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

 

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-nine-months-ended-september-30-2018-300739295.html

SOURCE MDC Partners Inc.

Copyright 2018 Canada NewsWire

MDC Partners (NASDAQ:MDCA)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more MDC Partners Charts.
MDC Partners (NASDAQ:MDCA)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more MDC Partners Charts.