MDC Partners Inc. reports strong results for the three months ended March 31, 2010
FIRST QUARTER HIGHLIGHTS:
- Revenue increased to $136.2 million versus $126.7 million in Q1 2009,
an increase of 7.5%
- Organic revenue flat for Q1 2010 and trending to solid growth for the
year
- MDC EBITDA decreased to $7.8 million versus $11.2 million in the
first quarter of 2009 due to timing of client wins and losses and
investment in key talent
- Net new business wins of $6.6 million for Q1 2010
- Digital revenue reached 40.5% of total revenues in Q1 2010
- Acquired majority stakes in TEAM Enterprises, a leading national
experiential marketing platform; Sloane & Company, a strategic
corporate public relations firm; and Allison & Partners, an award
winning national public relations firm
- Raising fiscal 2010 guidance due to improving trends and completion
of accretive acquisitions
- 2010 revenue guidance raised to $620-635 million, an estimated
increase of 13.6% to 16.3%
- 2010 MDC EBITDA guidance raised to $78-80 million, an estimated
increase of 20.4% to 23.5%
NEW YORK, May 4 /PRNewswire-FirstCall/ - MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three months ended March 31, 2010.
"We are very pleased with our first quarter results, particularly the market share gains we continue to achieve and our success in investing in great talent and in new partner firms, all of which further enhances our ability to generate free cash flow and earnings growth," said Miles S Nadal, Chairman and Chief Executive Officer of MDC Partners. "Our new business pipeline is strong; our financial discipline is paying off; we continue to make strategic, accretive acquisitions; and we have a set of assets already in place that are well situated to take advantage of the numerous market opportunities in front of us. As such, we are significantly raising our fiscal 2010 financial guidance."
Guidance for 2010 is adjusted as follows:
-----------------------------------------------------------
Implied Implied
Initial Revised Year over Pro Forma Year over
2010 2010 Year 2010 Year
Guidance Guidance Change Estimate Change
-------------------------------------------------------------------------
+13.6% +18.1%
$573 - $620 - to $645 - to
Revenue $584 million $635 million +16.3% $660 million +20.9%
+20.4% +32.7%
$69 - $78 - to $86 - to
MDC EBITDA $71 million $80 million +23.5% $88 million +35.8%
+0.2% +14.9%
Free Cash $35 - $41 - to $47 - to
Flow $37 million $43 million +5.1% $49 million +19.8%
+ Change in
Working
Capital and
Other +$5 million +$12 million +$12 million
--------------------------- --------------
Total Free $40 - $53 - $59 -
Cash Flow $42 million $55 million $61 million
-------------------------------------------------------------------------
Note: The "Pro Forma 2010 Estimate" section of the above table accounts
for recent acquisitions as if financial contributions to MDC occur for
the entirety of 2010.
Consolidated revenue for the first quarter of 2010 was $136.2 million, an increase of 7.5% compared to $126.7 million in the first quarter of 2009. MDC EBITDA (as defined) for the first quarter of 2010 was $7.8 million, a decrease of 30.3% compared to $11.2 million in the first quarter of 2009 driven by the timing of client wins and losses and our planned investment in talent. Net income (loss) attributable to MDC Partners Inc. in the first quarter was a loss of ($10.2) million compared to nominal income in the first quarter of 2009. Diluted earnings (loss) per share from continuing operations attributable to MDC Partners Inc. common shareholders for the first quarter of 2010 was a loss of ($0.38) compared with $0.01 per share in the same period of 2009. Free cash flow (as defined) was an outflow of $1.9 million in the first quarter of 2010, compared with an inflow of $7.8 million in the first quarter of 2009.
"We continue to execute on our disciplined financial plan which we believe will lead to another year of industry leading growth, continued margin expansion, and increased free cash flow generation," said David Doft, Chief Financial Officer. "Our focus remains on optimizing our organic growth opportunities and supplementing them with highly accretive strategic acquisitions. We believe that the combination of organic growth and the responsible deployment of capital will set us apart from other industry participants and will drive continued significant improvements in shareholder value creation."
Conference Call
Management will host a conference call on May 5, 2010 at 8:00 a.m. (EST) to discuss our results. The conference call will be accessible by dialing 1-647-427-7450 or toll free 1-888-231-8191. 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 until Wednesday, May 19, 2010 by dialing 1-416-849-0833 or toll free 1-800-642-1687 (passcode 69738546 followed by the number sign) or by visiting our website.
