36,108
|
|
$
6,103
|
|
$
6,383
|
|
$
2,253
|
|
$
17,363
|
|
$
(8,381)
|
|
$
59,829
|
|
|
margin
|
|
18.1%
|
|
20.4%
|
|
24.6%
|
|
15.0%
|
|
6.4%
|
|
18.1%
|
|
|
|
15.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA is a
non-GAAP measure, but as shown above it represents operating profit
(loss) plus depreciation and amortization, goodwill and other asset
impairment, stock-based compensation, deferred
acquisition
|
consideration
adjustments, distributions from non-consolidated affiliates, and
other items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** Other items, net
includes severance expense and other restructuring expenses, legal
fees and related expenses, net of insurance proceeds, relating to
the SEC investigation and related class action litigation
claims. 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 Nine
Months Ended September 30, 2018, as reported under ASC
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and
|
|
Integrated
|
|
Creative
|
|
Specialized
|
|
Media
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
Agencies
|
|
Agencies
|
|
Communications
|
|
Services
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
1,082,541
|
|
$
510,360
|
|
$
75,503
|
|
$
129,724
|
|
$
104,460
|
|
$
262,494
|
|
$
-
|
|
$
1,082,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(48,339)
|
|
|
|
Adjustments to
reconcile to operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on and net income allocated to
convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preference
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,204
|
|
|
|
Net
income attributable to the noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,900
|
|
|
|
Equity
in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(358)
|
|
|
|
Income
tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,367)
|
|
|
|
Interest
expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,005
|
|
|
|
Foreign exchange
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,934
|
|
|
|
Other,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,222)
|
|
|
|
Operating profit
(loss)
|
|
$
63,993
|
|
$
6,099
|
|
$
14,451
|
|
$
14,471
|
|
$
407
|
|
$
28,565
|
|
$
(45,236)
|
|
$
18,757
|
|
|
|
margin
|
|
5.9%
|
|
1.2%
|
|
19.1%
|
|
11.2%
|
|
0.4%
|
|
10.9%
|
|
|
|
1.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
34,629
|
|
18,499
|
|
1,185
|
|
3,163
|
|
2,315
|
|
9,467
|
|
583
|
|
35,212
|
|
|
|
Goodwill and other
asset impairment
|
|
21,008
|
|
21,008
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,317
|
|
23,325
|
|
|
|
Stock-based
compensation
|
|
12,793
|
|
8,492
|
|
945
|
|
542
|
|
282
|
|
2,532
|
|
4,089
|
|
16,882
|
|
|
|
Deferred acquisition
consideration adjustments
|
|
8,522
|
|
2,778
|
|
-
|
|
1,335
|
|
183
|
|
4,226
|
|
-
|
|
8,522
|
|
|
|
Distributions from
non-consolidated affiliates **
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
509
|
|
509
|
|
|
|
Other items, net
***
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
7,400
|
|
7,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
*
|
|
$
140,945
|
|
$
56,876
|
|
$
16,581
|
|
$
19,511
|
|
$
3,187
|
|
$
44,790
|
|
$
(30,338)
|
|
$
110,607
|
|
|
|
margin
|
|
13.0%
|
|
11.1%
|
|
22.0%
|
|
15.0%
|
|
3.1%
|
|
17.1%
|
|
|
|
10.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA is a
non-GAAP measure, but as shown above it represents operating profit
(loss) plus depreciation and amortization, goodwill and other asset
impairment, stock-based compensation, deferred
acquisition
|
|
|
|
consideration
adjustments, distributions from non-consolidated affiliates, and
other items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** Other items, net
