MDC Partners Inc. Reports Results For The Three And Nine Months Ended September 30, 2020

Company Delivers 9% Sequential Revenue Growth, Strategic Plan Implementation Results in Solid Q3 & YTD Results

NEW YORK, Oct. 29, 2020 /PRNewswire/ --

THIRD QUARTER & YTD HIGHLIGHTS:

  • Revenue of $283.4 million in the third quarter versus $342.9 million in the prior period, a decline of 17.3%; and $870.8 million YTD versus $1,033.8 million in the prior year period, a decline of 15.8%.
  • Sequential revenue growth of 9.1% from the second quarter of 2020.
  • Organic revenue declined 16.4% in the third quarter and 14.1% YTD.
  • Net income attributable to MDC Partners common shareholders was $0.4 million in the third quarter of 2020 versus net loss of $5.1 million a year ago.
  • Net loss attributable to MDC Partners common shareholders was $6.0 million in the nine months ended September 30, 2020 versus $6.5 million a year ago.
  • Adjusted EBITDA for the three months ended September 30, 2020 was $54.1 million versus $49.2 million a year ago, an increase of 9.9%. Adjusted EBITDA Margin of 19.1%, compared to 14.3% in the prior year quarter.
  • Sequential Adjusted EBITDA growth of 49.5% from the second quarter of 2020, increasing from $36.2 million to $54.1 million.
  • Adjusted EBITDA for the nine months ended September 30, 2020 was $129.8 million versus $117.1 million a year ago, an increase of 10.8%. Adjusted EBITDA Margin of 14.9%, compared to 11.3% a year ago.
  • Excluding the sales of Kingsdale and Sloane, Adjusted EBITDA increased 12.1% in the third quarter and increased 15.2% in the nine months of 2020 compared with the prior year period.
  • Covenant EBITDA (LTM) of $199.3 million versus $175.5 million at September 30, 2019, an increase of  13.6%.
  • Net New Business wins totaled $31.9 million in the third quarter, and $60.8 million in the nine months ended September 30, 2020.

(NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended September 30, 2020.

"MDC Partners delivered strong results this quarter in the face of the significant but reduced drag of the COVID-19 pandemic. We delivered 9 percent sequential revenue growth and 49 percent sequential Adjusted EBITDA growth from the second quarter of 2020, along with $32 million in net new business in the quarter," said Mark Penn, Chairman and Chief Executive Officer of MDC Partners.

"We continue to implement and make progress on our strategic plan that has brought our partners together into newly formed networks and collaborative holding company pitches. We launched our first major digital marketing product, and expanded profitability and margins as we continued to centralize back-office operations and consolidate real estate," added Mr. Penn.

Frank Lanuto, Chief Financial Officer, added, "Our cost management measures resulted in higher year-over year Adjusted EBITDA in both the third quarter and year-to-date, with third quarter margins expanding to 19.1%. We ended the quarter with $37 million in cash and no borrowings on our revolver, lowering our leverage to 4.4x from 5.0x a year ago." 

Lead Independent Director and Special Committee Chairman Irwin Simon commented, "Having reached an agreement in principle on certain key aspects of the proposed merger with The Stagwell Group, the special committee, working closely with its independent advisors, continues to proceed diligently towards an outcome that will maximize value to our shareholders."

The agreement in principle is non-binding and subject to several conditions, including obtaining relevant third-party consents to the potential transaction (in certain cases prior to entering into definitive documentation).  No assurances can be given regarding the likelihood of obtaining such consents, of reaching agreement on definitive documentation, or of ultimately completing the potential transaction.

Third Quarter and Year-to-Date 2020 Financial Results

Revenue for the third quarter of 2020 was $283.4 million versus $342.9 million for the third quarter of 2019, a decline of 17.3%. The effect on revenue of foreign exchange was positive 0.3%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.2%, and organic revenue decline was 16.4%, inclusive of $11.8 million or 121 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Revenue increased 9.1% sequentially from the second quarter of 2020 as client spending activity increased following the initial decline in the second quarter due to COVID-19. Net New Business wins in the third quarter of 2020 totaled $31.9 million.