About MDC Partners Inc.
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 North America, Europe 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 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 MDC EBITDA and EBITDA margin (as defined) for the three months ended March 31, 2010 and 2009; and (2) presenting Free Cash Flow and Free Cash Flow per Share (as defined) for the three months ended March 31, 2010 and 2009. 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, 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 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.
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.
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 March 31,
-----------------------------
2010 2009
-------------------------------------------------------------------------
Revenue $136,182 $126,738
Operating Expenses:
Cost of services sold 96,969 85,879
Office and general expenses 34,625 31,152
Depreciation and amortization 5,833 7,593
-----------------------------
-----------------------------
137,427 124,624
-----------------------------
Operating profit (loss) (1,245) 2,114
Other Income (Expenses):
Other income (expense) (613) 2,629
Interest expense and finance charges (7,028) (3,761)
Interest income 21 203
-----------------------------
Income (loss) from continuing operations
before income taxes and equity in
affiliates (8,865) 1,185
Income tax expense 249 615
-----------------------------
Income (loss) from continuing operations
before equity in affiliates (9,114) 570
Equity in earnings (loss) of non-
consolidated affiliates (104) 93
-----------------------------
-----------------------------
Income (loss) from continuing operations (9,218) 663
Loss from discontinued operations,
net of taxes - (252)
-----------------------------
Net income (loss) (9,218) 411
Net income attributable to the non-
controlling interests (968) (382)
-----------------------------
-----------------------------
Net income (loss) attributable to
MDC Partners Inc. ($10,186) $29
-----------------------------
-----------------------------
Income (Loss) Per Common Share:
Basic:
Income (loss) from continuing
operations attributable to MDC
Partners Inc. common shareholders ($0.38) $0.01
Discontinued operations - ($0.01)
-----------------------------
Net income (loss) attributable to
MDC Partners Inc. common shareholders ($0.38) $0.00
-----------------------------
-----------------------------
Income (Loss) Per Common Share:
Diluted:
Income (loss) from continuing
operations attributable to MDC
Partners Inc. common shareholders ($0.38) $0.01
Discontinued operations - ($0.01)
-----------------------------
Net income (loss) attributable to
MDC Partners Inc. common shareholders ($0.38) $0.00
-----------------------------
-----------------------------
Weighted Average Number of Common Shares:
Basic 27,631,903 27,115,751
Diluted 27,631,903 27,115,751
-------------------------------------------------------------------------
SCHEDULE 2
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended March 31, 2010
Strategic Performance
Marketing Marketing
Services Services Corporate Total
-------------------------------------------------------------------------
Revenue $91,525 $44,657 - $136,182
--------------------------------------------------
--------------------------------------------------
Operating income (loss)
as reported $6,283 ($2,652) ($4,876) ($1,245)
Add:
Depreciation and
amortization 3,301 2,439 93 5,833
Stock-based
compensation 1,753 366 1,349 3,468
Acquisition deal costs - 399 - 399
Deferred acquisition
consideration
adjustments to P&L 196 138 - 334
--------------------------------------------------
--------------------------------------------------
EBITDA* 11,533 690 (3,434) 8,789
margin 12.6% 1.5% 6.5%
Less income attributable
to noncontrolling
interests (927) (41) - (968)
--------------------------------------------------
--------------------------------------------------
MDC's Share of
EBITDA** $10,606 $649 ($3,434) $7,821
-------------------------------------------------------------------------
* EBITDA is a non-GAAP measure, but as shown above it represents
operating income (loss) plus depreciation and amortization, stock-
based compensation, acquisition deal costs and deferred acquisition
consideration adjustments.
** MDC's Share of EBITDA is a non-GAAP measure, but as shown above it
represents operating income (loss) plus depreciation and
amortization, stock-based compensation, acquisition deal costs and
deferred acquisition consideration adjustments less net income
attributable to noncontrolling interests.
