MDC Partners Inc. Reports Results For The Three Months Ended March 31, 2021
MDC Reports Highest Net Income in Nearly Three Years and Highest First Quarter Adjusted EBITDA in Company History
FIRST QUARTER HIGHLIGHTS:
- GAAP revenue of $307.6 million in the first quarter versus $327.7 million in the prior year period, a decline of 6.2%.
- Organic revenue declined 6.9% in the first quarter, continuing to narrow the year-over-year revenue decline amidst the pandemic recovery.
- Net revenue of $270.7 million in the first quarter vs. $274.4 million in the prior period, a decline of 1.4%.
- Organic net revenue declined 2.1% in the first quarter.
- Net income attributable to MDC Partners Inc. common shareholders was $0.9 million in the first quarter of 2021 versus net loss of $2.4 million in the prior year period, MDC's highest net income reported in 11 quarters.
- Adjusted EBITDA for the three months ended March 31, 2021 was $51.9 million versus $39.6 million a year ago, an increase of 31.3% and the highest first quarter Adjusted EBITDA result in company history, driven by cost actions taken during 2019 and 2020.
- Adjusted EBITDA Margin of 16.9%, compared to 12.1% in the prior year period.
- Covenant EBITDA (LTM) of $200.7 million, up from $190.1 million in the fourth quarter of 2020 and consistent with the first quarter of 2020.
- Net New Business wins totaled $10.2 million in the first quarter against $8.4 million a year ago and totaled $92.1 million over the last twelve months.
NEW YORK, May 5, 2021 /PRNewswire/ -- (NASDAQ:MDCA) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three months ended March 31, 2021.
"MDC delivered its highest net income in nearly three years and $52 million of Adjusted EBITDA in the first quarter, up 31% from prior year and the strongest first quarter Adjusted EBITDA result in the company's history," said Mark Penn, Chairman and Chief Executive Officer of MDC Partners. "We continue to see a rebound from pandemic revenue lows, with year-over-year revenue growth in the Healthcare, Consumer Products and Financial client sectors. We are encouraged by the strong start to the year and maintain our outlook of 7 to 9% organic revenue growth for the year with Adjusted EBITDA of $190 million to $200 million. This momentum sets us up well for the next major step in our strategic transformation, the proposed combination of MDC and Stagwell, which we believe promises to disrupt the industry and provide value for all our stakeholders."
Frank Lanuto, Chief Financial Officer, added, "As our revenue rebounds from pandemic declines, we again delivered expanded Adjusted EBITDA margins to 16.9%, up 480 basis points from a year ago. We continued to lower our leverage, down to 4.1x, and generated $47 million in cash flow from operations in the quarter, ending with net cash of $93 million."
First Quarter 2021 Financial Results
Revenue for the first quarter of 2021 was $307.6 million versus $327.7 million for the first quarter 2020, a decline of 6.2%. The effect on revenue of foreign exchange was positive 1.4%, the impact of non-GAAP acquisitions (dispositions), net was negative 0.6%, and organic revenue decline was 6.9%, inclusive of $16.9 million or 481 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19.
Revenue in the first quarter of 2021 decreased 6.3% sequentially from the fourth quarter of 2020, less than the typical seasonal decline as revenue continues to rebound from COVID-19 declines. Net New Business wins in the first quarter of 2021 totaled $10.2 million.
Net income attributable to MDC Partners Inc. common shareholders for the first quarter of 2021 was $0.9 million versus net loss of $2.4 million for the first quarter 2020. 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 first quarter of 2021 was $0.01 versus diluted loss per share of $0.03 for the first quarter 2020.
Adjusted EBITDA for the first quarter of 2021 was $51.9 million versus $39.6 million for the first quarter 2020, an increase of 31.3%, primarily due to lower revenues, more than offset by a reduction in expenses to combat the impact of COVID-19 on the business. This led to a 480 basis point increase in Adjusted EBITDA margin in the first quarter of 2021 to 16.9% from 12.1% in the first quarter 2020.