includes severance expense and other restructuring expenses, legal
fees and related expenses, net of insurance proceeds, relating to
the SEC investigation and related class action litigation
claims. 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 Three
Months Ended September 30, 2017, as reported under ASC
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and
|
|
Integrated
|
|
Creative
|
|
Specialized
|
|
Media
|
|
|
|
|
|
|
|
|
|
Communications
|
|
Agencies
|
|
Agencies
|
|
Communications
|
|
Services
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
375,800
|
|
$
196,974
|
|
$
28,096
|
|
$
40,670
|
|
$
38,315
|
|
$
71,745
|
|
$
-
|
|
$
375,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
14,137
|
|
Adjustments to
reconcile to operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on and net income allocated to
convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preference
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,356
|
|
Net
income attributable to the noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,491
|
|
Equity
in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,422)
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,049
|
|
Interest
expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,258
|
|
Foreign exchange
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,913)
|
|
Other,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,264
|
|
Operating profit
(loss)
|
|
$
47,946
|
|
$
20,069
|
|
$
6,627
|
|
$
4,775
|
|
$
2,555
|
|
$
13,920
|
|
$
(10,726)
|
|
$
37,220
|
|
margin
|
|
12.8%
|
|
10.2%
|
|
23.6%
|
|
11.7%
|
|
6.7%
|
|
19.4%
|
|
|
|
9.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
10,996
|
|
6,365
|
|
375
|
|
1,220
|
|
1,011
|
|
2,025
|
|
256
|
|
11,252
|
|
Stock-based
compensation
|
|
5,903
|
|
3,842
|
|
188
|
|
659
|
|
160
|
|
1,054
|
|
477
|
|
6,380
|
|
Deferred acquisition
consideration adjustments
|
|
(2,462)
|
|
1,901
|
|
-
|
|
136
|
|
115
|
|
(4,614)
|
|
-
|
|
(2,462)
|
|
Distributions from
non-consolidated affiliates **
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,118
|
|
1,118
|
|
Other items, net
***
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
330
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
*
|
|
$
62,383
|
|
$
32,177
|
|
$
7,190
|
|
$
6,790
|
|
$
3,841
|
|
$
12,385
|
|
$
(8,545)
|
|
$
53,838
|
|
margin
|
|
16.6%
|
|
16.3%
|
|
25.6%
|
|
16.7%
|
|
10.0%
|
|
17.3%
|
|
|
|
14.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** Other items, net
includes legal fees and related expenses, net of insurance
proceeds, relating to the SEC investigation and related class
action litigation claims. See Schedule 10 for a
reconciliation of amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Due to changes
in the Company's internal management and reporting structure during
2018, reportable segment results for the 2017 periods presented
have been recasted to reflect the reclassification of certain
businesses between segments. The changes were as follows: 1)
Source Marketing, previously within the All Other category, was
included within the Doner operating segment, which is aggregated
into the Global Integrated Agencies reportable segment, 2)
Yamamoto, previously within the All Other category, was included
within the Domestic Creative Agencies reportable segment, and 3)
Bruce Mau Design, Hello Design and Northstar Research Partners,
previously within the All Other category, and Varick Media
Management, previously within the Media Services reportable
segment, were included into a newly formed operating segment,
Yes & Company, which is aggregated within the Media Services
reportable segment.
|
|
|
|
|
|
SCHEDULE
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS
INC.