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended March 31, 2009
Strategic Performance
Marketing Marketing
Services Services Corporate Total
-------------------------------------------------------------------------
Revenue $84,463 $42,275 - $126,738
--------------------------------------------------
--------------------------------------------------
Operating income
(loss) as reported $6,799 ($679) ($4,006) $2,114
Add:
Depreciation and
amortization 5,372 2,127 94 7,593
Stock-based
compensation 433 190 1,274 1,897
--------------------------------------------------
EBITDA* 12,604 1,638 (2,638) 11,604
margin 14.9% 3.9% 9.2%
Less income attributable
to noncontrolling
interests (676) 294 - (382)
--------------------------------------------------
MDC's Share of
EBITDA** $11,928 $1,932 ($2,638) $11,222
-------------------------------------------------------------------------
* EBITDA is a non-GAAP measure, but as shown above it represents
operating income (loss) plus depreciation and amortization, stock-
based compensation, acquisition deal costs and deferred acquisition
consideration adjustments.
** MDC's Share of EBITDA is a non-GAAP measure, but as shown above it
represents operating income (loss) plus depreciation and
amortization, stock-based compensation, acquisition deal costs and
deferred acquisition consideration adjustments less net income
attributable to noncontrolling interests.
SCHEDULE 3
MDC PARTNERS INC.
FREE CASH FLOW
(US$ in 000s, except share and per share amounts)
Three Months Ended March 31,
-----------------------------
2010 2009
-------------------------------------------------------------------------
MDC EBITDA $7,821 $11,222
Capital Expenditures (2,762) (830)
Cash Taxes (645) 66
Cash Interest, net & Other (6,287) (2,640)
-----------------------------
Free Cash Flow* ($1,873) $7,818
-----------------------------
-----------------------------
Diluted Common Shares Outstanding 27,631,903 27,115,751
Free Cash Flow per Share ($0.07) $0.29
-----------------------------
-----------------------------
* As defined by MDC Partners
SCHEDULE 4
MDC PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
March 31, December 31,
2010 2009
-------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $21,247 $51,926
Accounts receivable, net 131,944 118,211
Expenditures billable to clients 23,226 24,003
Other current assets 10,706 8,105
-----------------------------
Total Current Assets 187,123 202,245
Fixed assets, net 36,327 35,375
Investment in affiliates 1,473 1,547
Goodwill 338,142 301,632
Other intangible assets, net 39,765 34,715
Deferred tax assets 12,625 12,542
Other assets 17,611 16,463
-----------------------------
Total Assets $633,066 $604,519
-----------------------------
-----------------------------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $69,967 $77,450
Accrued and other liabilities 65,694 66,967
Advance billings 80,907 65,879
Current portion of long term debt 1,308 1,456
Current portion of deferred
acquisition consideration 21,258 30,645
-----------------------------
Total Current Liabilities 239,134 242,397
Revolving credit facility 10,278 -
Long-term debt 216,928 216,490
Long-term portion of deferred
acquisition consideration 16,690 -
Other liabilities 8,617 8,707
Deferred tax liabilities 9,005 9,051
-----------------------------
Total Liabilities 500,652 476,645
-----------------------------
-----------------------------
Redeemable Non-controlling Interests 29,868 33,728
-----------------------------
-----------------------------
Shareholders' Equity:
Common shares 219,993 218,533
Additional paid in capital 7,668 9,174
Accumulated deficit (141,348) (131,160)
Stock subscription receivable (217) (341)
Accumulated other comprehensive loss (4,462) (5,880)
-----------------------------
-----------------------------
MDC Partners Inc. Shareholders' Equity 81,634 90,326
Non-controlling Interests 20,912 3,820
-----------------------------
-----------------------------
Total Equity 102,546 94,146
-----------------------------
Total Liabilities, Redeemable
Non-controlling Interests and Equity $633,066 $604,519
-----------------------------
-----------------------------
SCHEDULE 5
MDC PARTNERS INC.
SUMMARY CASH FLOW DATA
(US$ in 000s)
Three Months Ended March 31,
-----------------------------
2010 2009
-------------------------------------------------------------------------
Cash flows provided by continuing
operating activities ($11,218) $928
Discontinued operations - (368)
-----------------------------
-----------------------------
Net cash provided by (used in) operating
activities (11,218) 560
-----------------------------
-----------------------------
Net cash used in investing activities (26,143) (4,121)
Net cash provided by continuing financing
activities 6,788 8,924
Effect of exchange rate changes on cash
and cash equivalents (106) (447)
-----------------------------
-----------------------------
Net increase (decrease) in cash and
cash equivalents ($30,679) $4,916
-----------------------------
SOURCE MDC Partners Inc.
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