NEW YORK, Nov. 3, 2016 /PRNewswire/ --
THIRD QUARTER HIGHLIGHTS:
- Reported revenue increased 6.3% to $349.3 million; Organic revenue growth of 2.7%, 30 basis
points favorable impact from increased billable pass-through costs
- Net loss attributable to MDC Partners of ($33.5) million vs ($8.6)
million, including a non-cash impairment charge of $29.6 million predominantly related to
our experiential business
- Adjusted EBITDA decreased 13.5% to $46.3 million, with margins of 13.2% (See Schedules 2
and 3)
- 2016 guidance revised to reflect lowered full year expectations and cost of restructuring efforts
- Quarterly dividend suspended to allocate resources to accelerated de-leveraging and strategic growth initiatives
- Advisor hired to assist in evaluating the Company's financial and capital structure strategy
YEAR-TO-DATE HIGHLIGHTS:
- Reported revenue increased 2.9% to $995.3 million; Organic revenue growth of 1.7%, 70 basis
point negative impact from decreased billable pass-through costs
- Net loss attributable to MDC Partners of ($55.7) million vs ($11.1)
million, including a non-cash impairment charge of $29.6 million predominantly related to
our experiential business
- Adjusted EBITDA decreased 8.4% to $121.0 million, with margins of 12.2% (See Schedules 4
and 5)
- Net New Business wins totaled $1.3 million in Q3 and $58.0
million year-to-date
(NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine
months ended September 30, 2016.
Scott Kauffman, Chairman and Chief Executive Officer of MDC Partners, said, "The third quarter
was impacted by the many actions we are taking to position our business for long-term profitable growth and balance sheet
strength. We are reducing expenses, optimizing our partner portfolio, and re-prioritizing how we allocate capital, all
while investing in our partners to ensure that they have the right resources to continue to drive outstanding performance for our
clients. While some of these efforts carry near-term costs, which is contributing to our lower full year financial projections,
we expect to reap the benefits in 2017. In addition, the suspension of our dividend will free up over $11
million in cash per quarter, which we plan to allocate toward enhanced liquidity, accelerated de-leveraging and investment
in growth initiatives. We are confident that the moves we are making, alongside our active pipeline of new business
opportunities, will lead to a reacceleration of the business beginning in 2017."
David Doft, CFO of MDC Partners, said, "Our lowered 2016 outlook reflects a diminished revenue
recovery in the second half of the year as well as the upfront costs associated with our expense containment and restructuring
initiatives. While we won't see the payback this year, these actions will enable us to permanently remove approximately
$30 million of costs on a run-rate basis. We will rebuild off this leaner cost base into next year,
manage to more optimal profit ratios and return to building the long-term value of our business."
Third Quarter and Year-to-Date Financial Results
Revenue for the third quarter of 2016 was $349.3 million, an increase of 6.3%, compared to
$328.4 million in the third quarter of 2015. The effect of foreign currency translation was
negative 0.6%, the impact of net acquisitions was positive 4.3%, and the resulting organic revenue growth was 2.7%. Organic
revenue growth for the period was favorably impacted by 30 basis points from increased billable pass-through costs incurred on
client's behalf from certain of our partner firms acting as principal.
Net loss attributable to MDC Partners in the third quarter of 2016 was ($33.5) million compared
to ($8.6) million in the third quarter of 2015, partially attributable to a non-cash charge on
impairment of $29.6 million predominantly related to our experiential business. Diluted loss
per share from continuing operations attributable to MDC Partners common shareholders for the third quarter of 2016 was
($0.64) compared to ($0.15) per share in the third quarter of
2015. Adjusted EBITDA for the third quarter of 2016 was $46.3 million, a decrease of 13.5%
compared to $53.5 million in the third quarter of 2015. Adjusted EBITDA Available for General
Capital Purposes was $21.7 million in the third quarter of 2016, a decrease of 29.7%, compared to
$30.9 million in the third quarter of 2015.
