EX-99.1 2 v121353_ex99-1.htm

 
 
PRESS RELEASE
FOR IMMEDIATE RELEASE


FOR:
MDC Partners Inc.
CONTACT:
Donna Granato
 
950 Third Avenue, 5th Floor
  
Director, Finance & Investor Relations
 
New York, NY 10022
  
646-429-1809
     
dgranato@mdc-partners.com

 
MDC PARTNERS INC. REPORTS RESULTS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2008

QUARTERLY HIGHLIGHTS: 
 
·
Revenues increased to $158.3 million vs. $134.5 million in Q2 2007, an increase of 17.7%
 
·
Organic revenue growth of 14.8% for Q2 2008
 
·
Net new business wins of $3.0 million for Q2 2008
 
·
MDC EBITDA increased to $15.8 million vs. $9.6 million in Q2 2007, an increase of 64.9%
 
·
Free Cash Flow increased to $6.6 million vs. $3.6 million in Q2 2007, an increase of 82.5%

YEAR TO DATE HIGHLIGHTS:
 
·
Revenues increased to $301.0 million vs. $252.6 million in the first half of 2007, an increase of 19.2%
 
·
Organic revenue growth of 14.7% for the first half of 2008
 
·
Net new business wins of $43.0 million for the first half of 2008
 
·
MDC EBITDA increased to $25.6 million vs. $15.1 million in the first half of 2007, an increase of 69.9%
 
·
Free Cash Flow increased to $9.4 million vs. $1.7 million in Q2 2007, an increase of 447.0%
 
NEW YORK, NY (July 30, 2008) - MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and six months ended June 30, 2008.
 
Consolidated revenues for the second quarter of 2008 were $158.3 million, an increase of 17.7% compared to $134.5 million in the second quarter of 2007. MDC EBITDA (as defined) for the second quarter of 2008 was $15.8 million, an increase of 64.9% compared to $9.6 million in the second quarter of 2007. Free cash flow (as defined) was $6.6 million in the second quarter of 2008 compared with $3.6 million in the second quarter of 2007.
 
Consolidated revenues for the first half of 2008 were $301.0 million, an increase of 19.2% compared to $252.6 million in the first half of 2007. MDC EBITDA (as defined) for the first half of 2008 was $25.6 million, an increase of 69.9% compared to $15.1 million in the first half of 2007. Free cash flow (as defined) was $9.4 million in the first half of 2008 compared with $1.7 million in the first half of 2007.
 
“We are very pleased with another strong quarter of excellent financial results and believe that our investment in talent and technology is continuing to enable us to win market share as we deliver outstanding results for our clients. We believe that our first half momentum will continue for the second half of the year and into 2009, despite the challenging economic environment,” said Miles S. Nadal, Chairman & CEO of MDC Partners.
 
 
The Company affirms it previously issued guidance for 2008 of revenues of $600 to $610 million, MDC’s EBITDA (as defined) of $61 to $64 million and Free Cash Flow (as defined) of $30 to $35 million.
 
Conference Call

Management will host a conference call on July 30, at 4:30 p.m. (EST) to discuss our results. The conference call will be accessible by dialing 1-416-644-3427 or toll free 1-800-595-8550. An investor presentation has been posted on our website www.mdc-partners.com and will be referred to during the conference call.
 
About MDC Partners Inc.
 
MDC Partners is a leading provider of marketing communications solutions and services to clients in North America, Europe and Latin America. Through its partnership of entrepreneurial firms it provides advertising, specialized communications and consulting services to leading brands. MDC Partners’ philosophy emphasizes the utilization of strategy and creativity to drive growth for its clients. “MDC Partners is The Place Where Great Talent Lives”. MDC Partners Class A shares are publicly traded on the NASDAQ under the symbol “MDCA” and on the Toronto Stock Exchange under the symbol “MDZ.A”.

Non-GAAP Financial Measures

In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to: (1) presenting MDC’s share of EBITDA (as defined) for the three and six months ended June 30, 2008 and 2007; and (2) presenting Free Cash Flow (as defined) for the three and six months ended June 30, 2008 and 2007. Included in this earnings release are tables reconciling MDC’s reported results to arrive at these non-GAAP financial measures.
 