|
|
|
|
UNAUDITED
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
|
|
|
(US$ in 000s,
except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
Months Ended September 30, 2017, as reported under ASC
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and
|
|
Integrated
|
|
Creative
|
|
Specialized
|
|
Media
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
Agencies
|
|
Agencies
|
|
Communications
|
|
Services
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
1,111,032
|
|
$
585,290
|
|
$
77,325
|
|
$
125,470
|
|
$
122,207
|
|
$
200,740
|
|
$
-
|
|
$
1,111,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
13,033
|
|
|
|
Adjustments to
reconcile to operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on and net income allocated to
convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preference
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,147
|
|
|
|
Net
income attributable to the noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,588
|
|
|
|
Equity
in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,924)
|
|
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,659
|
|
|
|
Interest
expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,309
|
|
|
|
Foreign exchange
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,798)
|
|
|
|
Other,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
986
|
|
|
|
Operating profit
(loss)
|
|
$
100,983
|
|
$
33,240
|
|
$
15,411
|
|
$
13,423
|
|
$
9,169
|
|
$
29,740
|
|
$
(28,983)
|
|
$
72,000
|
|
|
|
margin
|
|
9.1%
|
|
5.7%
|
|
19.9%
|
|
10.7%
|
|
7.5%
|
|
14.8%
|
|
|
|
6.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
32,052
|
|
17,913
|
|
1,172
|
|
3,657
|
|
3,232
|
|
6,078
|
|
864
|
|
32,916
|
|
|
|
Stock-based
compensation
|
|
15,271
|
|
9,912
|
|
534
|
|
2,264
|
|
495
|
|
2,066
|
|
1,599
|
|
16,870
|
|
|
|
Deferred acquisition
consideration adjustments
|
|
13,275
|
|
12,367
|
|
359
|
|
606
|
|
429
|
|
(486)
|
|
-
|
|
13,275
|
|
|
|
Distributions from
non-consolidated affiliates **
|
|
105
|
|
-
|
|
-
|
|
105
|
|
-
|
|
-
|
|
1,118
|
|
1,223
|
|
|
|
Other items, net
***
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
365
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
*
|
|
$
161,686
|
|
$
73,432
|
|
$
17,476
|
|
$
20,055
|
|
$
13,325
|
|
$
37,398
|
|
$
(25,037)
|
|
$
136,649
|
|
|
|
margin
|
|
14.6%
|
|
12.5%
|
|
22.6%
|
|
16.0%
|
|
10.9%
|
|
18.6%
|
|
|
|
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, deferred acquisition consideration adjustments,
distributions from
|
|
|
|
non-consolidated
affiliates, and other items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*** Other items, net
includes legal fees and related expenses, net of insurance
proceeds, relating to the SEC investigation and related class
action litigation claims. See Schedule 10 for a
reconciliation of amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Due to changes
in the Company's internal management and reporting structure during
2018, reportable segment results for the 2017 periods presented
have been recasted to reflect the reclassification of certain
businesses between segments. The changes were as follows: 1)
Source Marketing, previously within the All Other category, was
included within the Doner operating segment, which is aggregated
into the Global Integrated Agencies reportable segment, 2)
Yamamoto, previously within the All Other category, was included
within the Domestic Creative Agencies reportable segment, and 3)
Bruce Mau Design, Hello Design and Northstar Research Partners,
previously within the All Other category, and Varick Media
Management, previously within the Media Services reportable
segment, were included into a newly formed operating segment,
Yes & Company, which is aggregated within the Media Services
reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
8
|
|
|
|
|
|
MDC PARTNERS
INC.