Revenue for the first nine months of 2016 was $995.3 million, an increase of 2.9%, compared to
$967.2 million in the first nine months of 2015. The effect of foreign currency translation
was negative 0.8%, the impact of net acquisitions was positive 2.0%, and the resulting organic revenue growth was 1.7%. Organic
revenue growth for the period was negatively impacted by 70 basis points from decreased billable pass-through costs incurred on
client's behalf from certain of our partner firms acting as principal.
Net loss attributable to MDC Partners in the first nine months of 2016 was ($55.7) million
compared to ($11.1) million in the first nine months of 2015, partially attributable to a non-cash
charge on impairment of $29.6 million predominantly related to our experiential business.
Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the first nine months of
2016 was ($1.09) compared to ($0.10) per share in the first nine
months of 2015. Adjusted EBITDA for the first nine months of 2016 was $121.0 million, a
decrease of 8.4%, compared to $132.1 million in the first nine months of 2015. Adjusted
EBITDA Available for General Capital Purposes was $50.7 million in the first nine months of 2016, a
decrease of 26.4%, compared to $68.9 million in the first nine months of 2015.
Financial Guidance
Guidance for 2016 is revised as follows:
|
|
|
|
Prior
|
|
Revised
|
|
Implied
|
|
|
2015
Actuals
|
|
2016
Guidance
|
|
2016
Guidance
|
|
Year over Year
Change
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$1.326 billion
|
|
$1.390 - $1.420 billion
|
|
$1.365 - $1.375 billion
|
|
+2.9% to +3.7%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$197.7 million
|
|
$205 - $215 million
|
|
$170 - $180 million
|
|
-14.0% to -8.9%
|
|
Implied Adjusted EBITDA Margin
|
|
14.9%
|
|
14.7% to 15.1%
|
|
12.4% to 13.2%
|
|
-250 to -170 basis points
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Available for
General Capital Purposes
|
|
$113.4 million
|
|
$110 - $120 million
|
|
$75 - $85 million
|
|
-33.9% to -25.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisor hired to assist in evaluating the Company's financial and capital structure strategy
The Company also announced today that it engaged LionTree Advisors to assist in evaluating the Company's financial and capital
structure strategy. The Company's leadership team and Board of Directors reiterate their commitment to solidifying the balance
sheet and capital structure in its continued efforts to enhance shareholder value.
Conference Call
Management will host a conference call on Thursday, November 3, 2016, at 4:30 p.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 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 10, 2016, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode
10095565), or by visiting our website at www.mdc-partners.com.
About MDC Partners Inc.
MDC Partners is one of the fastest-growing and most influential marketing and communications networks in the world. Its
50+ advertising, public relations, branding, digital, social and event marketing agencies are responsible for some of the most
memorable and engaging campaigns for the world's most respected brands. As "The Place Where Great Talent Lives," MDC
Partners is known for its unique partnership model, empowering the most entrepreneurial and innovative talent to drive
competitive advantage and business growth for clients. By leveraging technology, data analytics, insights, and strategic
consulting solutions, MDC Partners drives measurable results and optimizes 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 for the three and
nine months ended September 30, 2016, and 2015, include the following:
(1) Organic Revenue: "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results,
respectively, of the following calculation: (i) the change in revenue during the relevant time period, less (ii) for each
business acquired in the current year, the incremental impact on revenue for the comparable period prior to the Company's
ownership of such acquired business, less revenue from each business acquired by the Company in the previous year through the
twelve month anniversary of the Company's ownership, plus (iii) for each business disposed of in the current year, 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 Company's
disposition, less (iv) foreign exchange impacts.
(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, acquisition deal costs, deferred acquisition consideration adjustments, distributions
from non-consolidated affiliates, and other items.
(4) Adjusted EBITDA Available for General Capital Purposes: Adjusted EBITDA Available for General Capital Purposes is a
non-GAAP measure that represents Adjusted EBITDA less net income attributable to the noncontrolling interests, capital
expenditures net of landlord reimbursements, cash taxes, and cash interest, net & other.
