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Revenue increased to $267.8 million versus $235.7 million in Q3 2011, an increase of 13.6%
Organic revenue increased 6.7% for Q3 2012
EBITDA increased to $33.7 million versus $17.3 million in Q3 2011, an increase of 94.7%
EBITDA margin increased 530 basis points to 12.6% versus 7.3% in Q3 2011
Free Cash Flow (as defined) increased to $17.4 million versus an outflow of ($3.7) million in Q3 2011
Net new business wins of $23.4 million for Q3 2012
NINE MONTHS HIGHLIGHTS:
Revenue increased to $777.3 million versus $686.3 million in the nine months ended September 30, 2011, an increase of 13.2%
Organic revenue increased 7.2% year to date for 2012
EBITDA increased to $73.4 million versus $66.7 million in the nine months ended September 30, 2011, an increase of 10.0%
Free Cash Flow improved to $24.2 million versus $15.7 million in the nine months ended September 30, 2011, an increase of 54.2%
Net new business wins of $103.2 million in the nine months ended September 30, 2012, an increase of 36.4%
MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended September 30, 2012.
Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "We are very pleased with our third quarter financial performance. Following a three-year period of investment in our business, our results in the third quarter, and particularly our growth in EBITDA and margin, are proof that our plan to broaden our service offering and to build new platforms that represent the future of the industry is working. We are well on our way to continued margin expansion in the periods to come as we leverage the investments we have made."
Guidance for 2012 is maintained as follows:
Implied
2012
Year over Year
Guidance
Change
Revenue
$1,050 - $1,075 million
+11.3% to +14.0%
EBITDA
$110 - $115 million
+21.2% to +26.7%
Free Cash Flow
$35 - $40 million
+50.8% to +72.3%
+ Change in Working Capital and Other
+$25 million
Total Free Cash Flow
$60 - $65 million
+10.6% to +19.8%
Implied EBITDA Margin
10.5% - 10.7%
+90 to +110 basis points
Consolidated revenue for the third quarter of 2012 was $267.8 million, an increase of 13.6% compared to $235.7 million in the third quarter of 2011. EBITDA (as defined) for the third quarter of 2012 was $33.7 million, an increase of 94.7% compared to $17.3 million in the third quarter of 2011, as the company realized 530 basis points of EBITDA margin expansion from the leveraging of prior investments in growth initiatives. Loss attributable to MDC Partners in the third quarter was ($14.5) million compared to a loss of ($19.6) million in the third quarter of 2011. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the third quarter of 2012 was ($0.45) compared to ($0.65) per share in the same period of 2011. Free cash flow from operations (as defined) was $17.4 million in the third quarter of 2012, compared with an outflow of ($3.7) million in the third quarter of 2011.
For the nine month period ended September 30, 2012, consolidated revenue was $777.3 million, an increase of 13.2% compared to $686.3 million in the nine months ended September 30, 2011. EBITDA (as defined) for the nine months ended 2012 increased 10.0% to $73.4 million compared to $66.7 million in the same period of 2011. Loss attributable to MDC Partners in the nine months ended 2012 was ($60.9) million compared to a loss of ($26.9) million in the nine months ended 2011. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the nine months ended 2012 was ($1.89) compared to a loss of ($0.86) per share in the same period of 2011. Free cash flow from operations (as defined) was $24.2 million in the nine months ended 2012, compared with $15.7 million in the same period of 2011.
David Doft, CFO of MDC Partners, said, "We are making significant progress reducing our balance sheet leverage, which was at 3.46 times net debt-to-pro-forma-EBITDA as of the end of the quarter. Our focus over the next several quarters is to bring our leverage down further, and we expect it to be between 3.0 and 3.5 times net debt-to-pro-forma-EBITDA by year-end and 2.5 to 3 times net debt-to-pro-forma-EBITDA by the end of 2013. We believe that a stronger balance sheet in conjunction with expanding EBITDA and margin growth will result in stronger equity returns for shareholders over time."
