MDCA - Earnings call transcript Q3 2019

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Operator

Good afternoon everyone and welcome to MDC Partners Third Quarter Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today's event is being recorded.

At this time, I would like to turn the conference call over to Alex Delanghe, Chief Communications Officer. Ma'am, please go ahead.

Alexandra Delanghe Ewing

you. Thank everyone. afternoon, Good MDC call the quarter the of XXXX. Partners to for conference third Welcome

are Chairman Mark Officer; today me Joining Penn, Lanuto, Financial and and Chief Officer. Frank Executive Chief

remind forward-looking statements non-GAAP our I’d prepared Before and the we contains like financial begin to discussion following you remarks, data. that

the earnings further and the Form statements included cautionary company’s to those in about detailed slide to SEC subject our including company are Forward-looking release presentation statement are and uncertainties in the earnings subsequent and related guidance referenced XX-K in filings.

investor For we’ve posted your reference, presentation an to our website.

to afternoon's definitions, financial you refer also presentation of slide data. release for We and non-GAAP reconciliations this press and explanations

like now turn Executive to it start over Penn. Chief call, And to I’d to our Mark the Officer,

Mark Penn

us MDC’s to today. against be here performance recent joining our pleased update for to New am you on discuss I provide Thank and an progress plan. afternoon. World Good

move priorities, will execute business the continue to profitability. on third believe we quickly that strategic to our position growth initiatives and we quarter, for During the pursuing

on the of a year this year-to-date in taken XXXX late prudent terms reduction adjusted actions significant throughout In tandem in EBITDA increase management basis. helped and with X% financial deliver in cost a performance,

all of and quarter. World down business those the a New year-on-year new addressing adjusted a clients QX was issues some EBITDA was the strong Revenue XXXX as seeing of plan driven media and of areas. against creative rebound one We're global in agencies. third healthcare softness part in the by are in of the

Global expanded and brands with Partners. creative notable from significant at over and anomaly, [ph] and quarter Crispin solid wins portfolio assignments record $XX Porter several no two AOR with net and with F&B, duties Although at new and revenue ancestry.com Qualcomm Vodafone for business at the Bounty Group Allison was including Doner, the Nature's Electrolux creative again down million, for international was

and F&B duties creative agency. momentum XXandSunny's expanded just relationship won this This announced that Johnson's Mills Listerine of on The we've from win potential achievement significant brands, to Häagen-Dazs and of win has this the three, global top and General not QX recognizable such MDC, it together last that global most it's a MBC Zyrtec. with only quarter, we of Tylenol, is into reported Stagwell we collaboration. another addition, Audi new the latest was Colle Johnson duties with since of continued In creative further with morning, with Doners & indicator win fantastic an can for Group's, Doner but since come theory [ph], one recent success a brand

I line and want to difficult strong Allison+Partners, today. significant Other with strong that Anomaly Moto, of as bottom marketing to YML I've digital growth, demonstrating and strategy, agencies combination spot of include the hitting creativity, even its performers and showing innovation some call are sweet a environment. execution, highlighted agencies the an Doner, agency in a Instrument. in particularly attention marketplace

to decline much Operationally revenue. across and cost our business other improvements efficiency offset disciplined of the a in helped management

quarter. successfully I in of $XXX generating target year-end keeps we $XX of revolver as March reduced million drove XXXX. million cash million generation, also We our flow free to my the CEO of This track cash on $X the on deliver strong since through in from to us result became

strategy laid provide take we that against update an new of world Let the date me on our now to to our on our a execution last few minutes out call. plan

strategy the our built is at a around key principles. high level, transformational following reminder a As

estate, creative it's across are overhead. same one investment in that be cultures Our go technologies, great not and today, agencies and than enhance better are creativity operations Group the creativity, whenever real efficient apart digital hand-in-hand, online possible. agency together should Data increases the and and for offline growth

order to offerings, capabilities. strengths smart these enhance costs, our on objectives, our will our our In and taking actions that reduce meet capitalize go-to-market organize we're

offerings terms together. sophisticated Gale, analytics In is agencies with among the quarter, our identified our The clients. alliance in between organizing Media bringing closely MDC data creative of has second media new more reuniting numerous the pitch during our we team and existing effectively Partners media and announced opportunities