Included in this earnings release are tables reconciling MDC Partners' reported results to arrive at certain of 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, and
estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, 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 the SEC's ongoing investigation and the related class action litigation claims;
- 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 redeemable noncontrolling
interests and deferred acquisition consideration;
- the successful completion and integration of acquisitions which complement and expand the Company's business
capabilities; and
- foreign currency fluctuations.
The Company's business strategy includes ongoing efforts to engage in 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 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.
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(US$ in 000s, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
349,254
|
$
328,415
|
|
$
995,343
|
$
967,243
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
Cost of services sold
|
|
235,659
|
212,925
|
|
675,940
|
648,386
|
|
Office and general expenses
|
|
83,303
|
78,786
|
|
233,840
|
206,169
|
|
Depreciation and amortization
|
|
11,412
|
13,086
|
|
34,068
|
39,393
|
|
Goodwill impairment
|
|
29,631
|
-
|
|
29,631
|
-
|
|
|
360,005
|
304,797
|
|
973,479
|
893,948
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
(10,751)
|
23,618
|
|
21,864
|
73,295
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
Other, net
|
|
(6,008)
|
(15,623)
|
|
9,530
|
(29,315)
|
|
Interest expense and finance charges
|
|
(16,540)
|
(14,638)
|
|
(49,289)
|
(43,022)
|
|
Loss on redemption of notes
|
|
-
|
-
|
|
(33,298)
|
-
|
|
Interest income
|
|
218
|
114
|
|
599
|
338
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
|
|
|
and equity in earnings of non-consolidated affiliates
|
|
(33,081)
|
(6,529)
|
|
(50,594)
|
1,296
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
(540)
|
(1,191)
|
|
1,893
|
(566)
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before equity in
|
|
|
|
|
|
|
|
earnings of non-consolidated affiliates
|
|
(32,541)
|
(5,338)
|
|
(52,487)
|
1,862
|
|
Equity in earnings of non-consolidated affiliates
|
|
70
|
172
|
|
9
|
627
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
(32,471)
|
(5,166)
|
|
(52,478)
|
2,489
|
|
Loss from discontinued operations attributable to
|
|
|
|
|
|
|
|
MDC Partners Inc., net of taxes
|
|
-
|
(1,316)
|
|
-
|
(6,281)
|
|
Net loss
|
|
(32,471)
|
(6,482)
|
|
(52,478)
|
(3,792)
|
|
Net income attributable to the noncontrolling interests
|
|
(1,059)
|
(2,122)
|
|
(3,172)
|
(7,343)
|
|
Net loss attributable to MDC Partners Inc.
|
|
$
(33,530)
|
$
(8,604)
|
|
$
(55,650)
|
$
(11,135)
|
|
|
|
|
|
|
|
|
Loss Per Common Share:
|
|
|
|
|
|
|
|
Basic and Diluted:
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to
|
|
|
|
|
|
|
|
MDC Partners Inc. common shareholders
|
|
$
(0.64)
|
$
(0.15)
|
|
$
(1.09)
|
$
(0.10)
|
|
Discontinued operations attributable to MDC
|
|
|
|
|
|
|
|
Partners Inc. common shareholders
|
|
-
|
(0.02)
|
|
-
|
(0.12)
|
|
Net loss attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
common shareholders
|
|
$
(0.64)
|
$
(0.17)
|
|
$
(1.09)
|
$
(0.22)
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding:
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
52,244,819
|
49,915,807
|
|
50,861,890
|
49,843,980
|
|
SCHEDULE 2
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
|
(US$ in 000s, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and
|
|
Reportable
|
|
|
|
|
|
|
|
|
Communications
|
|
Segment
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ 349,254
|
|
$ 289,988
|
|
$ 59,266
|
|
$
-
|
|
$ 349,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
$ (33,530)
|
|
Adjustments to reconcile to Operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the noncontrolling
interests
|
|
|
|
|
|
|
|
|
|
1,059
|
|
Equity in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
(70)
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
(540)
|
|
Interest expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
16,322
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