Conference Call
Management will host a conference call on Monday, November 5, 2012 at 4:30 p.m. (EST) to discuss results. The conference call will be accessible by dialing 1-412-858-4600 or toll free 1-800-860-2442. An investor presentation has been posted on our website www.mdc-partners.com and will be referred to during the conference call.
A recording of the conference call will be available one hour after the call until 9:00 a.m.November 19, 2012, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10019812) or by visiting our website at www.mdc-partners.com.
About MDC Partners Inc.
MDC is a Business Transformation Organization that utilizes technology, marketing communications, data analytics and insights and strategic consulting solutions to drive meaningful returns on Marketing and Communications Investments for multinational clients in the United States, Canada, Europe, Latin America and the Caribbean.
MDC's durable competitive advantage is to Empower the Most Talented Entrepreneurial Thought Leaders to Drive Business Success to new levels of Achievement, for both our Clients and our Shareholders, reinforcing MDC's reputation as "The Place Where Great Talent Lives."
MDC Partners' Class A shares are publicly traded on NASDAQ under the symbol "MDCA" and on the Toronto Stock Exchange under the symbol "MDZ.A".
Non-GAAP Financial Measures
In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to: (1) presenting EBITDA and EBITDA margin (as defined) for the three and nine months ended September 30, 2012 and 2011; and (2) presenting Total Free Cash Flow, Free Cash Flow and Free Cash Flow per Share (as defined) for the three and nine months ended September 30, 2012 and 2011. Included in this earnings release are tables reconciling MDC's reported results to arrive at these non-GAAP financial measures.
This press release contains forward-looking statements. The Company's representatives may also make forward-looking statements orally from time to time. Statements in this press release that are not historical facts, including statements about the Company's beliefs and expectations, earnings guidance, recent business and economic trends, potential acquisitions, estimates of amounts for deferred acquisition consideration and "put" option rights, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
risks associated with severe effects of international, national and regional economic downturn;
the Company's ability to attract new clients and retain existing clients;
the spending patterns and financial success of the Company's clients;
the Company's ability to retain and attract key employees;
the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to "put" option right and deferred acquisition consideration;
the successful completion and integration of acquisitions which complement and expand the Company's business capabilities; and
foreign currency fluctuations.
The Company's business strategy includes ongoing efforts to engage in material acquisitions of ownership interests in entities in the marketing communications services industry. The Company intends to finance these acquisitions by using available cash from operations, from borrowings under its credit facility and through incurrence of bridge or other debt financing, any of which may increase the Company's leverage ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate ownership. At any given time the Company may be engaged in a number of discussions that may result in one or more material acquisitions. These opportunities require confidentiality and may involve negotiations that require quick responses by the Company. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of the Company's securities.
Investors should carefully consider these risk factors and the additional risk factors outlined in more detail in the Annual Report on Form 10-K under the caption "Risk Factors" and in the Company's other SEC filings.
SCHEDULE 1
MDC PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in 000s, except share and per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
Revenue
$267,817
$235,706
$777,269
$686,335
Operating Expenses:
Cost of services sold
180,888
173,526
546,117
489,207
Office and general expenses
73,168
55,373
207,297
152,093
Depreciation and amortization
12,435
9,778
36,071
29,645
266,491
238,677
789,485
670,945
Operating profit (loss)
1,326
(2,971)
(12,216)
15,390
Other Income (Expenses):
Other expense, net
(433)
(3,112)
(1,242)
(2,350)
Interest expense
(11,594)
(10,800)
(34,420)
(31,030)
Interest income
70
51
183
152
Loss from continuing operations before income taxes
and equity in affiliates
(10,631)
(16,832)
(47,695)
(17,838)
Income tax expense (recovery)
2,207
(42)
6,014
904
Loss from continuing operations before equity in affiliates
(12,838)
(16,790)
(53,709)
(18,742)
Equity in earnings (loss) of non-consolidated affiliates
93
(120)
399
214
Loss from continuing operations
(12,745)
(16,910)
(53,310)
(18,528)
Loss from discontinued operations, net of taxes
(630)
(608)
(3,153)
(1,869)
Net loss
(13,375)
(17,518)
(56,463)
(20,397)
Net income attributable to the noncontrolling interests
(1,121)
(2,056)
(4,428)
(6,537)
Net loss attributable to MDC Partners Inc.
