MDC PARTNERS INC. REPORTS RESULTS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2010
Increases Quarterly Dividend 10% to $0.11 per Share From $0.10 Previously
SECOND QUARTER HIGHLIGHTS:
| · | Revenue increased to $170.0 million versus $134.9 million in Q2 2009, an increase of 26.0% |
| · | Organic revenue increased 5.3% for Q2 2010, an over 500 basis point acceleration from Q1 2010 |
| · | EBITDA decreased slightly to $18.3 million versus $18.5 million in Q2 2009 due to timing of client activity and investment in key talent and growth initiatives |
| · | Net new business wins of $27.2 million for Q2 2010, an increase of over $20 million from Q1, to bring the year to date total to $33.8 million |
| · | Digital revenue increased to 43% of total revenues in Q2 2010 from 41% in Q1 2010 |
| · | Adjusting fiscal 2010 guidance for change to consolidated EBITDA from MDC EBITDA |
| · | Increasing 2010 revenue guidance to $640-655 million, an estimated increase of 17.2% to 20.0% from 2009 |
| · | 2010 consolidated EBITDA guidance increased to $86-88 million, an estimated increase of 22.6% to 25.4% from 2009 |
| · | Increasing Total Free Cash Flow guidance to $61-63 million from $53-55 million due to increased improvement in Working Capital and Other |
| · | Increasing quarterly dividend 10% to $0.11 per share from $0.10 |
| | · | Agreed to acquire a majority interest in a leading experiential marketing firm |
NEW YORK, NY (July 29, 2010) – MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and six months ended June 30, 2010.
“We are very pleased with our second quarter financial performance, and particularly with the way our businesses performed in the latter part of the period,” said Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners. “We’re leading the industry in developing marketing strategies that deliver superior return on marketing investment. This success is enabling us to win new business at an unprecedented pace. We are building long-term and profitable relationships with some of the biggest and best marketing brands in the world. With business momentum picking up significantly in the second quarter, the second half of 2010 is shaping up to be particularly robust, and we are well on our way to an industry-leading financial performance with increased 2010 guidance on all financial metrics. We are very well positioned to continue our growth in 2011.”
Guidance for 2010 is adjusted as follows to account for a change to consolidated EBITDA from MDC EBITDA due to the diminishing income from noncontrolling interests as a percent of the total business, acquisitions and expected improvements in cash generation:
| | | Adjusted | | Implied | | Pro Forma | | Implied |
| | | 2010 | | Year over Year | | 2010 | | Year over Year |
| | | Guidance | | Change | | Estimate | | Change |
| Revenue | | $640 - $655 million | | +17.2% to +20.0% | | $675 - $690 million | | +23.6% to +26.4% |
| EBITDA | | $86 - $88 million | | +22.6% to +25.4% | | $96 - $98 million | | +36.8% to +39.7% |
| Free Cash Flow | | $41 - $43 million | | +0.2% to +5.1% | | $48 - $50 million | | +17.3% to +22.2% |
| + Change in Working Capital and Other | | +$20 million | | | | +$20 million | | |
| Total Free Cash Flow | | $61 - $63 million | | +10.5% to +14.1% | | $68 - $70 million | | +23.2% to +26.8% |
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 second quarter of 2010 was $170.0 million, an increase of 26.0% compared to $134.9 million in the second quarter of 2009. EBITDA (as defined) for the second quarter of 2010 was $18.3 million, a decrease of 1.1% compared to $18.5 million in the second quarter of 2009 driven by the timing of client wins and losses and our planned investment in talent and other growth initiatives. Net income (loss) attributable to MDC Partners Inc. in the second quarter was a loss of ($5.8) million compared to nominal income in the second quarter of 2009. Diluted earnings (loss) per share from continuing operations attributable to MDC Partners Inc. common shareholders for the second quarter of 2010 was a loss of ($0.19) compared with $0.01 per share in the same period of 2009. Free cash flow (as defined) was $5.5 million in the second quarter of 2010, compared with $12.9 million in the second quarter of 2009.
For the six month ended June 30, 2010 consolidated revenue was $306.2 million, an increase of 17.0% compared to $261.6 million in the same period of 2009. EBITDA (as defined) for the first six months of 2010 was $27.1 million, a decrease of 10.0% compared to $30.1 million in the first six months of 2009. Net income (loss) attributable to MDC Partners Inc. for the first six months of 2010 was a loss of ($16.0) million compared to nominal income in the first half of 2009. Diluted earnings (loss) per share from continuing operations attributable to MDC Partners Inc. common shareholders for the six months ended June 30, 2010 was a loss of ($0.55) compared with $0.02 per share in the same period of 2009.
“Our strategy to deliver solid organic growth and to strategically invest capital was reinforced in the first half of the year,” said David Doft, Chief Financial Officer. “The strategic acquisitions that we have completed are all operating on or ahead of expectations, and contributing positively to our financial performance. Additionally, the 5.3% organic revenue growth accelerated throughout the second quarter and our overall financial performance for the quarter exceeded our internal expectations. In particular, our results for June were up dramatically year over year and give us great confidence in our momentum for the rest of 2010. While our investment in talent and infrastructure weighed on our profitability metrics in the first two quarters of 2010, we are beginning to see significant positive returns. We also fully expect that the robust new business pipeline and wins we are experiencing now will significantly enhance our organic growth and our financial performance in the second half of 2010, and for the full year 2011.”
MDC Partners Announces $0.11 per Share Cash Dividend
MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.11 per share on all of its outstanding Class A shares and Class B shares. The dividend will be payable on August 27, 2010 to shareholders of record at the close of business on August 13, 2010.
“As we previously stated in the first quarter of 2010, we are dedicated to rewarding all of our shareholders for their loyalty and commitment,” said Mr. Nadal. “The payment of cash dividends remains an important part of our ongoing strategy to maximize shareholder value. The new dividend of $0.11 per share represents a 10% increase above MDC Partners’ last dividend payment and is representative of the significant increase in free cash flow that MDC has achieved to date. As free cash flow continues to increase over time, we expect dividend payments to continue to increase as well.”
Conference Call
Management will host a conference call on July 30, 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 Friday, August 13, 2010 by dialing 1-416-849-0833 or toll free 1-800-642-1687 (passcode 86728867#) or by visiting our website.
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 EBITDA and EBITDA margin (as defined) for the three months and six months ended June 30, 2010 and 2009; and (2) presenting Free Cash Flow and Free Cash Flow per Share (as defined) for the three months and six months ended June 30, 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.
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| MDC PARTNERS INC. |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (US$ in 000s, except share and per share amounts) |