Covenant EBITDA for the last twelve months (LTM) was $200.7 million as of March 31, 2021, up from $190.1 million in the fourth quarter of 2020 and flat versus the first quarter of 2020.
Financial Outlook
2021 financial guidance is as follows:
2021 Outlook Commentary * | |
Organic Revenue Growth | We expect approximately 7 to 9% growth in organic revenue. |
Foreign Exchange Impact, net | No estimated impact at this time. |
Impact of Non-GAAP Acquisitions (Dispositions), net | Our current expectations are that the impact of acquisitions, net of disposition activity, will have no material impact on revenue. |
Adjusted EBITDA | The Company expects to complete fiscal year 2021 with approximately $190 million to $200 million of Adjusted EBITDA, approximately 7 to 13% above prior year. |
* The Company has excluded a quantitative reconciliation with respect to the Company's 2021 guidance under the "unreasonable efforts" exception in Item 10(e)(1)(i)(B) of Regulation S-K See "Non-GAAP Financial Measures" below for additional information. | |
Conference Call
Management will host a conference call on Wednesday, May 5, 2021, at 8:30 a.m. (ET) to discuss its results. The conference call will be accessible by dialing 1-412-902-4266 or toll free 1-888-346-6216. 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 one hour after the end of the conference call until 12:00 a.m. (ET), May 12, 2021, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10154411), 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 non-operating items 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 merger related costs, severance 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;
- an inability to realize expected benefits of the proposed redomiciliation of the Company from the federal jurisdiction of Canada to the State of Delaware (the "Redomiciliation") and the subsequent combination of the Company's business with the business of the subsidiaries of Stagwell Media LP ("Stagwell") that own and operate a portfolio of marketing services companies (the "Business Combination" and, together with the Redomiciliation, the "Proposed Transactions") or the occurrence of difficulties in connection with the Proposed Transaction;
- adverse tax consequences in connection with the Proposed Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company's determination of value and computations of its tax attributes may result in increased tax costs;
- the occurrence of material Canadian federal income tax (including material "emigration tax") as a result of the Proposed Transactions;
- the impact of uncertainty associated with the Proposed Transactions on the Company's businesses;
- direct or indirect costs associated with the Proposed Transactions, which could be greater than expected;
- the risk that a condition to completion of the Proposed Transactions may not be satisfied and the Proposed Transactions may not be completed;
- the risk of parties challenging the Proposed Transactions or the impact of the Proposed Transactions on the Company's debt arrangements;
- 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 2020 Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 16, 2021 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 March 31, | |||||||
2021 | 2020 | ||||||
Revenue: | |||||||
Services | $ | 307,585 | $ | 327,742 | |||
Operating Expenses | |||||||
Cost of services sold | 186,921 | 222,694 | |||||
Office and general expenses | 83,946 | 66,354 | |||||
Depreciation and amortization | 8,176 | 9,206 | |||||
Impairment and other losses | 875 | 161 | |||||