($14,496)
($19,574)
($60,891)
($26,934)
Loss Per Common Share:
Basic and Diluted:
Loss from continuing operations attributable to MDC
Partners Inc. common shareholders
($0.45)
($0.65)
($1.89)
($0.86)
Discontinued operations attributable to MDC
Partners Inc. common shareholders
($0.02)
($0.02)
($0.10)
($0.07)
Loss attributable to MDC Partners Inc.
common shareholders
($0.47)
($0.67)
($1.99)
($0.93)
Weighted Average Number of Common Shares:
Basic and Diluted
31,051,561
29,158,703
30,606,146
29,051,450
SCHEDULE 2
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended September 30, 2012
Strategic
Performance
Marketing
Marketing
Services
Services
Corporate
Total
Revenue
$176,672
$91,145
-
$267,817
Operating income (loss) as reported
$8,158
($214)
($6,618)
$1,326
margin
4.6%
-0.2%
0.5%
Add:
Depreciation and amortization
7,813
4,292
330
12,435
Stock-based compensation
2,769
2,009
355
5,133
Acquisition deal costs
213
160
438
811
Deferred acquisition consideration adjustments to P&L
10,964
2,667
-
13,631
Profit distributions from affiliates
-
-
376
376
EBITDA *
$29,917
$8,914
($5,119)
$33,712
margin
16.9%
9.8%
12.6%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended September 30, 2011
Strategic
Performance
Marketing
Marketing
Services
Services
Corporate
Total
Revenue
$146,130
$89,576
-
$235,706
Operating income (loss) as reported
($183)
$6,726
($9,514)
(2,971)
margin
-0.1%
7.5%
-1.3%
Add:
Depreciation and amortization
5,353
4,200
225
9,778
Stock-based compensation
2,173
1,608
3,990
7,771
Acquisition deal costs
52
251
494
797
Deferred acquisition consideration adjustments to P&L
2,871
(1,027)
-
1,844
Profit distributions from affiliates
-
-
100
100
EBITDA*
$10,266
$11,758
($4,705)
$17,319
margin
7.0%
13.1%
7.3%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
SCHEDULE 3
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Nine Months Ended September 30, 2012
Strategic
Performance
Marketing
Marketing
Services
Services
Corporate
Total
Revenue
$520,518
$256,751
-
$777,269
Operating income (loss) as reported
$22,044
($2,057)
($32,203)
($12,216)
margin
4.2%
-0.8%
-1.6%
Add:
Depreciation and amortization
21,738
13,326
1,007
36,071
Stock-based compensation
6,602
5,587
14,181
26,370
Acquisition deal costs
863
448
1,170
2,481
Deferred acquisition consideration adjustments to P&L
17,820
2,306
-
20,126
Profit distributions from affiliates
-
-
542
542
EBITDA *
$69,067
$19,610
($15,303)
$73,374
margin
13.3%
7.6%
9.4%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Nine Months Ended September 30, 2011
Strategic
Performance
Marketing
Marketing
Services
Services
Corporate
Total
Revenue
$442,580
$243,755
-
$686,335
Operating income (loss) as reported
$30,840
$11,594
($27,044)
$15,390
margin
7.0%
4.8%
2.2%
Add:
Depreciation and amortization
16,342
12,857
446
29,645
Stock-based compensation
3,896
2,591
11,333
17,820
Acquisition deal costs
451
635
1,352
2,438
Deferred acquisition consideration adjustments to P&L
3,428
(2,562)
-
866
Profit distributions from affiliates
-
-
548
548
EBITDA*
$54,957
$25,115
($13,365)
$66,707
margin
12.4%
10.3%
9.7%
* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.