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
(US$ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
25,056
|
|
$
46,179
|
Cash held in
trusts
|
|
3,965
|
|
4,632
|
Accounts receivable,
net
|
|
437,024
|
|
434,072
|
Expenditures billable
to clients
|
|
59,317
|
|
31,146
|
Other current
assets
|
|
37,867
|
|
26,742
|
Total current
assets
|
|
563,229
|
|
542,771
|
Fixed assets,
net
|
|
90,249
|
|
90,306
|
Investments in
non-consolidated affiliates
|
|
6,814
|
|
6,307
|
Goodwill
|
|
843,180
|
|
835,935
|
Other intangible
assets, net
|
|
75,115
|
|
70,605
|
Deferred tax
assets
|
|
122,505
|
|
115,325
|
Other
assets
|
|
28,632
|
|
37,643
|
Total
assets
|
|
$
1,729,724
|
|
$
1,698,892
|
|
|
|
|
|
Liabilities,
redeemable noncontrolling interests, and shareholders'
deficit
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
219,757
|
|
$
244,527
|
Trust
liability
|
|
3,965
|
|
4,632
|
Accruals and other
liabilities
|
|
300,664
|
|
327,812
|
Advance
billings
|
|
182,305
|
|
148,133
|
Current portion of
long-term debt
|
|
360
|
|
313
|
Current portion of
deferred acquisition consideration
|
|
37,902
|
|
50,213
|
Total current
liabilities
|
|
744,953
|
|
775,630
|
Long-term debt, less
current portion
|
|
987,880
|
|
882,806
|
Long-term portion of
deferred acquisition consideration
|
|
56,827
|
|
72,213
|
Other
liabilities
|
|
53,912
|
|
54,110
|
Deferred tax
liabilities
|
|
6,899
|
|
6,760
|
Total
liabilities
|
|
1,850,471
|
|
1,791,519
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
57,193
|
|
62,886
|
|
|
|
|
|
Shareholders'
deficit
|
|
|
|
|
Convertible
preference shares (liquidation preference $107,556 and
$101,352)
|
|
90,123
|
|
90,220
|
Common
shares
|
|
362,195
|
|
352,432
|
Charges in excess of
capital
|
|
(311,576)
|
|
(314,241)
|
Accumulated
deficit
|
|
(383,305)
|
|
(340,000)
|
Accumulated other
comprehensive gain (loss)
|
|
(1,319)
|
|
(1,954)
|
MDC Partners Inc.
shareholders' deficit
|
|
(243,882)
|
|
(213,543)
|
Noncontrolling
interests
|
|
65,942
|
|
58,030
|
Total shareholders'
deficit
|
|
(177,940)
|
|
(155,513)
|
Total liabilities,
redeemable noncontrolling interests, and shareholders'
deficit
|
|
$
1,729,724
|
|
$
1,698,892
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
9
|
|
|
|
|
|
|
MDC PARTNERS
INC.
|
|
UNAUDITED SUMMARY
CASH FLOW DATA
|
|
(US$ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2018
|
2017
|
|
|
|
|
|
|
Net cash used in
operating activities
|
|
$
(31,729)
|
$
(14,450)
|
|
|
|
|
|
|
Net cash used in
investing activities
|
|
(48,355)
|
(19,503)
|
|
|
|
|
|
|
Net cash provided by
financing activities
|
|
59,122
|
24,887
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(161)
|
6
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
|
$
(21,123)
|
$
(9,060)
|
|
|
|
|
|
|
|
|
|
|
|
Note: Effective
January 1, 2018, we adopted ASU 2016-15, "Statement of Cash Flows",
which clarifies how cash receipts and cash payments in certain
transactions are presented and classified on the statement of
cash flows. We applied ASU 2016-15 on a retrospective basis, and
accordingly the prior period has been reclassified to conform to
the new standard.
|
SCHEDULE
10
|
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS
INC.