Gale, of reduce We're nearly take formation of two half. knowledge, reach. and by geographic process in agencies The complementary reporting We're about additional advantage details with capabilities, of of to of the flagship Media in expect our the substantive networks the two those enter a been the plan MDC that our XX have to our and with led finalized. next combination operationalizing phase of we of Partners variety Together multi-agency by ways networks. resources, units

expect will both these also forward synergies, of details terms go-to-market new weeks. in I opportunities actions on of cost we drive Importantly, and to more coming both networks within that significant the look sharing savings. these

foreign the that These pitches a have MDC consolidate and firms world partners rallied it at of all team. and activity, way around the the culture MDC early same as across with imperative through the class creation I've global especially and firms, to relates definitely its we communications proving strategy. MDC that our the country create compete pitches, at content unified time, also we're previously the indeed a pleased interdisciplinary interdisciplinary, were federation our been are pitch go-to-market furthering global to unity levels extremely MDC. with multi can that unique truly At of of employees

discipline time At these to to is to management center, create we're HR the successful agencies and of expenses From cost and profitable efficient, perspective, IT, management bringing moving more administrative the revenue an at compensation hire create particularly integral legal ratio, factors proven talent. Proper to finance, best we're more headroom running operational same management active to CapEx. and the the structure, resources.

footprint including streamline interagency administration to cross as nearly on progressing consolidation our generating is to real our a by selling portfolio. rapidly natural estate creating with plan efforts well placed opportunities, reduce in synergies York services, expansive also estate co-location collaboration, priority real We're our as New hedge XX% A expected fluctuating revenue needs.

and transformation savings York of our the generate complete to million. XXXX, cost of by end New $XX about annualized expect full future We

forward, move the I'm future that in wins. to by the see particularly with heartened we're we holds, all all fronts, new I'm what seeing making that and client As we're progress momentum significant excited the some building

now turn will to I more on Frank provide quarter over results. the call Frank? to third color

Frank Lanuto

good afternoon, you, Thank everyone. Mark, and

beginning our of business media we the reviewing recently Before have Prior realignment agency one to the operational businesses, want the of to is media the results, network. based the that reclassified the quarter. the to facilitate management domestic point announced I of out results. The at under from the reclassified services of on segment periods our creative financial comparability been

quarter, our us third scrolling of And X.X%. revenue some $XXX businesses. a As at we led Mark organically a had of agencies. performances select the same This down time, number mentioned, in number challenges the at to continued of down we in million experienced and report X.X%

billion For period, X.X% a revenue $X.XX basis was from organic an $X.XX the month on down nine reported billion year-ago.

by benefit nine three Pass-through to and costs the respectively. revenue continue periods reported for X% and X.X%, month approximately our organic

as saw communication they segment, continued For specialist positive growth, X% our in revenue organic delivering the market momentum share. continue quarter, to capture we

business the an environment a remits or on relations decision agencies Officer of our one take derail recognize We are where brand tweet and public corporations as can mismanaged in severely larger-and-larger importance growing the seeing swiftly narrative. Communications Chief

experienced PR the in largely our This budgets are driven CMOs was downward Offsetting agencies positioning to to we Additionally, increasingly environment. larger in PR businesses pressure unique with this, continues connected this three specialty results. by agencies. our drive

losses of approximately to accounts First, EBITDA. The inclusive from with related of project or mentioned and two to one impact minimal have no work. a resulting which client related reclassification on principally acquisitions quarter remaining loss was of related is XX%, media some of the to the lesser business, deferral impact the extent pass-through declined amount EBITDA. costs, previously on These

factor the cycling one accomplices previously was at profile high agency second global segment. of two our The integrated and announced

these This winning as end in be year future. We business we strong and its the by of by a in continue fundamentally award great run losses course wins, impact of evidenced and account have confidence expect is resilient XXXX. to the to recent and offset its the

offset the X% organic the group in in overall the quarter. segment by partially in at for an strong decline performance Softness resulting global two the segment a leaders was in

which final segment, as approximately contributing regulatory approvals all client for The was recent spending organically. drivers, factor solid us some well and Delayed this our declined in year. segment our other by portfolio were principle reported improvement wins but healthcare reductions in certain in in next we expect position the XX% and