6,008
|
|
Operating profit (loss)
|
|
$
(3,700)
|
|
$ 20,834
|
|
$ (24,534)
|
|
$
(7,051)
|
|
$ (10,751)
|
|
margin
|
|
-1.1%
|
|
7.2%
|
|
-41.4%
|
|
|
|
-3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
11,053
|
|
10,070
|
|
983
|
|
359
|
|
11,412
|
|
Goodwill impairment
|
|
29,631
|
|
-
|
|
29,631
|
|
-
|
|
29,631
|
|
Stock-based compensation
|
|
4,623
|
|
3,337
|
|
1,286
|
|
605
|
|
5,228
|
|
Acquisition deal costs
|
|
639
|
|
639
|
|
-
|
|
167
|
|
806
|
|
Deferred acquisition consideration adjustments
|
|
11,152
|
|
9,918
|
|
1,234
|
|
-
|
|
11,152
|
|
Distributions from non-consolidated affiliates **
|
|
-
|
|
-
|
|
-
|
|
1,247
|
|
1,247
|
|
Other items, net ***
|
|
-
|
|
-
|
|
-
|
|
(2,463)
|
|
(2,463)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA *
|
|
$ 53,398
|
|
$ 44,798
|
|
$
8,600
|
|
$
(7,136)
|
|
$ 46,262
|
|
margin
|
|
15.3%
|
|
15.4%
|
|
14.5%
|
|
|
|
13.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted EBITDA is a non-GAAP measure, but as shown above it represents
operating profit (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, 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 (i) one-time gains related to the former CEO's
repayment to the Company for certain perquisites and expenses, (ii) legal fees and related expenses, net of insurance
proceeds, relating to the ongoing SEC investigation and related class action litigation claims, (iii) one-time charge for
the balance of prior cash bonus award amounts paid to the former CEO and CAO that will not be recovered, and (iv)
write-off of certain assets related to the CEO and CAO termination. See Schedule 9 for reconciliation of
amounts.
|
|
SCHEDULE 3
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
|
(US$ in 000s, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and
|
|
Reportable
|
|
|
|
|
|
|
|
Communications
|
|
Segment
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$ 328,415
|
|
$ 271,882
|
|
$ 56,533
|
|
$
-
|
|
$ 328,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
$
(8,604)
|
|
Adjustments to reconcile to Operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the noncontrolling
interests
|
|
|
|
|
|
|
|
|
2,122
|
|
Loss from discontinued operations attributable
to
|
|
|
|
|
|
|
|
|
|
|
MDC Partners Inc., net of taxes
|
|
|
|
|
|
|
|
|
1,316
|
|
Equity in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
(172)
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
(1,191)
|
|
Interest expense and finance charges, net
|
|
|
|
|
|
|
|
|
14,524
|
|
Other, net
|
|
|
|
|
|
|
|
|
15,623
|
|
Operating profit (loss)
|
$ 43,419
|
|
$ 39,418
|
|
$
4,001
|
|
$ (19,801)
|
|
$ 23,618
|
|
margin
|
13.2%
|
|
14.5%
|
|
7.1%
|
|
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
|
|
Additional adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
12,749
|
|
8,095
|
|
4,654
|
|
337
|
|
13,086
|
|
Stock-based compensation
|
2,660
|
|
1,857
|
|
803
|
|
606
|
|
3,266
|
|
Acquisition deal costs
|
108
|
|
87
|
|
21
|
|
620
|
|
728
|
|
Deferred acquisition consideration adjustments
|
4,927
|
|
3,669
|
|
1,258
|
|
-
|
|
4,927
|
|
Distributions from non-consolidated affiliates **
|
67
|
|
30
|
|
37
|
|
30
|
|
97
|
|
Other items, net ***
|
-
|
|
-
|
|
-
|
|
7,751
|
|
7,751
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA *
|
$ 63,930
|
|
$ 53,156
|
|
$ 10,774
|
|
$ (10,457)
|
|
$ 53,473
|
|
margin
|
19.5%
|
|
19.6%
|
|
19.1%
|
|
|
|
16.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted EBITDA is a non-GAAP measure, but as shown above it represents
operating profit (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, 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 (i) one-time gains related to the former CEO's
repayment to the Company for certain perquisites and expenses, (ii) legal fees and related expenses, net of insurance
proceeds, relating to the ongoing SEC investigation and related class action litigation claims, (iii) one-time charge for
the balance of prior cash bonus award amounts paid to the former CEO and CAO that will not be recovered, and (iv)
write-off of certain assets related to the CEO and CAO termination. See Schedule 9 for reconciliation of
amounts.
