MDC Partners Inc. reports strong results for the three and nine months ended
September 30, 2009
THIRD QUARTER HIGHLIGHTS: - Revenues decreased to $134.6 million vs. $142.1 million in Q3 2008, a decrease of 5.3% - Organic revenues declined 4.4% in Q3 2009 - MDC EBITDA increased to $17.7 million vs. $16.1 million in Q3 2008, an increase of 9.9% - Free Cash Flow increased to $13.8 million vs. $12.1 million in Q3 2008, an increase of 14.1% - Free Cash Flow per Share increased to $0.48 vs. $0.44 in Q3 2008, an increase of 9.1% - EBITDA margin increased to 14.8% vs. 12.3% in Q3 2008, an increase of 250 basis points YEAR-TO-DATE HIGHLIGHTS: - Revenues decreased to $396.2 million vs. $439.9 million in the first nine months of 2008, a decrease of 9.9% - Organic revenues declined 7.9% in the first nine months of 2009 - MDC EBITDA increased to $46.5 million vs. $43.9 million in the first nine months of 2008, an increase of 5.9% - Free Cash Flow increased to $34.5 million vs. $23.7 million in the first nine months of 2008, an increase of 45.6% - Free Cash Flow per Share increased to $1.24 vs. $0.87 in the first nine months of 2008, an increase of 42.5% - EBITDA margin increased to 12.6% vs. 11.5% in the first nine months of 2008, an increase of 110 basis points </pre> <p/> <p>NEW YORK, NY, <chron>Oct. 29</chron> /CNW/ - MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended <chron>September 30, 2009</chron>.</p> <p>Consolidated revenues for the third quarter of 2009 were <money>$134.6 million</money>, a decrease of 5.3% compared to <money>$142.1 million</money> in the third quarter of 2008. MDC EBITDA (as defined) for the third quarter of 2009 was <money>$17.7 million</money>, an increase of 9.9% compared to <money>$16.1 million</money> in the third quarter of 2008. Net income attributable to MDC Partners Inc. in the third quarter was minimal compared to <money>$3.3 million</money> in the third quarter of 2008. Diluted earnings per share attributable to MDC Partners Inc. common shareholders for the third quarter of 2009 was minimal compared with <money>$0.12</money> per share in the same period of 2008. Free cash flow (as defined) was <money>$13.8 million</money> in the third quarter of 2009, compared with <money>$12.1 million</money> in the third quarter of 2008.</p> <p>Consolidated revenues for the first nine months of 2009 were <money>$396.2 million</money>, a decrease of 9.9% compared to <money>$439.9 million</money> in the first nine months of 2008. MDC EBITDA (as defined) for the first nine months of 2009 was <money>$46.5 million</money>, an increase of 5.9% compared to <money>$43.9 million</money> in the first nine months of 2008. Net income attributable to MDC Partners Inc. in the first nine months was <money>$0.1 million</money> compared to a loss of (<money>$4.6</money>) million in the first nine months of 2008. Diluted earnings per share attributable to MDC Partners Inc. common shareholders for the first nine months of 2009 was <money>$0.01</money> compared with a loss of (<money>$0.17</money>) per share in the same period of 2008. Free cash flow (as defined) was <money>$34.5 million</money> in the first nine months of 2009 compared with <money>$23.7 million</money> in the first nine months of 2008.</p> <p>"We are thrilled with our best in class financial performance in the third quarter," said Miles S Nadal, Chairman and Chief Executive Officer of MDC Partners. "We are especially pleased with the organic growth of our core Strategic Marketing Services Group of positive 6.6%. This, coupled with our strong new business pipeline is expected to position the company for a strong 2010. Our success in leveraging our infrastructure and improving our efficiency and productivity, as well as our investment in thought leadership talent, resulted in our delivering excellent growth in EBITDA, Free Cash Flow and margin improvement for the quarter, despite the continued challenges in the advertising industry. Never in the Company's history has the momentum in the business or financial results been as strong. As of today we have over <money>$200 million</money> of liquidity and we have put in place a permanent capital structure that will allow us to build our business with a patient view toward building shareholder value creation."</p> <p>Earlier this week MDC announced that it had delivered formal notice to redeem all of its 8.00% convertible unsecured subordinated debentures. The debentures will be redeemed effective <chron>November 26, 2009</chron>.