SCHEDULE 4
MDC PARTNERS INC.
FREE CASH FLOW
(US$ in 000s, except share and per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
EBITDA
$33,712
$17,319
$73,374
$66,707
Net Income Attributable to Noncontrolling Interests
(1,121)
(2,056)
(4,428)
(6,537)
Capital Expenditures, net (1)
(4,736)
(9,145)
(13,679)
(16,168)
Cash Taxes
(572)
(29)
(919)
(164)
Cash Interest, net & Other
(9,871)
(9,744)
(30,138)
(28,142)
Free Cash Flow (2)
$17,412
($3,655)
$24,210
$15,696
Changes in Working Capital (3)
17,742
14,257
96,421
(14,811)
Total Free Cash Flow (2)
$35,154
$10,602
$120,631
$885
Diluted Common Shares Outstanding
31,051,561
29,158,703
30,606,146
29,051,450
Total Free Cash Flow per Share (2)
$1.13
$0.36
$3.94
$0.03
(1) Capital Expenditures, net represents capital expenditures net of landlord reimbursements.
(2) Free Cash Flow and Total Free Cash Flow are non-GAAP measures. As shown above, Free Cash Flow represents EBITDA less net income attributable to noncontrolling interests, less capital expenditures, less cash taxes, less net cash interest (including interest paid and other)
(3) Changes in Working Capital includes cash acquired in acquisitions.
SCHEDULE 5
MDC PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
September 30,
December 31,
2012
2011
Assets
Current Assets:
Cash and cash equivalents
$72,799
$8,096
Accounts receivable, net
313,540
238,592
Expenditures billable to clients
52,554
39,067
Other current assets
17,634
12,657
Total Current Assets
456,527
298,412
Fixed assets, net
51,852
47,737
Investment in affiliates
18
99
Goodwill
718,196
605,244
Other intangible assets, net
75,985
57,980
Deferred tax assets
15,500
15,380
Other assets
33,663
30,893
Total Assets
$1,351,741
$1,055,745
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable
$311,023
$178,282
Accrued and other liabilities
87,682
72,930
Advance billings
127,636
122,021
Current portion of long term debt
1,871
1,238
Current portion of deferred acquisition consideration
82,765
51,829
Total Current Liabilities
610,977
426,300
Long-term debt
469,780
383,936
Long-term portion of deferred acquisition consideration
85,804
85,394
Other liabilities
49,778
14,900
Deferred tax liabilities
55,248
50,724
Total Liabilities
1,271,587
961,254
Redeemable Noncontrolling Interests
100,455
107,432
Shareholders' Equity (Deficit)
Common shares
253,245
228,209
Shares to be issued
424
424
Charges in excess of capital
(58,234)
(45,102)
Accumulated deficit
(292,165)
(231,274)
Stock subscription receivable
(55)
(55)
Accumulated other comprehensive loss
(933)
(4,658)
MDC Partners Inc. Shareholders' Deficit
(97,718)
(52,456)
Noncontrolling Interests
77,417
39,515
Total Deficit
(20,301)
(12,941)
Total Liabilities, Redeemable Noncontrolling
Interests and Deficit
$1,351,741
$1,055,745
SCHEDULE 6
MDC PARTNERS INC.
SUMMARY CASH FLOW DATA
(US$ in 000s)
Nine Months Ended September 30,
2012
2011
Cash flows provided by (used in) continuing operating activities
$18,119
($3,770)
Discontinued operations
(2,313)
(2,411)
Net cash provided by (used in) operating activities
15,806
(6,181)
Net cash provided by (used in) continuing investing activities
13,727
(37,660)
Discontinued operations
46
(252)
Net cash provided by (used in) investing activities
13,773
(37,912)
Net cash provided by continuing financing activities
35,143
41,162
Effect of exchange rate changes on cash and cash equivalents
(19)
(673)
Net increase (decrease) in cash and cash equivalents
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