|
|
SCHEDULE 4
|
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA
|
|
(US$ in 000s, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and
|
|
Reportable
|
|
|
|
|
|
|
|
|
Communications
|
|
Segment
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ 995,343
|
|
$ 822,762
|
|
$ 172,581
|
|
$
-
|
|
$ 995,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
$ (55,650)
|
|
Adjustments to reconcile to Operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the noncontrolling
interests
|
|
|
|
|
|
|
|
|
|
3,172
|
|
Equity in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
(9)
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
1,893
|
|
Interest expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
48,690
|
|
Loss on redemption of notes
|
|
|
|
|
|
|
|
|
|
33,298
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
(9,530)
|
|
Operating profit (loss)
|
|
$ 54,846
|
|
$ 68,136
|
|
$ (13,290)
|
|
$ (32,982)
|
|
$ 21,864
|
|
margin
|
|
5.5%
|
|
8.3%
|
|
-7.7%
|
|
|
|
2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
32,802
|
|
24,462
|
|
8,340
|
|
1,266
|
|
34,068
|
|
Goodwill impairment
|
|
29,631
|
|
-
|
|
29,631
|
|
-
|
|
29,631
|
|
Stock-based compensation
|
|
13,384
|
|
11,067
|
|
2,317
|
|
2,059
|
|
15,443
|
|
Acquisition deal costs
|
|
1,106
|
|
1,106
|
|
-
|
|
1,160
|
|
2,266
|
|
Deferred acquisition consideration adjustments
|
|
17,180
|
|
15,453
|
|
1,727
|
|
-
|
|
17,180
|
|
Distributions from non-consolidated affiliates **
|
|
-
|
|
-
|
|
-
|
|
1,247
|
|
1,247
|
|
Other items, net ***
|
|
-
|
|
-
|
|
-
|
|
(725)
|
|
(725)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA *
|
|
$ 148,949
|
|
$ 120,224
|
|
$ 28,725
|
|
$ (27,975)
|
|
$ 120,974
|
|
margin
|
|
15.0%
|
|
14.6%
|
|
16.6%
|
|
|
|
12.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted EBITDA is a non-GAAP measure, but as shown above it represents
operating profit (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, 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 (i) one-time gains related to the former CEO's
repayment to the Company for certain perquisites and expenses, (ii) legal fees and related expenses, net of insurance
proceeds,
relating to the ongoing SEC investigation and related class action litigation claims, (iii) one-time charge for the
balance of prior cash bonus award amounts paid to the former CEO and
CAO that will not be recovered, and (iv) write-off of certain assets related to the CEO and CAO
termination. See Schedule 9 for 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, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and
|
|
Reportable
|
|
|
|
|
|
|
|
|
Communications
|
|
Segment
|
|
All Other
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ 967,243
|
|
$ 804,399
|
|
$ 162,844
|
|
$
-
|
|
$ 967,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to MDC Partners Inc.