Net income attributable to MDC Partners common shareholders for the third quarter of 2020 was $0.4 million versus net loss of $5.1 million for the third quarter of 2019. The increase was primarily due to lower revenues, more than offset by a reduction in expenses, as well as the favorable impact of foreign exchange. Diluted income per share attributable to MDC Partners common shareholders for the third quarter of 2020 was $0.00 versus diluted loss per share of $0.07 for the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 was $54.1 million versus $49.2 million for the third quarter of 2019, an increase of 9.9%, primarily due to reduced expenses. This led to a 480 basis point increase in Adjusted EBITDA margin in the third quarter of 2020 to 19.1% from 14.3% in the third quarter of 2019.

Covenant EBITDA for the last twelve months (LTM) was $199.3 million as of September 30, 2020 versus $175.5 million at September 30, 2019, an increase of 13.6%. The change was primarily driven by the increase in Adjusted EBITDA.    

Revenue for the first nine months of 2020 was $870.8 million versus $1,033.8 million for the first nine months of 2019, a decline of 15.8%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 0.4%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.3%, and organic revenue decline was 14.1%, inclusive of $39.9 million or 198 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net New Business wins for the first nine months of 2020 totaled $60.8 million.

Net loss attributable to MDC Partners common shareholders for the first nine months of 2020 was $6.0 million versus $6.5 million for the first nine months of 2019. Diluted loss per share attributable to MDC Partners common shareholders for the nine months of 2020 was $0.08 versus diluted loss per share of $0.10 for the first nine months of 2019.

Adjusted EBITDA for the first nine months of 2020 was $129.8 million versus $117.1 million for the first nine months of 2019, an increase of 10.8%. The improvement was primarily due to a reduction in expenses to combat the impact of COVID-19 on the business, partially offset by lower revenues. This led to a 360 basis point improvement in Adjusted EBITDA margin in the first nine months of 2020 to 14.9% from 11.3% in the first nine months of 2019.

Financial Outlook

Given the uncertainties in the global business environment arising from the COVID-19 pandemic, the Company is not providing a 2020 outlook for Revenue and Covenant EBITDA at this time.

Conference Call

Management will host a conference call on Thursday, October 29, 2020, at 8:30 a.m. (ET) to discuss its results.  The conference call will be accessible by dialing 1-862-298-0702 or toll free 1-888-437-3179.  An investor presentation has been posted on our website at www.mdc-partners.com and may be referred to during the conference call.

A recording of the conference call will be accessible within one business day after the conference call until 12:00 a.m. (ET), November 5, 2020, by dialing 1-754-333-7735 or toll free 1-888-539-4649 (passcode 153920), or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC Partners is one of the most influential marketing and communications networks in the world. As "The Place Where Great Talent Lives," MDC Partners is celebrated for its innovative advertising, public relations, branding, digital, social and event marketing agency partners, which are responsible for some of the most memorable and effective campaigns for the world's most respected brands. By leveraging technology, data analytics, insights and strategic consulting solutions, MDC Partners drives creative excellence, business growth and measurable 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 (SEC) 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 include the following:

(1) Organic Revenue: "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

(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 financial measure that represents Net income (loss) attributable to MDC Partners Inc. common shareholders plus or minus adjustments to operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items, net which includes items such as severance expense and other restructuring expenses, including costs for leases that will either be terminated or sublet in connection with the centralization of our New York real estate portfolio.

(4) Covenant EBITDA: Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one-time charges, permitted dispositions and other items, as defined in the Company's Credit Agreement. We believe that the presentation of Covenant EBITDA is useful to investors as it eliminates the effect of certain non-cash and other items not necessarily indicative of a company's underlying operating performance. In addition, the presentation of Covenant EBITDA provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Company's Credit Agreement.

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. Statements in this press release that are not historical facts, including without limitation the information under the heading "Financial Outlook" and statements about the Company's beliefs and expectations, earnings (loss) guidance, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Words such as "estimates", "expects", "contemplates", "will", "anticipates", "projects", "plans", "intends", "believes", "forecasts", "may", "should", and variations of such words or similar expressions are intended to identify 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 international, national and regional unfavorable economic conditions that could affect the Company or its clients, including as a result of the novel coronavirus pandemic ("COVID-19");
  • the effects of the outbreak of COVID-19, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;
  • developments involving the proposal by Stagwell Media LP to enter into a business combination with the Company (the "Potential Transaction"), including the impact of the announcement of the formation of the special committee, the reaching of an agreement in principle on certain aspects of a Potential Transaction, and the continuing discussion and review of a Potential Transaction on the Company's business, whether any Potential Transaction will occur, and/or the ability to implement any Potential Transaction or other transaction;
  • the Company's ability to attract new clients and retain existing clients;
  • reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
  • financial failure of the Company's clients;
  • the Company's ability to retain and attract key employees;
  • the Company's ability to achieve the full amount of its stated cost saving initiatives;
  • the Company's implementation of strategic initiatives;
  • 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.

Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in the Company's 2019 Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 5, 2020 and accessible on the SEC's website at www.sec.gov., 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 per Share Amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

Revenue:








Services

$

283,423



$

342,907



$

870,843



$

1,033,828


Operating Expenses:








Cost of services sold

172,531



222,448



560,856



700,351


Office and general expenses

72,512



79,726



205,075



234,120


Depreciation and amortization

9,332



9,368



27,437



28,869


Impairment and other losses

159



1,944



19,159



1,944



254,534



313,486



812,527



965,284


Operating income

28,889



29,421



58,316



68,544


Other Income (Expenses):








Interest expense and finance charges, net

(15,266)



(16,110)



(46,819)



(49,284)


Foreign exchange gain (loss)

2,159



(3,973)



(7,256)



4,401


Other, net

505



(431)



22,723



(4,559)



(12,602)



(20,514)



(31,352)



(49,442)


Income before income taxes and equity in earnings of non-
consolidated affiliates

16,287



8,907



26,964



19,102


Income tax expense

1,452



3,457



7,029



6,292


Income before equity in earnings of non-consolidated affiliates

14,835



5,450



19,935



12,810


Equity in earnings (losses) of non-consolidated affiliates

(31)



63



(829)



352


Net income

14,804



5,513



19,106



13,162


Net income attributable to the noncontrolling interest

(10,728)



(7,265)



(14,620)



(10,737)


Net income (loss) attributable to MDC Partners Inc.

4,076



(1,752)



4,486



2,425


Accretion on and net income allocated to convertible preference
shares

(3,716)



(3,306)



(10,528)



(8,931)


Net income (loss) attributable to MDC Partners Inc. common
shareholders

$

360



$

(5,058)



$

(6,042)



$

(6,506)


Income (loss) Per Common Share:








Basic








Net income (loss) attributable to MDC Partners Inc. common
shareholders

$

0.00



$

(0.07)



$

(0.08)



$

(0.10)


Diluted








Net income (loss) attributable to MDC Partners Inc. common
shareholders

$

0.00



$

(0.07)



$

(0.08)



$

(0.10)


Weighted Average Number of Common Shares Outstanding:








Basic

73,207,619



72,044,480



72,713,257



68,154,306


Diluted

73,476,779



72,044,480



72,713,257



68,154,306


 

SCHEDULE 2

MDC PARTNERS INC.

UNAUDITED REVENUE RECONCILIATION

(US$ in 000s, except percentages)



Three Months Ended


Nine Months Ended


Revenue $


% Change


Revenue $


% Change

September 30, 2019

$

342,907





$

1,033,828




Organic revenue (1)

(56,281)



(16.4)

%


(145,285)



(14.1)

%

Non-GAAP acquisitions (dispositions), net

(4,076)



(1.2)

%


(13,865)



(1.3)

%

Foreign exchange impact

873



0.3

%


(3,835)



(0.4)

%

Total change

(59,484)



(17.3)

%


(162,985)



(15.8)

%

September 30, 2020

$

283,423





$

870,843





 

(1) Organic revenue refers to the positive results of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue component reflects the constant currency impact of (a) the change in revenue of the partner firms which the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year. See "Non-GAAP Financial Measures" herein.

Note: Actuals may not foot due to rounding.