279,918 | 298,415 | ||||||
Operating income | 27,667 | 29,327 | |||||
Other Income (expenses): | |||||||
Interest expense and finance charges, net | (19,065) | (15,611) | |||||
Foreign exchange gain (loss) | 2,080 | (14,757) | |||||
Other, net | 614 | 16,334 | |||||
(16,371) | (14,034) | ||||||
Income before income taxes and equity in earnings of non-consolidated affiliates | 11,296 | 15,293 | |||||
Income tax expense | 1,302 | 13,500 | |||||
Income before equity in earnings of non-consolidated affiliates | 9,994 | 1,793 | |||||
Equity in losses of non-consolidated affiliates | (493) | — | |||||
Net income | 9,501 | 1,793 | |||||
Net income attributable to the noncontrolling interest | (4,491) | (791) | |||||
Net income attributable to MDC Partners Inc. | 5,010 | 1,002 | |||||
Accretion on and net income allocated to convertible preference shares | (4,089) | (3,440) | |||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 921 | $ | (2,438) | |||
Income (loss) Per Common Share: | |||||||
Basic | |||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 0.01 | $ | (0.03) | |||
Diluted | |||||||
Net income (loss) attributable to MDC Partners Inc common shareholders | $ | 0.01 | $ | (0.03) | |||
Weighted Average Number of Common Shares Outstanding: | |||||||
Basic | 73,392,824 | 72,397,661 | |||||
Diluted | 75,439,066 | 72,397,661 | |||||
SCHEDULE 2 | |||||||
MDC PARTNERS INC. | |||||||
UNAUDITED REVENUE RECONCILIATION | |||||||
(US$ in 000s, except percentages) | |||||||
Three Months Ended | |||||||
Revenue $ | % Change | ||||||
March 31, 2020 | $ | 327,742 | |||||
Organic revenue (1) | (22,615) | (6.9) | % | ||||
Non-GAAP acquisitions (dispositions), net | (2,101) | (0.6) | % | ||||
Foreign exchange impact | 4,559 | 1.4 | % | ||||
Total change | (20,157) | (6.2) | % | ||||
March 31, 2021 | $ | 307,585 | |||||
(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 March 31, 2021 | |||||||||||||||||||||||
Integrated Networks - | Integrated Networks - | Media & | All Other | Corporate | Total | ||||||||||||||||||
Revenue: | $ | 102,386 | $ | 111,151 | $ | 36,783 | $ | 57,265 | $ | — | $ | 307,585 | |||||||||||
Net income attributable to MDC Partners Inc. common shareholders | $ | 921 | |||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | |||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 4,089 | ||||||||||||||||||||||
Net income attributable to the noncontrolling interest | 4,491 | ||||||||||||||||||||||
Equity in losses of non-consolidated affiliates | 493 | ||||||||||||||||||||||
Income tax expense | 1,302 | ||||||||||||||||||||||
Interest expense and finance charges, net | 19,065 | ||||||||||||||||||||||
Foreign exchange gain | (2,080) | ||||||||||||||||||||||
Other, net | (614) | ||||||||||||||||||||||
Operating income (loss) | $ | 11,450 | $ | 19,910 | $ | 3,392 | $ | 4,657 | $ | (11,742) | $ | 27,667 | |||||||||||
Operating margin | 11.2 | % | 17.9 | % | 9.2 | % | 8.1 | % | 9.0 | % | |||||||||||||
Adjustments: | |||||||||||||||||||||||
Depreciation and amortization | $ | 1,294 | $ | 3,657 | $ | 472 | $ | 1,537 | $ | 1,216 | $ | 8,176 | |||||||||||
Impairment and other losses | — | 875 | — | — | — | 875 | |||||||||||||||||
Stock-based compensation | (3,628) | 953 | 21 | 61 | 630 | (1,963) | |||||||||||||||||
Deferred acquisition consideration | 11,824 | 128 | — | (267) | — | 11,685 | |||||||||||||||||
Distributions from non-consolidated affiliates (1) | — | — | — | — | 9 | 9 | |||||||||||||||||
Other items, net (2) | 1,522 | 346 | 1,196 | 54 | 2,367 | 5,485 | |||||||||||||||||