|
UNAUDITED
RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
|
(US$ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
NON-GAAP
ACQUISITIONS (DISPOSITIONS), NET
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenue from
current year acquisitions
|
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
|
$
-
|
$
11,066
|
$
12,734
|
$
23,800
|
GAAP revenue from
prior year acquisitions *
|
|
18,552
|
24,983
|
-
|
-
|
43,535
|
|
-
|
-
|
-
|
-
|
Impact of adoption of
ASC 606 exclusion
|
|
-
|
-
|
-
|
-
|
-
|
|
-
|
450
|
(1,122)
|
(672)
|
Foreign exchange
impact
|
|
1,046
|
1,341
|
-
|
-
|
2,387
|
|
-
|
-
|
-
|
-
|
Contribution to
organic revenue (growth) decline **
|
|
1,470
|
(6,399)
|
-
|
-
|
(4,929)
|
|
-
|
(3,417)
|
(945)
|
(4,362)
|
Prior year revenue
from dispositions ***
|
|
(691)
|
(660)
|
(3,153)
|
(6,103)
|
(10,607)
|
|
(5,261)
|
(5,592)
|
(3,847)
|
(14,700)
|
Non-GAAP acquisitions
(dispositions), net
|
|
$
20,377
|
$
19,265
|
$
(3,153)
|
$
(6,103)
|
$
30,386
|
|
$
(5,261)
|
$
2,507
|
$
6,820
|
$
4,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
OTHER ITEMS,
NET
|
|
|
|
|
|
|
|
|
|
|
|
SEC investigation and
class action litigation expenses
|
|
$
339
|
$
382
|
$
330
|
$
287
|
$
1,338
|
|
$
122
|
$
235
|
$
(88)
|
$
269
|
D&O insurance
proceeds
|
|
(204)
|
(482)
|
-
|
(399)
|
(1,085)
|
|
-
|
(303)
|
(231)
|
(534)
|
Severance and other
restructuring expenses
|
|
-
|
-
|
-
|
-
|
-
|
|
-
|
-
|
7,665
|
7,665
|
Total other items,
net
|
|
$
135
|
$
(100)
|
$
330
|
$
(112)
|
$
253
|
|
$
122
|
$
(68)
|
$
7,346
|
$
7,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
CASH INTEREST, NET
& OTHER
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest
paid
|
|
$
(999)
|
$
(30,567)
|
$
(758)
|
$
(30,571)
|
$
(62,895)
|
|
$
(649)
|
$
(30,765)
|
$
(1,597)
|
$
(33,011)
|
Bond interest accrual
adjustment
|
|
(14,625)
|
14,625
|
(14,625)
|
14,625
|
-
|
|
(14,625)
|
14,625
|
(14,625)
|
(14,625)
|
Adjusted cash
interest paid
|
|
(15,624)
|
(15,942)
|
(15,383)
|
(15,946)
|
(62,895)
|
|
(15,274)
|
(16,140)
|
(16,222)
|
(47,636)
|
Interest
income
|
|
227
|
178
|
145
|
209
|
759
|
|
148
|
159
|
91
|
398
|
Total cash interest,
net & other
|
|
$
(15,397)
|
$
(15,764)
|
$
(15,238)
|
$
(15,737)
|
$
(62,136)
|
|
$
(15,126)
|
$
(15,981)
|
$
(16,131)
|
$
(47,238)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
CAPITAL
EXPENDITURES, NET
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
(9,413)
|
$
(11,743)
|
$
(7,149)
|
$
(4,653)
|
$
(32,958)
|
|
$
(3,799)
|
$
(5,890)
|
$
(5,543)
|
$
(15,232)
|
Landlord
reimbursements
|
|
75
|
3,146
|
1,357
|
1,858
|
6,436
|
|
219
|
851
|
291
|
1,361
|
Total capital
expenditures, net
|
|
$
(9,338)
|
$
(8,597)
|
$
(5,792)
|
$
(2,795)
|
$
(26,522)
|
|
$
(3,580)
|
$
(5,039)
|
$
(5,252)
|
$
(13,871)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
MISCELLANEOUS
OTHER DISCLOSURES
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to the noncontrolling interests
|
|
$
883
|
$
2,214
|
$
3,491
|
$
8,787
|
$
15,375
|
|
$
897
|
$
2,545
|
$
2,458
|
$
5,900
|
Cash taxes
|
|
$
1,293
|
$
2,130
|
$
3,486
|
$
1,191
|
$
8,100
|
|
$
1,333
|
$
1,293
|
$
2,196
|
$
4,822
|
Acquisition deal
costs
|
|
$
234
|
$
242
|
$
216
|
$
185
|
$
877
|
|
$
376
|
$
335
|
$
232
|
$
943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* GAAP revenue from
prior year acquisitions for 2018 and 2017 relates to acquisitions
which occurred in 2017 and 2016, respectively.
|
**
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.
|
*** 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
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/mdc-partners-inc-reports-results-for-the-three-and-nine-months-ended-september-30-2018-300739295.html
SOURCE MDC Partners Inc.