 

 

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, 2020


Integrated
Networks -
Group A


Integrated
Networks -
Group B


Media &
Data
Network


All Other


Corporate


Total

Revenue

$

87,064



$

112,159



$

33,572



$

50,628



$



$

283,423














Net income attributable to MDC Partners Inc.
common shareholders











$

360


Adjustments to reconcile to operating income
(loss):












Accretion on and net income allocated to
convertible preference shares











3,716


Net income attributable to the noncontrolling
interests











10,728


Equity in losses of non-consolidated affiliates











31


Income tax expense











1,452


Interest expense and finance charges, net











15,266


Foreign exchange gain











(2,159)


Other, net











(505)


Operating income (loss)

$

12,700



$

23,636



$

2,114



$

5,201



$

(14,762)



$

28,889


margin

14.6

%


21.1

%


6.3

%


10.3

%




10.2

%













Adjustments:












Depreciation and amortization

$

1,601



$

4,813



$

786



$

1,933



$

199



$

9,332


Impairment and other losses



157





2





159


Stock-based compensation

4,024



742



131



141



1,421



6,459


Deferred acquisition consideration adjustments

2,684



250





(131)





2,803


Distributions from non-consolidated affiliates (1)









208



208


Other items, net (2)









6,208



6,208


Adjusted EBITDA (3)

$

21,009



$

29,598



$

3,031



$

7,146



$

(6,726)



$

54,058


Adjusted EBITDA margin

24.1

%


26.4

%


9.0

%


14.1

%




19.1

%


(1) 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).

 

(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

 

(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based
compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein.

 

Note: Effective in the first quarter of 2020, the Company reorganized its management structure resulting in the aggregation of certain Partner Firms into integrated
groups ("Networks").  In connection with our discussions with the SEC, the Company has changed the prior presentation for the Networks. Beginning in the
second quarter of 2020, the Company separated the Networks into two reportable segments: Integrated Networks - Group A and Integrated Networks - Group B.
Prior periods presented have been recast to reflect the change in reportable segments.

 

Note: Actuals may not foot due to rounding.

 

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, 2020


Integrated
Networks -
Group A


Integrated
Networks -
Group B


Media &
Data
Network


All Other


Corporate


Total

Revenue

$

260,420



$

323,264



$

103,181



$

183,978



$



$

870,843














Net loss attributable to MDC Partners Inc. common
shareholders











$

(6,042)


Adjustments to reconcile to operating income
(loss):












Accretion on convertible preference shares











10,528


Net income attributable to the noncontrolling
interests











14,620


Equity in losses of non-consolidated affiliates











829


Income tax expense











7,029


Interest expense and finance charges, net











46,819


Foreign exchange loss











7,256


Other, net











(22,723)


Operating income (loss)

$

39,337



$

33,080



$

2,777



$

18,045



$

(34,923)



$

58,316


margin

15.1

%


10.2

%


2.7

%


9.8

%




6.7

%













Adjustments:












Depreciation and amortization

$

4,908



$

13,726



$

2,401



$

5,735



$

667



$

27,437


Impairment and other losses



17,786



35



209



1,129



19,159


Stock-based compensation

5,880



2,388



122



339



1,839



10,568


Deferred acquisition consideration adjustments

4,391



(3,859)



375



(392)





515


Distributions from non-consolidated affiliates (1)









1,273



1,273


Other items, net (2)









12,519



12,519


Adjusted EBITDA (3)

$

54,516



$

63,121



$

5,710



$

23,936



$

(17,496)



$

129,787


Adjusted EBITDA margin

20.9

%


19.5

%


5.5

%


13.0

%




14.9

%


(1) 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).

 

(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

 

(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based c
ompensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein.

 

Note: Actuals may not foot due to rounding.

 

SCHEDULE 5

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)


For the Three Months Ended September 30, 2019


Integrated
Networks -
Group A


Integrated
Networks -
Group B


Media &
Data
Network


All Other


Corporate


Total

Revenue

$

99,299



$

129,057



$

36,235



$

78,316



$



$

342,907














Net loss attributable to MDC Partners Inc. common
shareholders











$

(5,058)


Adjustments to reconcile to operating income (loss):












Accretion on convertible preference shares











3,306


Net income attributable to the noncontrolling
interests











7,265


Equity in earnings of non-consolidated affiliates











(63)


Income tax expense











3,457


Interest expense and finance charges, net











16,110


Foreign exchange loss











3,973


Other, net











431


Operating income (loss)

$

17,441



$

15,488



$

331



$

5,272



$

(9,111)



$

29,421


margin

17.6

%


12.0

%


0.9

%


6.7

%




8.6

%













Adjustments:












Depreciation and amortization

$

2,132



$

3,872



$

1,004



$

2,168



$

192



$

9,368


Impairment and other losses


1,933





11





1,944


Stock-based compensation

4,330



740



16



107



833



6,026


Deferred acquisition consideration adjustments

71



206



3



1,663





1,943


Distributions from non-consolidated affiliates (1)



(250)







48



(202)


Other items, net (2)









705



705


Adjusted EBITDA (3)

$

23,974



$

21,989



$

1,354



$

9,221



$

(7,333)



$

49,205


Adjusted EBITDA margin

24.1

%


17.0

%


3.7

%


11.8

%




14.3

%


(1) 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).