Adjusted EBITDA (3) | $ | 22,462 | $ | 25,869 | $ | 5,081 | $ | 6,042 | $ | (7,520) | $ | 51,934 | |||||||||||
Adjusted EBITDA margin | 21.9 | % | 23.3 | % | 13.8 | % | 10.6 | % | 16.9 | % | |||||||||||||
(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 merger related costs, severance 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 4 | |||||||||||||||||||||||
MDC PARTNERS INC. | |||||||||||||||||||||||
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA | |||||||||||||||||||||||
(US$ in 000s, except percentages) | |||||||||||||||||||||||
For the Three Months Ended March 31, 2020 | |||||||||||||||||||||||
Integrated Networks - | Integrated Networks - | Media & | All Other | Corporate | Total | ||||||||||||||||||
Revenue: | $ | 90,621 | $ | 117,707 | $ | 41,058 | $ | 78,356 | $ | — | $ | 327,742 | |||||||||||
Net loss attributable to MDC Partners Inc. common shareholders | $ | (2,438) | |||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | |||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 3,440 | ||||||||||||||||||||||
Net income attributable to the noncontrolling interest | 791 | ||||||||||||||||||||||
Income tax expense | 13,500 | ||||||||||||||||||||||
Interest expense and finance charges, net | 15,611 | ||||||||||||||||||||||
Foreign exchange loss | 14,757 | ||||||||||||||||||||||
Other, net | (16,334) | ||||||||||||||||||||||
Operating income (loss) | $ | 12,030 | $ | 17,161 | $ | 617 | $ | 7,857 | $ | (8,338) | $ | 29,327 | |||||||||||
Operating margin | 13.3 | % | 14.6 | % | 1.5 | % | 10.0 | % | 8.9 | % | |||||||||||||
Adjustments: | |||||||||||||||||||||||
Depreciation and amortization | $ | 1,741 | $ | 4,526 | $ | 808 | $ | 1,899 | $ | 232 | $ | 9,206 | |||||||||||
Impairment and other losses | — | 161 | — | — | — | 161 | |||||||||||||||||
Stock-based compensation | 1,961 | 900 | (13) | 80 | 142 | 3,070 | |||||||||||||||||
Deferred acquisition consideration | 569 | (5,612) | 375 | 68 | — | (4,600) | |||||||||||||||||
Distributions from non-consolidated affiliates (1) | — | — | — | — | (14) | (14) | |||||||||||||||||
Other items, net (2) | — | — | — | — | 2,416 | 2,416 | |||||||||||||||||
Adjusted EBITDA (3) | $ | 16,301 | $ | 17,136 | $ | 1,787 | $ | 9,904 | $ | (5,562) | $ | 39,566 | |||||||||||
Adjusted EBITDA margin | 18.0 | % | 14.6 | % | 4.4 | % | 12.6 | % | 12.1 | % | |||||||||||||
(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 merger related costs, severance 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 5 | ||||||||||||||||||||||||||||
MDC PARTNERS INC. | ||||||||||||||||||||||||||||
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA | ||||||||||||||||||||||||||||
(US$ in 000s) | ||||||||||||||||||||||||||||
2020 | 2021 | Covenant EBITDA | ||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q4-2020- | Q1-2021 - | ||||||||||||||||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | (2,438) | $ | (4,102) | $ | 360 | $ | (237,108) | $ | 921 | $ | (243,288) | $ | (239,929) | ||||||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 3,440 | 3,509 | 3,716 | 3,651 | 4,089 | 14,316 | 14,965 | |||||||||||||||||||||
Net income attributable to the noncontrolling interest | 791 | 3,101 | 10,728 | 7,154 | 4,491 | 21,774 | 25,474 | |||||||||||||||||||||
Equity in losses of non-consolidated affiliates | — | 798 | 31 | 1,411 | 493 | 2,240 | 2,733 | |||||||||||||||||||||
Income tax expense (benefit) | 13,500 | (7,923) | 1,452 | 109,526 | 1,302 | 116,555 | 104,357 | |||||||||||||||||||||
Interest expense and finance charges, net | 15,611 | 15,941 | 15,266 | 15,344 | 19,065 | 62,162 | 65,616 | |||||||||||||||||||||