</p> <p/> <p>Conference Call</p> <p/> <p>Management will host a conference call on <chron>October 30, 2009</chron> at <chron>8:30 a.m. (EST</chron>) to discuss our results. The conference call will be accessible by dialing 1-416-644-3423 or toll free 1-866-250-4892. An investor presentation has been posted on our website <a href="http://www.mdc-partners.com">www.mdc-partners.com</a> and will be referred to during the conference call.</p> <p>A recording of the conference call will be available until <chron>Friday, November 13, 2009</chron> by dialing 1-416-640-1917 or toll free 1-877-289-8525 (passcode 4175719 followed by the number sign) or by visiting our website.</p> <p/> <p>About MDC Partners Inc.</p> <p/> <p>MDC Partners is a progressive Marketing and Communications Network, championing the most innovative entrepreneurial talent. MDC Partners provides strategic solutions and services to multinational clients in <location>North America</location>, <location>Europe</location> and Latin America. Our philosophy emphasizes the utilization of Strategy and High Value Creativity to drive growth and measurable impact for our clients. "MDC Partners is The Place Where Great Talent Lives." The company's Class A shares are publicly traded on the NASDAQ under the symbol "MDCA" and on the <location>Toronto</location> Stock Exchange under the symbol "MDZ.A".</p> <p/> <p>Non-GAAP Financial Measures</p> <p/> <p>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 MDC's share of EBITDA and EBITDA margin (as defined) for the three and nine months ended <chron>September 30, 2009</chron> and 2008; and (2) presenting Free Cash Flow and Free Cash Flow per Share (as defined) for the three and nine months ended <chron>September 30, 2009</chron> and 2008. Included in this earnings release are tables reconciling MDC's reported results to arrive at these non-GAAP financial measures.</p> <p/> <p>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, 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.</p> <p>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:</p> <p/> <pre> - risks associated with severe effects of national and regional economic downturn; - the Company's ability to attract new clients and retain existing clients; - the 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. </pre> <p/> <p>In addition to improving organic growth for its existing operations, 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 and through incurrence of bridge or other debt financing, either 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.</p> <p>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.</p> <p/> <p/> <p/> <pre> SCHEDULE 1 MDC PARTNERS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (US$ in 000s, except share and per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Revenue $134,625 $142,089 $396,246 $439,940 Operating Expenses: Cost of services sold 85,526 94,558 259,644 292,410 Office and general expenses 31,401 31,864 92,726 102,754 Depreciation and amortization 7,514 7,428 22,711 25,789 ---------------------- ---------------------- 124,441 133,850 375,081 420,953 ---------------------- ---------------------- Operating profit 10,184 8,239 21,165 18,987 Other Income (Expenses): Other income (expense) (3,080) 2,418 (2,991) 5,545 Interest expense (3,792) (3,573) (11,276) (11,140) Interest income 17 456 289 1,350 ---------------------- ---------------------- Income from continuing operations before income taxes and equity in affiliates 3,329 7,540 7,187 14,742 Income tax expense 1,149 2,222 3,373 6,415 ---------------------- ---------------------- Income from continuing operations before equity in affiliates 2,180 5,318 3,814 8,327 Equity in earnings of non- consolidated affiliates 60 69 258 290 ---------------------- ---------------------- Income from continuing operations 2,240 5,387 4,072 8,617 Loss from discontinued operations attributable to MDC Partners Inc., net of taxes - (771) (361) (6,698) ---------------------- ---------------------- Net income 2,240 4,616 3,711 1,919 Net income attributable to the noncontrolling interests (2,204) (1,366) (3,569) (6,533) ---------------------- ---------------------- Net income (loss) attributable to MDC Partners Inc. $36 $3,250 $142 ($4,614) ---------------------- ---------------------- ---------------------- ---------------------- Income (Loss) Per Common Share: Basic and Diluted: Income from continuing operations attributable to MDC Partners Inc. common shareholders $0.00 $0.15 $0.02 $0.08 Discontinued operations attributable to MDC Partners Inc. common shareholders $0.00 ($0.03) ($0.01) ($0.25) ---------------------- ---------------------- Net