|
|
|
|
|
|
|
|
|
|
$ (11,135)
|
|
Adjustments to reconcile to Operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the
noncontrolling
interests
|
|
|
|
|
|
|
|
|
|
7,343
|
|
Loss from discontinued operations
attributable to
MDC Partners Inc., net of taxes
|
|
|
|
|
|
|
|
|
|
6,281
|
|
Equity in earnings of non-consolidated affiliates
|
|
|
|
|
|
|
|
|
|
(627)
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
(566)
|
|
Interest expense and finance charges, net
|
|
|
|
|
|
|
|
|
|
42,684
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
29,315
|
|
Operating profit (loss)
|
|
$ 123,804
|
|
$ 107,232
|
|
$ 16,572
|
|
$ (50,509)
|
|
$ 73,295
|
|
margin
|
|
12.8%
|
|
13.3%
|
|
10.2%
|
|
|
|
7.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
38,157
|
|
24,486
|
|
13,671
|
|
1,236
|
|
39,393
|
|
Stock-based compensation
|
|
11,023
|
|
7,763
|
|
3,260
|
|
2,002
|
|
13,025
|
|
Acquisition deal costs
|
|
647
|
|
587
|
|
60
|
|
1,797
|
|
2,444
|
|
Deferred acquisition consideration adjustments
|
|
(5,566)
|
|
(2,290)
|
|
(3,276)
|
|
-
|
|
(5,566)
|
|
Distributions from non-consolidated affiliates **
|
|
577
|
|
334
|
|
243
|
|
150
|
|
727
|
|
Other items, net ***
|
|
-
|
|
-
|
|
-
|
|
8,795
|
|
8,795
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA *
|
|
$ 168,642
|
|
$ 138,112
|
|
$ 30,530
|
|
$ (36,529)
|
|
$ 132,113
|
|
margin
|
|
17.4%
|
|
17.2%
|
|
18.7%
|
|
|
|
13.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted EBITDA is a non-GAAP measure, but as shown above it represents
operating profit (loss) plus depreciation and amortization, stock-based compensation, acquisition deal costs, 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 (i) one-time gains related to the former CEO's
repayment to the Company for certain perquisites and expenses, (ii) legal fees and related expenses, net of insurance
proceeds, relating to the ongoing SEC investigation and related class action litigation claims, (iii) one-time charge for
the balance of prior cash bonus award amounts paid to the former CEO and CAO that will not be recovered, and (iv)
write-off of certain assets related to the CEO and CAO termination. See Schedule 9 for reconciliation of
amounts.
|
|
SCHEDULE 6
|
|
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED ADJUSTED EBITDA AVAILABLE FOR GENERAL CAPITAL
PURPOSES
|
|
(US$ in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
2015
|
|
2016
|
2015
|
|
Adjusted EBITDA (1)
|
$
46,262
|
$
53,473
|
|
$
120,974
|
$
132,113
|
|
Net income attributable to the noncontrolling interests
|
(1,059)
|
(2,122)
|
|
(3,172)
|
(7,343)
|
|
Capital expenditures, net (2)
|
(6,027)
|
(6,902)
|
|
(18,604)
|
(16,014)
|
|
Cash taxes
|
(1,991)
|
(685)
|
|
(2,798)
|
(1,400)
|
|
Cash interest, net & other (3)
|
(15,470)
|
(12,879)
|
|
(45,689)
|
(38,423)
|
|
|
|
|
|
|
|
Adjusted EBITDA Available for General Capital Purposes (4)
|
$
21,715
|
$
30,885
|
|
$
50,711
|
$
68,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjusted EBITDA is a non GAAP measure. See schedules 2 through 5
for a reconciliation of Net income (loss) to Adjusted EBITDA.
|
|
(2) Capital expenditures, net represents capital expenditures net of
landlord reimbursements. See Schedule 9 for reconciliation of amounts.
|
|
(3) Cash interest, net & other represents the cash interest paid for
our borrowings, less interest income, adjusted for the quarterly accrual of cash interest under our Senior Notes.