rise creativity. experience agencies continues in strength saw in and the demand also as We enabled our at in QX, this to intersection of consumer segment technology digital

year-to-date. businesses, Excluding EBITDA the been have up XX% three these would impact over of

of nine each XXXX year, decreased through EBITDA in quarter million. in million implemented unusually trailing EBITDA $XX performance to $XX In EBITDA initiatives other strong to increased but adjusted the a was $XXX initially adjusted by $XXX the and of in in X% Severance from incremental quarter, of the was in covenant to the For to periods, the cost significant the reduction reduction quarters million charges XXXX. compared both months. as first continuing prior and cost million third three XX-month first aided taken an XX% leading EBITDA covenant through

corporate including approximately to $X.X office. initiatives our restructuring cost in in delivering the continued quarter, $X.X also progress make savings We the at against severance, charges million in million

overhead nine period, with recorded of basis. million have the estimated we on months charges, savings an annualized Notably, million. including at corporate our we in annualized corporate the For million $X office, $XX $X of $X million total a reduced over by nearly

rate million We will of achieve restructuring the I expect are year. by the actions that help committed run savings $XX and the fourth would further goal in and our improvements, us of to delivering incremental end therefore quarter

facility down while acquisition compared cash million $X from the in distributions We $XXX $XX interest Net taxes, to working credit balance debt we interest from as to payments, reducing but capital sheet, $X minority million solid performance. flat another third million, and and the $X QX, further million. $XXX on funded related million delivered Moving at $X million our of to approximately million was and borrowings year-end.

the the in our performance the total on revolver and to flat leverage EBITDA, quarter. Given ratio cash prior essentially change was covenant,

be up by of paid payments to cash and to and net remain flow. on [ph] to year-end interest VAC reduce exit we approximately $X track the funding revolver million Overall, related acquisition-related fourth liabilities The remaining to with this minority in of significant quarter achieve $XXX the year. the expected positive million, to obligations

million, X% X% the for maintaining will covenant the lower down are be anticipate $XXX Given guidance EBITDA through forecasted we months, $XXX to on which though to organic year. trends revenue, nine of we full our XXXX

enhanced fostering on simultaneously cross agency we our the of world executing focused profitability expeditiously Thank creativity strengthening proven As strategy ahead, are initiatives against you. driving to new strategic costs we and and while combining unnecessary collaboration, our sheet. look eliminating with plan, balance

Operator, you questions? please open would for the line

Operator

question Steiner [Operator question. instructions] your Avi go first Please with today JPMorgan. from ahead from Our comes

Avi Steiner

Thanks, I got a couple here.

recognize guess all you how August end then side, deferral on the materialize I'm really happens, about little to -- Thank I spoke last part, on quarter, that But trying mentioned in difficult we can back? I'm deeper deferral, to did do healthcare But what the dig the into have then coming So happened I I heard account few that you you. from if how back losses, forecast the through this of what others. side. some the half And to is and think business. market early it when wondering the a we the revenue I you the understand

Frank Lanuto

think pieces that to I probably. a of So couple there's

increasing on work has of The become revenues based is of first portion a you project amount thing know, an projected work, for project our oriented. is, fair budget as

visibility So don't have approach But some those that always use estimate therefore, what try will to trends and out. we you be. the macro, far

shows up work doesn't. that it Sometimes and sometimes

bit little that of a on. going there's So

Second, every and day. business lose we win

met So businesses, so certain client which aren't spending, get in of in business, you get your softness always that. on which part happens regulatory expectations the delays, just about you a as

I the that's think some comes of sort overall, softness of where So from.

Mark Penn

the strong as of this think, And really, one are back-to-back look seeing see, just we're Mark. we back I particularly the is was new this on had coming first significant and third I we've was go after to as quarter And losses that quarter, last business. think cycled you if two had net winds the of can year I and occurred our loss of some you as quarters, several through

We've the stream contrasted of has it had to net and on, longer, because think for revenue wins the fully finally off takes quarters of brought wins agencies I did these come as first to an and taken two be But major business. as the days, on it of Johnson now, that Johnson with Audi. business agencies some old beginning to see goes, we're & we the are and the I have business

things sequencing So, the kind I in are that those think of things.