 

(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

 

(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based
compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP
Financial Measures" herein.

 

Note: Actuals may not foot due to rounding.

 

SCHEDULE 6

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(US$ in 000s, except percentages)


For the Nine Months Ended September 30, 2019


Integrated
Networks -
Group A


Integrated
Networks -
Group B


Media &
Data
Network


All Other


Corporate


Total

Revenue

$

276,286



$

395,622



$

118,923



$

242,997



$



$

1,033,828














Net loss attributable to MDC Partners Inc. common
shareholders











$

(6,506)


Adjustments to reconcile to operating income (loss):












Accretion on convertible preference shares











8,931


Net income attributable to the noncontrolling
interests











10,737


Equity in earnings of non-consolidated affiliates











(352)


Income tax expense











6,292


Interest expense and finance charges, net











49,284


Foreign exchange gain











(4,401)


Other, net











4,559


Operating income (loss)

$

28,553



$

52,189



$

(1,041)



$

19,408



$

(30,565)



$

68,544


margin

10.3

%


13.2

%


(0.9)

%


8.0

%




6.6

%













Adjustments:












Depreciation and amortization

$

6,420



$

11,964



$

3,332



$

6,523



$

630



$

28,869


Impairment and other losses



1,933





11





1,944


Stock-based compensation

8,564



3,231



22



363



452



12,632


Deferred acquisition consideration adjustments

(409)



(3,950)



75



657





(3,627)


Distributions from non-consolidated affiliates (1)



(250)







79



(171)


Other items, net (2)









8,926



8,926


Adjusted EBITDA (3)

$

43,128



$

65,117



$

2,388



$

26,962



$

(20,478)



$

117,117


Adjusted EBITDA margin

15.6

%


16.5

%


2.0

%


11.1

%




11.3

%


(1) 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).

 

(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

 

(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based
compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP
Financial Measures" herein.

 

Note: Actuals may not foot due to rounding.

 

SCHEDULE 7

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA

(US$ in 000s)



2019


2020


 Covenant EBITDA
(LTM) (1)


Q3


Q4


Q1


Q2


Q3


Q2-2020-
LTM


Q3-2020 -

LTM

Net income (loss) attributable to MDC Partners Inc.
common shareholders

$

(5,058)



$

(10,488)



$

(2,437)



$

(4,102)



$

360



$

(22,085)



$

(16,667)


Adjustments to reconcile to operating income:














Accretion on and net income allocated to convertible
preference shares

3,306



3,373



3,440



3,509



3,716



13,628



14,038


Net income attributable to the noncontrolling
interests

7,265



5,419



791



3,101



10,728



16,576



20,039


Equity in losses (earnings) of non-consolidated
affiliates

(63)







798



31



735



829


Income tax expense (benefit)

3,457



4,241



13,500



(7,923)



1,452



13,275



11,270


Interest expense and finance charges, net

16,110



15,658



15,612



15,941



15,266



63,321



62,477


Foreign exchange loss (gain)

3,973



(4,349)



14,757



(5,342)



(2,159)



9,039



2,907


Other, net

431



(2,158)



(16,334)



(5,884)



(505)



(23,945)



(24,881)


Operating income

$

29,421



$

11,696



$

29,329



$

98



$

28,889



$

70,544



$

70,012
















Adjustments to reconcile to Adjusted EBITDA:














Depreciation and amortization

$

9,368



$

9,460



$

9,206



$

8,899



$

9,332



$

36,933



$

36,897


Impairment and other losses

1,944



5,875



161



18,839



159



26,819



25,034


Stock-based compensation

6,026



18,408



3,070



1,039



6,459



28,543



28,976


Deferred acquisition consideration adjustments

1,943



9,030



(4,600)



2,312



2,803



8,685



9,545


Distributions from non-consolidated affiliates

(202)



2,219



(14)



1,079



208



3,082



3,492


Other items, net (2)