See Schedule 9 for reconciliation of amounts.
|
|
(4) Adjusted EBITDA Available for General Capital Purposes is a non-GAAP
measure, and represents funds available for repayment of debt, acquisitions, deferred acquisition consideration,
dividends, and other general corporate initiatives.
|
|
SCHEDULE 7
|
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED CONSOLIDATED BALANCE SHEETS
|
|
(US$ in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ 21,735
|
|
$ 61,458
|
|
Cash held in trusts
|
|
5,268
|
|
5,122
|
|
Accounts receivable, net
|
|
419,355
|
|
361,044
|
|
Expenditures billable to clients
|
|
40,615
|
|
44,012
|
|
Other current assets
|
|
53,872
|
|
37,109
|
|
Total Current Assets
|
|
540,845
|
|
508,745
|
|
|
|
|
|
|
Fixed assets, net
|
|
73,868
|
|
63,557
|
|
Investment in non-consolidated affiliates
|
|
5,159
|
|
6,263
|
|
Goodwill
|
|
868,483
|
|
870,301
|
|
Other intangible assets, net
|
|
92,975
|
|
72,382
|
|
Deferred tax assets
|
|
21,774
|
|
15,367
|
|
Other assets
|
|
39,208
|
|
41,010
|
|
Total Assets
|
|
$ 1,642,312
|
|
$ 1,577,625
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Redeemable Noncontrolling Interests and Shareholders'
Deficit
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$ 331,330
|
|
$ 359,568
|
|
Trust liability
|
|
5,268
|
|
5,122
|
|
Accruals and other liabilities
|
|
255,282
|
|
297,964
|
|
Advance billings
|
|
148,352
|
|
119,100
|
|
Current portion of long-term debt
|
|
260
|
|
470
|
|
Current portion of deferred acquisition consideration
|
|
119,506
|
|
130,400
|
|
Total Current Liabilities
|
|
859,998
|
|
912,624
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
951,187
|
|
728,413
|
|
Long-term portion of deferred acquisition consideration
|
|
123,591
|
|
216,704
|
|
Other liabilities
|
|
52,293
|
|
44,905
|
|
Deferred tax liabilities
|
|
106,950
|
|
92,581
|
|
Total Liabilities
|
|
2,094,019
|
|
1,995,227
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests
|
|
60,174
|
|
69,471
|
|
|
|
|
|
|
Shareholders' Deficit
|
|
|
|
|
|
Common shares
|
|
315,369
|
|
269,842
|
|
Shares to be issued
|
|
2,360
|
|
-
|
|
Charges in excess of capital
|
|
(310,273)
|
|
(315,261)
|
|
Accumulated deficit
|
|
(582,640)
|
|
(526,990)
|
|
Accumulated other comprehensive income (loss)
|
|
(3,406)
|
|
6,257
|
|
MDC Partners Inc. Shareholders' Deficit
|
|
(578,590)
|
|
(566,152)
|
|
Noncontrolling Interests
|
|
66,709
|
|
79,079
|
|
Total Shareholders' Deficit
|
|
(511,881)
|
|
(487,073)
|
|
|
|
|
|
|
Total Liabilities, Redeemable Noncontrolling
|
|
|
|
|
|
Interests and Shareholders' Deficit
|
|
$ 1,642,312
|
|
$ 1,577,625
|
|
SCHEDULE 8
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED SUMMARY CASH FLOW DATA
|
|
(US$ in 000s)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2016
|
2015
|
|
|
|
|
|
Cash flows used in continuing operating activities
|
|
$
(58,919)
|
$
(9,147)
|
|
Discontinued operations
|
|
-
|
(1,342)
|
|
Net cash used in operating activities
|
|
(58,919)
|
(10,489)
|
|
|
|
|
|
Cash flows used in continuing investing activities
|
|
(14,663)
|
(42,723)
|
|
Discontinued operations
|
|
-
|
17,101
|
|
Net cash used in investing activities
|
|
(14,663)
|
(25,622)
|
|
|
|
|
|
Cash flows provided by (used in) continuing financing activities
|
|
32,663
|
(63,633)
|
|
Discontinued operations
|
|
-
|
(40)
|
|
Net cash provided by (used in) financing activities
|
|
32,663
|
(63,673)
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
1,196
|
2,194
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
$
(39,723)
|
$
(97,590)
|
|
SCHEDULE 9
|
|
|
|
|
|
|
|
|
|
|
|
|
MDC PARTNERS INC.