I think we what of resulted less year. the were that's really for through I in think, hoping hasn't somewhat that's revenue what, end the than

Avi Steiner

Understood, and question. a next that's good to segue my

profile high wins to prates. you've in the we've the So seen talked and that trade

want like I number fourth to MDC contribution anything are how think understand for quarter, Sounds sure think at in to to timing Number maybe make vis-à-vis in trying --? I'm about the economic the Stagwell a uncertain. is the and the two, team I shouldn't the you'd the least one splits of versus what wins assume one. partnership win with mentioned we

Frank Lanuto

these fourth revenue projected out had, of Well, without I again, anticipation we we wins. think the the have, quarter

in exactly these this, sometimes to shorter, but online, clients take or they'll came longer the whether significant when wins. I'm not I think quarter, as going come they So, fourth predict are

In that say, terms I in XXX% done of collaboration, be things as nothing might nothing. always is of

So I to are but going agencies figure significant both wins through here. agencies involved. these were six think both the go -- I'm not benefit for amounts

probability been of So case, that win increases there that think XX that unbalanced have solid agencies over percentage has in displace account. in they for economics cooperative that I winning think years kind I that and servicing the that of

that's And comfortable kind each there hopeful other have disciplines. in disciplines. thing will typically will the with we're is to agencies as future benefits those they continue So in happening partnerships that the across involve two that, thing of other become working

by the sale to several is though together able as itself and working it's disciplines. So not average higher contract across losing, is a agency so they're either bigger get

Avi Steiner

joined I targets, from cash $XXX believe XXXX you I of to the flow heard time target 'XX. Okay. you, million reiterate Mark, your free

organic anyone myself about this next here. new for I'm of X% were I you or about and wondering in get year. that And feel don't think think ending how context talked? previously revenue of in and else to I I you wins want trouble But to business X% talked some previously you've you how the growth that year's

Mark Penn

year, So in think to we for and right news of across the of it's and now, very We're factor And our cycles end think this guidance note on winning business of next other this we're happens budgeting forecast at I cycles in year, XXXX direction is came of our guidance new changing year. will the we middle loss to important I in quarter. time collect, start at process update as the accounts, the this win that I why to will not in at the entire and just we as this a as also the the beginning Avi, XXXX the our time. you even next into for

Avi Steiner

talked question, us, apologize. Fair I'll But and that enough. Frank, of of I more project earlier versus back one you kind my the shift want you kind to And to project dimensionalize get Can to kind about think for work. of other? I shortly. I go off of

Frank Lanuto

think in a it's, I forms. of look it Well, number comes

of competing even are the you Some though with may of roster. yourself work. project agencies, number of the by find or with our nature a pre-cleared larger some sort at agency some of will of that be year. agencies, for their throughout even client, mostly one agencies of sort you're, two on And you a But another work

what end, So, some you be plus it, in some, sort or I math macro minus it may estimate an but estimate. you use can make like to you of can on the said,

Mark Penn

just clients people they're from is switch on several project response their generally roster. to look, -- then to on Mark, to from agency some to life also is fact when, that choose work do, when our agencies a And that comment roster that to extent that, adapt if route, some preferred to a, don't. let So, one AORs the the me switching and in this

alliances packages also multiple sell together because announcing I into services importantly, of coherent think counter the that they that most services. bring that clients, we're

it the even it's or work and stand AOR four not across so project now, if disciplines. different Creative couldn't an And three

our so putting we're units reduce next the that will believe is the why from responding Alliance, process marketplace the And in here that in to the XX will, to few weeks about our this. strategy we're we network that's that and of announcing that together it operating half that of over critical on

Avi Steiner

Thank I head appreciate you. the will back time Gentlemen, in queue. I

Operator

additional Penn this I'm closing Instructions] remarks. over to I'd [Operator at And showing like turn gentlemen to time, Mark any and the ladies call for conference questions. back

Mark Penn

appreciative. for Thank managed questions the We're ask you. I the group. they've see to

update that momentum the plan produce of that And we're think that for as will timely this we forward. we think results progress. significant currently listening. combination World I again is, you this in move a seeing New is that the we with plan for given of company hoped that we Thank

Operator

conclude conference thank gentlemen, and attending today's do Ladies call. you for presentation. today's that We does

your now disconnect may lines. You

Stagwell (STGW) 9 Nov 192019 Q3 Earnings call transcript