705



349



2,416



3,895



6,208



7,365



12,868


Adjusted EBITDA

$

49,205



$

57,037



$

39,568



$

36,161



$

54,058



$

181,971



$

186,824
















Adjustments to reconcile to Covenant EBITDA:














Proforma dispositions (3)

$

(996)



$

(1,294)



$

(124)



$



$



$

(2,414)



$

(1,418)


Severance due to eliminated positions

1,956



3,221



2,133



5,233



2,336



12,543



12,923


Other adjustments, net (4)

228



368



357



207



77



1,160



1,009


Covenant adjusted EBITDA

$

50,393



$

59,332



$

41,934



$

41,601



$

56,471



$

193,260



$

199,338



(1) Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one-time charges, permitted dispositions and other adjustments, as defined
in the Company's Credit Agreement. Covenant EBITDA is calculated as the aggregate of operating results for the rolling last twelve months (LTM). Each quarter is
presented to provide the information utilized to calculate Covenant EBITDA. Historical Covenant EBITDA may be re-casted in the current period for any proforma
adjustments related to acquisitions and/or dispositions in the current period. See "Non-GAAP Financial Measures" herein.

 

(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

 

(3) Represents Kingsdale and Sloane EBITDA for the respective period.

 

(4) Other adjustments, net primarily includes one-time professional fees and costs associated with real estate consolidation.

 

Note: Actuals may not foot due to rounding.

 

SCHEDULE 8

MDC PARTNERS INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(US$ in 000s)



September 30,
2020


December 31,

2019





ASSETS




Current Assets:




Cash and cash equivalents

$

37,075



$

106,933


Accounts receivable, less allowance for doubtful accounts of $3,703 and $3,304

403,636



449,288


Expenditures billable to clients

21,884



30,133


Other current assets

67,585



35,613


Total Current Assets

530,180



621,967


Fixed assets, at cost, less accumulated depreciation of $138,859 and $129,579

87,908



81,054


Right of use assets - operating leases

227,362



223,622


Goodwill

710,013



731,691


Other intangible assets, net

46,600



54,893


Deferred tax assets

82,576



84,900


Other assets

21,493



30,179


Total Assets

$

1,706,132



$

1,828,306


LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND
SHAREHOLDERS' DEFICIT




Current Liabilities:




Accounts payable

$

128,643



$

200,148


Accruals and other liabilities

323,414



353,575


Advance billings

157,101



171,742


Current portion of lease liabilities - operating leases

40,038



48,659


Current portion of deferred acquisition consideration

39,321



45,521


Total Current Liabilities

688,517



819,645


Long-term debt

860,422



887,630


Long-term portion of deferred acquisition consideration

6,824



29,699


Long-term lease liabilities - operating leases

257,107



219,163


Other liabilities

38,439



25,771


Total Liabilities

1,851,309



1,981,908


Redeemable Noncontrolling Interests

25,172



36,973


Commitments, Contingencies, and Guarantees




Shareholders' Deficit:




Convertible preference shares, 145,000 authorized, issued and outstanding at September 30, 2020
and December 31, 2019

152,746



152,746


Common stock and other paid-in capital

106,037



101,469


Accumulated deficit

(476,293)



(480,779)


Accumulated other comprehensive loss (income)

6,768



(4,269)


MDC Partners Inc. Shareholders' Deficit

(210,742)



(230,833)


Noncontrolling interests

40,393



40,258


Total Shareholders' Deficit

(170,349)



(190,575)


Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit

$

1,706,132



$

1,828,306


 

SCHEDULE 9

MDC PARTNERS INC.

UNAUDITED SUMMARY CASH FLOW DATA

(US$ in 000s)



Nine Months Ended September 30,


2020


2019

Net cash used in operating activities

$

(2,491)



$

(5,840)


Net cash provided by investing activities

4,549



3,307


Net cash used in financing activities

(71,969)



(2,202)


Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts

53



8


Net decrease in cash, cash equivalents, and cash held in trusts including cash
classified within assets held for sale

$

(69,858)



$

(4,727)


Change in cash and cash equivalents held in trusts classified within held for sale



(3,307)


Change in cash and cash equivalents classified within assets held for sale



4,441


Net decrease in cash and cash equivalents

(69,858)



(3,593)


Cash and cash equivalents at beginning of period

106,933



30,873


Cash and cash equivalents at end of period

$

37,075



$

27,280


Supplemental disclosures:




Cash income taxes paid

$

2,700



$

3,631


Cash interest paid

$

29,311



$

32,525



       Note: Actuals may not foot due to rounding.