|
|
UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
|
|
(US$ in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
|
OTHER ITEMS, NET
|
|
|
|
|
|
|
|
|
|
|
|
SEC investigation and class action litigation expenses
|
$ 5,762
|
$ 3,882
|
$ 2,722
|
$ 1,340
|
$ 13,706
|
|
$ 1,486
|
$ 1,359
|
$ 767
|
$ 3,612
|
|
D&O insurance proceeds
|
-
|
-
|
-
|
(1,000)
|
(1,000)
|
|
-
|
(1,107)
|
(3,230)
|
(4,337)
|
|
CEO repayment for certain perquisites and expenses
|
-
|
(8,600)
|
(1,877)
|
(808)
|
(11,285)
|
|
-
|
-
|
-
|
-
|
|
CEO and CAO termination related expenses
|
-
|
-
|
6,906
|
-
|
6,906
|
|
-
|
-
|
-
|
-
|
|
Total other items, net
|
$ 5,762
|
$ (4,718)
|
$ 7,751
|
$ (468)
|
$ 8,327
|
|
$ 1,486
|
$ 252
|
$ (2,463)
|
$ (725)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
|
CAPITAL EXPENDITURES, NET
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
$ (5,656)
|
$ (3,848)
|
$ (8,161)
|
$ (5,910)
|
$ (23,575)
|
|
$ (5,539)
|
$ (7,909)
|
$ (6,275)
|
$ (19,723)
|
|
Landlord reimbursements
|
356
|
36
|
1,259
|
805
|
2,456
|
|
-
|
871
|
248
|
1,119
|
|
Total capital expenditures, net
|
$ (5,300)
|
$ (3,812)
|
$ (6,902)
|
$ (5,105)
|
$ (21,119)
|
|
$ (5,539)
|
$ (7,038)
|
$ (6,027)
|
$ (18,604)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
Q3
|
YTD
|
|
CASH INTEREST, NET & OTHER
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid
|
$ (367)
|
$ (25,401)
|
$ (590)
|
$ (26,308)
|
$ (52,666)
|
|
$ (25,703)
|
$ (1,212)
|
$ (1,063)
|
$ (27,978)
|
|
Bond interest accrual adjustment
|
(12,403)
|
12,403
|
(12,403)
|
12,403
|
-
|
|
11,995
|
(15,680)
|
(14,625)
|
(18,310)
|
|
Adjusted cash interest paid
|
(12,770)
|
(12,998)
|
(12,993)
|
(13,905)
|
(52,666)
|
|
(13,708)
|
(16,892)
|
(15,688)
|
(46,288)
|
|
Interest income
|
119
|
105
|
114
|
129
|
467
|
|
178
|
203
|
218
|
599
|
|
Other
|
-
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Total cash interest, net & other
|
$ (12,651)
|
$ (12,893)
|
$ (12,879)
|
$ (13,776)
|
$ (52,199)
|
|
$ (13,530)
|
$ (16,689)
|
$ (15,470)
|
$ (45,689)
|
CONTACT:
Matt Chesler, CFA
VP, Investor Relations
646-412-6877
mchesler@mdc-partners.com
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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mdc-partners-inc-reports-results-for-the-three-and-nine-months-ended-september-30-2016-300357145.html
SOURCE MDC Partners Inc.