income (loss) attributable to MDC Partners Inc. common shareholders $0.00 $0.12 $0.01 ($0.17) ---------------------- ---------------------- ---------------------- ---------------------- Weighted Average Number of Common Shares: Basic 27,471,041 26,835,101 27,343,575 26,721,820 Diluted 29,009,655 27,290,259 27,838,740 27,235,371 ------------------------------------------------------------------------- SCHEDULE 2 MDC PARTNERS INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA* (US$ in 000s, except percentages) For the Three Months Ended September 30, 2009 Strategic Customer Specialized Marketing Relationship Communication Services Management Services Corporate Total ------------------------------------------------------------------------- Revenue $86,302 $26,276 $22,047 - $134,625 ---------------------------------------------------------- ---------------------------------------------------------- Operating Income (Loss) as Reported $13,073 $856 $1,088 ($4,833) $10,184 Add: Depreciation and amortization 5,245 1,732 422 115 7,514 Stock-based compensation 705 44 248 1,234 2,231 ---------------------------------------------------------- EBITDA* 19,023 2,632 1,758 (3,484) 19,929 margin 22.0% 10.0% 8.0% 14.8% Less: Net income attributable to noncontrolling interests (1,817) - (387) - (2,204) ---------------------------------------------------------- MDC's Share of EBITDA(xx) $17,206 $2,632 $1,371 ($3,484) $17,725 ------------------------------------------------------------------------- * EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation. (xx) MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less net income attributable to noncontrolling interests. MDC PARTNERS INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA* (US$ in 000s, except percentages) For the Three Months Ended September 30, 2008 Strategic Customer Specialized Marketing Relationship Communication Services Management Services Corporate Total ------------------------------------------------------------------------- Revenue $81,279 $32,673 $28,137 - $142,089 ---------------------------------------------------------- ---------------------------------------------------------- Operating Income (Loss) as Reported $8,688 $1,160 $1,359 ($2,968) $8,239 Add: Depreciation and amortization 4,872 1,845 642 69 7,428 Stock-based compensation 475 31 174 1,149 1,829 ---------------------------------------------------------- EBITDA* 14,035 3,036 2,175 (1,750) 17,496 margin 17.3% 9.3% 7.7% 12.3% Less: Net income attributable to noncontrolling interests (1,180) (60) (126) - (1,366) ---------------------------------------------------------- MDC's Share of EBITDA(xx) $12,855 $2,976 $2,049 ($1,750) $16,130 ------------------------------------------------------------------------- * EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation. (xx) MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less net income attributable to noncontrolling interests. SCHEDULE 3 MDC PARTNERS INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA* (US$ in 000s, except percentages) For the Nine Months Ended September 30, 2009 Strategic Customer Specialized Marketing Relationship Communication Services Management Services Corporate Total ------------------------------------------------------------------------- Revenue $247,675 $85,702 $62,869 - $396,246 ---------------------------------------------------------- ---------------------------------------------------------- Operating Income (Loss) as Reported $30,202 $1,789 $2,231 ($13,057) $21,165 Add: Depreciation and amortization 15,826 5,340 1,257 288 22,711 Stock-based compensation 1,509 92 574 3,998 6,173 ---------------------------------------------------------- EBITDA* 47,537 7,221 4,062 (8,771) 50,049 margin 19.2% 8.4% 6.5% 12.6% Less: Net income attributable to noncontrolling interests (2,965) - (604) - (3,569) ---------------------------------------------------------- MDC's Share of EBITDA(xx) $44,572 $7,221 $3,458 ($8,771) $46,480 ------------------------------------------------------------------------- * EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation. (xx) MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less net income attributable to noncontrolling interests. MDC PARTNERS INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA* (US$ in 000s, except percentages) For the Nine Months Ended September 30, 2008 Strategic Customer Specialized Marketing Relationship Communication Services Management Services Corporate Total ------------------------------------------------------------------------- Revenue $246,383 $104,179 $89,378 - $439,940 ---------------------------------------------------------- ---------------------------------------------------------- Operating Income (Loss) as Reported $18,674 $4,682 $7,962 ($12,331) $18,987 Add: Depreciation and amortization 18,085 5,550 1,950 204 25,789 Stock-based compensation 1,492 98 648 3,452 5,690 ---------------------------------------------------------- EBITDA* 38,251 10,330 10,560 (8,675) 50,466 margin 15.5% 9.9% 11.8% 11.5% Less: Net income attributable to noncontrolling interests (3,708) (247) (2,578) - (6,533) ---------------------------------------------------------- MDC's Share of EBITDA(xx) $34,543 $10,083 $7,982 ($8,675) $43,933 ------------------------------------------------------------------------- * EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation. (xx) MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less net income attributable to noncontrolling interests. SCHEDULE 4 MDC PARTNERS INC. FREE CASH FLOW (US$ in 000s, except share and per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- MDC EBITDA $17,725 $16,130 $46,480 $43,933 Capital Expenditures (1,201) (1,842) (3,288) (10,434) Cash Taxes (85) (63) (487) (939) Cash Interest, net & Other (2,620) (2,163) (8,204) (8,856) ---------------------- ---------------------- Free Cash Flow $13,819 $12,062 $34,501 $23,704 ---------------------- ---------------------- ---------------------- ---------------------- Diluted Shares Outstanding 29,009,655 27,290,259 27,838,740 27,235,371 Free Cash Flow per Share $0.48 $0.44 $1.24 $0.87 ---------------------- ---------------------- ---------------------- ---------------------- SCHEDULE 5 MDC PARTNERS INC. CONSOLIDATED BALANCE SHEETS (US$ in 000s) September 30, December 31, 2009 2008 ------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $70,937 $41,331 Accounts receivable, net 126,281 106,954 Expenditures billable to clients 24,466 16,949 Prepaid expenses 5,955 5,240 Other current assets 3,643 5,270 ----------------------------- Total Current Assets 231,282 175,744 Fixed assets, net 36,547 44,021 Investment in affiliates 1,792 1,593 Goodwill 253,284 238,214 Other intangible assets, net 37,662 46,852 Deferred tax assets 9,871 11,926 Other assets 9,800 10,889 ----------------------------- Total Assets $580,238 $529,239 ----------------------------- ----------------------------- Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $79,364 $75,360 Accrued and other liabilities 58,984 55,338 Advance billings 74,536 50,053 Current portion of long term debt 43,059 1,546 Deferred acquisition consideration 2,932 5,538 ----------------------------- Total Current Liabilities 258,875 187,835 Revolving credit facility 9,347 9,701 Long-term debt 131,960 133,305 Convertible notes - 36,946 Other liabilities 9,728 6,949 Deferred tax liabilities 4,808 4,700 ----------------------------- Total Liabilities 414,718 379,436 ----------------------------- Redeemable Noncontrolling Interests 65,328 21,751 ----------------------------- Shareholders' Equity: Common shares 218,147 213,534 Additional paid in capital - 33,470 Charges in excess of capital (2,593) - Accumulated deficit (112,694) (112,836) Stock subscription receivable (341) (354) Accumulated other comprehensive income (loss) (5,560) (6,633) ----------------------------- MDC Partners Inc. Shareholders' Equity 96,959 127,181 Noncontrolling Interests 3,233 871 ----------------------------- Total Equity 100,192 128,052 ----------------------------- Total Liabilities, Redeemable Noncontrolling Interests and Equity $580,238 $529,239 ----------------------------- ----------------------------- SCHEDULE 6 MDC PARTNERS INC. SUMMARY CASH FLOW DATA (US$ in 000s) Nine Months Ended September 30, ------------------------------- 2009 2008 ------------------------------------------------------------------------- Cash flows provided by continuing operating activities $44,232 $22,830 Discontinued operations (290) (295) ------------------------------- Net cash provided by operating activities $43,942 $22,535 Net cash used in investing activities (11,159) (21,000) Net cash (used in)/provided by financing activities (2,691) 5,894 Effect of exchange rate changes on cash and cash equivalents (486) (356) ------------------------------- Net increase in cash and cash equivalents $29,606 $7,073 ------------------------------- -------------------------------
For further information: Donna Granato, VP, Finance & Corporate Development, (646) 429-1809, [email protected]
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