Foreign exchange loss (gain) | 14,757 | (5,342) | (2,159) | (6,274) | (2,080) | 982 | (15,855) | |||||||||||||||||||||
Other, net | (16,334) | (5,884) | (505) | 2,223 | (614) | (20,500) | (4,780) | |||||||||||||||||||||
Operating income (loss) | $ | 29,327 | $ | 98 | $ | 28,889 | $ | (104,073) | $ | 27,667 | $ | (45,759) | $ | (47,419) | ||||||||||||||
Adjustments to reconcile to Adjusted EBITDA: | ||||||||||||||||||||||||||||
Depreciation and amortization | $ | 9,206 | $ | 8,899 | $ | 9,332 | $ | 9,468 | $ | 8,176 | $ | 36,905 | $ | 35,875 | ||||||||||||||
Impairment and other losses | 161 | 18,839 | 159 | 77,240 | 875 | 96,399 | 97,113 | |||||||||||||||||||||
Stock-based compensation | 3,070 | 1,039 | 6,459 | 3,611 | (1,963) | 14,179 | 9,146 | |||||||||||||||||||||
Deferred acquisition consideration | (4,600) | 2,312 | 2,803 | 41,672 | 11,685 | 42,187 | 58,472 | |||||||||||||||||||||
Distributions from non-consolidated affiliates | (14) | 1,079 | 208 | 902 | 9 | 2,175 | 2,198 | |||||||||||||||||||||
Other items, net (2) | 2,416 | 3,895 | 6,208 | 18,725 | 5,485 | 31,244 | 34,313 | |||||||||||||||||||||
Adjusted EBITDA | $ | 39,566 | $ | 36,161 | $ | 54,058 | $ | 47,545 | $ | 51,934 | $ | 177,330 | $ | 189,698 | ||||||||||||||
Adjustments to reconcile to Covenant EBITDA: | ||||||||||||||||||||||||||||
Proforma dispositions (3) | $ | (124) | $ | — | $ | — | $ | — | $ | — | $ | (124) | $ | — | ||||||||||||||
Severance due to eliminated positions | 2,133 | 5,233 | 2,336 | 1,987 | 532 | 11,689 | 10,088 | |||||||||||||||||||||
Other adjustments, net (4) | 357 | 207 | 77 | 585 | 82 | 1,226 | 951 | |||||||||||||||||||||
Covenant EBITDA | $ | 41,932 | $ | 41,601 | $ | 56,471 | $ | 50,117 | $ | 52,548 | $ | 190,121 | $ | 200,737 | ||||||||||||||
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. |
(3) Represents 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 6 | |||||||
MDC PARTNERS INC. | |||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | |||||||
(US$ in 000s) | |||||||
March 31, 2021 | December 31, 2020 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 113,340 | $ | 60,757 | |||
Accounts receivable, less allowance for doubtful accounts of $4,498 and $5,473 | 377,670 | 374,892 | |||||
Expenditures billable to clients | 22,824 | 10,552 | |||||
Other current assets | 31,687 | 40,938 | |||||
Total Current Assets | 545,521 | 487,139 | |||||
Fixed assets, at cost, less accumulated depreciation of $137,729 and $136,166 | 85,085 | 90,413 | |||||
Right-of-use assets - operating leases | 207,418 | 214,188 | |||||
Goodwill | 669,060 | 668,211 | |||||
Other intangible assets, net | 30,784 | 33,844 | |||||
Other assets | 22,845 | 17,517 | |||||
Total Assets | $ | 1,560,713 | $ | 1,511,312 | |||
LIABILITIES, RNCI, AND SHAREHOLDERS' DEFICIT | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 209,679 | $ | 168,396 | |||
Accruals and other liabilities | 242,667 | 274,968 | |||||
Advance billings | 170,159 | 152,956 | |||||
Current portion of lease liabilities - operating leases | 41,229 | 41,208 | |||||
Current portion of deferred acquisition consideration | 52,156 | 53,730 | |||||
Total Current Liabilities | 715,890 | 691,258 | |||||
Long-term debt | 864,850 | 843,184 | |||||
Long-term portion of deferred acquisition consideration | 41,244 | 29,335 | |||||
Long-term lease liabilities - operating leases | 241,375 | 247,243 | |||||
Other liabilities | 77,585 | 82,065 | |||||
Total Liabilities | 1,940,944 | 1,893,085 | |||||
Redeemable Noncontrolling Interests | 25,352 | 27,137 | |||||
Commitments, Contingencies and Guarantees | |||||||