               

SCHEDULE 10

MDC PARTNERS INC.

UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES  

(US$ in 000s)



2019


2020


Q1

Q2

Q3

Q4

YTD


Q1

Q2

Q3

YTD

NON-GAAP ACQUISITIONS
(DISPOSITIONS), NET











GAAP revenue from current year acquisitions

$


$

698


$

1,347


$

1,396


$

3,441



$


$


$


$


GAAP revenue from prior year acquisitions (1)

15,685


1,519


1,109


291


18,604







Foreign exchange impact



470


(246)


224



(248)




(248)


Contribution to organic revenue (growth)
decline (2)

(4,008)


(440)


(2,185)


(1,694)


(8,327)



(411)




(411)


Prior year revenue from dispositions (3)

(1,825)


(5,995)


(3,178)


(4,505)


(15,503)



(5,024)


(4,106)


(4,076)


(13,206)


Non-GAAP acquisitions (dispositions), net

$

9,852


$

(4,218)


$

(2,437)


$

(4,758)


$

(1,561)



$

(5,683)


$

(4,106)


$

(4,076)


$

(13,865)














2019


2020


Q1

Q2

Q3

Q4

YTD


Q1

Q2

Q3

YTD

OTHER ITEMS, NET











Severance and other restructuring expenses

$


$

6,703


$

705


$


$

7,408



$

1,334


$

2,969


$

3,270


$

7,573


Strategic review process costs

1,626


(109)



349


1,866



1,082


926


2,938


4,946


Total other items, net

$

1,626


$

6,594


$

705


$

349


$

9,274



$

2,416


$

3,895


$

6,208


$

12,519














2019


2020


Q1

Q2

Q3

Q4

YTD


Q1

Q2

Q3

YTD

CASH INTEREST, NET & OTHER











Cash interest paid

$

(1,629)


$

(30,014)


$

(882)


$

(29,698)


$

(62,223)



$

(145)


$

(28,591)


(575)


$

(29,311)


Bond interest accrual adjustment

(14,625)


14,625


(14,625)


14,625




(14,625)


13,894


(14,035)


(14,766)


Adjusted cash interest paid

(16,254)


(15,389)


(15,507)


(15,073)


(62,223)



(14,770)


(14,697)


(14,610)


(44,077)


Interest income

149


138


165


162


614



114


190


114


418


Total cash interest, net & other

$

(16,105)


$

(15,251)


$

(15,342)


$

(14,911)


$

(61,609)



$

(14,656)


$

(14,507)


$

(14,496)


$

(43,659)














2019


2020


Q1

Q2

Q3

Q4

YTD


Q1

Q2

Q3

YTD

CAPITAL EXPENDITURES, NET











Capital expenditures

$

(3,606)


$

(4,317)


$

(5,863)


$

(4,810)


$

(18,596)



$

(1,546)


$

(2,144)


$

(24,187)


$

(27,877)














2019


2020


Q1

Q2

Q3

Q4

YTD


Q1

Q2

Q3

YTD

MISCELLANEOUS OTHER DISCLOSURES











Net income attributable to the noncontrolling
interests

$

429


$

3,043


$

7,265


$

5,419


$

16,156



$

791


$

3,101


$

10,728


$

14,620


Cash taxes

$

1,677


$

1,817


$

137


$

(1,335)


$

2,296



$

849


$

1,717


$

134


$

2,700



(1)  GAAP revenue from prior year acquisitions for 2020 and 2019 relates to acquisitions which occurred in 2019 and 2018, respectively.

(2) Contribution to organic revenue represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for
acquired businesses that are included in the Company's organic revenue growth (decline) calculation.

(3) Prior year revenue from dispositions reflects 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 disposition. Note: Actuals may not foot due to rounding.

 

MDC Partners Logo. (PRNewsfoto/MDC Partners Inc.)

 

CONTACT:

Erica Bartsch


Sloane & Company


212-446-1875


IR@mdc-partners.com

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/mdc-partners-inc-reports-results-for-the-three-and-nine-months-ended-september-30-2020-301162581.html

SOURCE MDC Partners Inc.

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