Shareholders' Deficit: | |||||||
Convertible preference shares, 145,000 authorized, issued and outstanding at March 31, 2021 and December 31, 2020 | 152,746 | 152,746 | |||||
Common stock and other paid-in capital | 106,193 | 104,367 | |||||
Accumulated deficit | (704,741) | (709,751) | |||||
Accumulated other comprehensive income | 183 | 2,739 | |||||
MDC Partners Inc. Shareholders' Deficit | (445,619) | (449,899) | |||||
Noncontrolling interests | 40,036 | 40,989 | |||||
Total Shareholders' Deficit | (405,583) | (408,910) | |||||
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit | $ | 1,560,713 | $ | 1,511,312 | |||
SCHEDULE 7 | |||||||
MDC PARTNERS INC. | |||||||
UNAUDITED SUMMARY CASH FLOW DATA | |||||||
(US$ in 000s) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Net cash provided by (used in) operating activities | $ | 47,060 | $ | (19,955) | |||
Net cash provided by (used in) investing activities | (7,032) | 16,645 | |||||
Net cash provided by financing activities | 13,427 | 119,642 | |||||
Effect of exchange rate changes on cash and cash equivalents | (872) | (2,164) | |||||
Net increase in cash and cash equivalents | $ | 52,583 | $ | 114,168 | |||
Cash and cash equivalents at beginning of period | 60,757 | 106,933 | |||||
Cash and cash equivalents at end of period | $ | 113,340 | $ | 221,101 | |||
Supplemental disclosures: | |||||||
Cash income taxes paid | $ | 251 | $ | 849 | |||
Cash interest paid | $ | 317 | $ | 145 | |||
Note: Actuals may not foot due to rounding. | |
SCHEDULE 8 | ||||||||||||||||||||
MDC PARTNERS INC. | ||||||||||||||||||||
UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES | ||||||||||||||||||||
(US$ in 000s) | ||||||||||||||||||||
2020 | 2021 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | |||||||||||||||
NON-GAAP DISPOSITIONS, NET | ||||||||||||||||||||
Foreign exchange impact | $ | (248) | $ | — | $ | — | $ | — | $ | (248) | $ | — | ||||||||
Contribution to organic revenue (growth) decline (1) | (411) | — | — | — | (411) | — | ||||||||||||||
Prior year revenue from dispositions (2) | (5,024) | (4,106) | (4,076) | (4,447) | (17,653) | (2,101) | ||||||||||||||
Non-GAAP Dispositions | $ | (5,683) | $ | (4,106) | $ | (4,076) | $ | (4,447) | $ | (18,312) | $ | (2,101) | ||||||||
2020 | 2021 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | |||||||||||||||
OTHER ITEMS, NET | ||||||||||||||||||||
Severance and other restructuring expenses | $ | 1,334 | $ | 2,969 | $ | 3,270 | $ | 1,072 | $ | 8,645 | $ | 2,345 | ||||||||
Merger costs | 1,082 | 926 | 2,938 | 17,653 | 22,599 | 3,140 | ||||||||||||||
Total other items, net | $ | 2,416 | $ | 3,895 | $ | 6,208 | $ | 18,725 | $ | 31,244 | $ | 5,485 | ||||||||
2020 | 2021 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | |||||||||||||||
CAPITAL EXPENDITURES, NET | ||||||||||||||||||||
Capital expenditures | $ | (1,546) | $ | (2,144) | $ | (24,187) | $ | (9,426) | $ | (37,303) | $ | (516) | ||||||||
Net revenue, primarily consisting of fees, commissions and performance incentives, represents the amount of our gross billings excluding billable expenses charged to a client. Net revenue of $270,707 (exclusive of billable expenses of $36,877) for the quarter ended March 31, 2021, declined from $274,445 (exclusive of billable expenses of $53,297) for the quarter ended March 31, 2020. |
(1) 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. |
(2) 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. |
CONTACT: | Michaela Pewarski |
MDC Partners | |
(646) 429-1812 | |
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SOURCE MDC Partners Inc.