This press release contains forward-looking statements. The Company’s representatives may also make forward-looking statements orally from time to time. Statements in this press release that are not historical facts, including statements about the Company’s beliefs and expectations, recent business and economic trends, potential acquisitions, estimates of amounts for deferred acquisition consideration and “put” option rights, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
 
 
·
risks associated with effects of national and regional economic conditions;
 
 
·
the Company’s ability to attract new clients and retain existing clients;
 
 
·
the financial success of the Company’s clients;
 
 
·
the Company’s ability to retain and attract key employees;
 
 
·
the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to “put” option right and deferred acquisition consideration;
 
 
·
the successful completion and integration of acquisitions which compliment and expand the Company’s business capabilities;
 
 
·
foreign currency fluctuations; and
 
 
·
risks arising from the Company’s historical option grant practices.
 
In addition to improving organic growth for its existing operations, the Company’s business strategy includes ongoing efforts to engage in material acquisitions of ownership interests in entities in the marketing communications services industry. The Company intends to finance these acquisitions by using available cash from operations and through incurrence of bridge or other debt financing, either of which may increase the Company’s leverage ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate ownership. At any given time the Company may be engaged in a number of discussions that may result in one or more material acquisitions. These opportunities require confidentiality and may involve negotiations that require quick responses by the Company. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of the Company’s securities.

Investors should carefully consider these risk factors and the additional risk factors outlined in more detail in the Annual Report on Form 10-K under the caption “Risk Factors” and in the Company’s other SEC filings.
 
 
SCHEDULE 1
 
 
 
 
 
 
 
MDC PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in 000s, except share and per share amounts)
 
   
Three Months Ended June 30,
 
Six Months Ended June 30,
 
   
 
2008
 
2007
   
2008
 
2007
  
                   
                   
Revenue
  
$
158,275
  
$
134,497
  
$
300,965
  
$
252,577
  
                           
Operating Expenses
                          
Cost of services sold
    
104,012
   
85,885
   
201,186
   
162,848
 
Office and general expenses
    
37,480
   
35,179
   
73,072
   
68,423
 
Depreciation and amortization
    
8,708
   
5,916
   
18,782
   
11,727
 
     
150,200
   
126,980
   
293,040
   
242,998
 
                           
Operating Income
   
8,075
   
7,517
   
7,925
   
9,579
 
                           
Other Income (Expenses)
                          
Other income (expense)
    
(527
)
  
(1,012
)
  
3,077
   
(1,719
)
Interest expense
    
(3,645
)
  
(3,589
)
  
(7,532
)
  
(6,239
)
Interest income
    
173
   
1,079
   
379
   
1,235
 
Income from Continuing Operations Before Income Taxes,
                          
Equity in Affiliates and Minority Interests
    
4,076
   
3,995
   
3,849
   
2,856
 
                           
Income Tax (Expense) Recovery
    
(3,943
)
  
433
   
(3,118
)
  
948
 
                           
Income from Continuing Operations Before Equity in
                         
Affiliates and Minority Interests
    
133
   
4,428
   
731
   
3,804
 
Equity in Earnings of Non-consolidated Affiliates
    
81
   
61
   
221
   
11
 
Minority Interests in Income of Consolidated Entities
    
(2,869
)
  
(5,419
)
  
(4,976
)
  
(9,710
)
                           
Loss From Continuing Operations
    
(2,655
)
  
(930
)
  
(4,024
)
  
(5,895
)
Loss from Discontinued Operations
    
(1,817
)
  
(1,671
)
  
(3,840
)
  
(5,502
)
Net Loss
    
($4,472
)
  
($2,601
)
  
($7,864
)
  
($11,397
)
                           
Loss Per Common Share
                          
Basic and Diluted:
                          
Continuing Operations
    
($0.10
)
  
($0.04
)
  
($0.15
)
  
($0.24
)
Discontinued Operations
    
(0.07
)
  
(0.07
)
  
(0.14
)
  
(0.22
)
Net Loss
    
($0.17
)
  
($0.11
)
  
($0.29
)
  
($0.46
)
                           
Weighted Average Number of Common Shares:
                          
Basic and Diluted
    
26,831,952
   
24,752,472
   
26,664,557
   
24,514,954
 
 
 
SCHEDULE 2
 
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA*
(US$ in 000s)
 
For the Three Months Ended June 30, 2008
 
   
Strategic
 
Customer
 
Specialized
 
 
 
 
 
 
 
Marketing
 
Relationship
 
Communication
 
 
 
 
 
  
 
Services
 
Management
 
Services
 
Corporate
 
Total
  
                       
Revenue
  
$
88,785
  
$
36,843
  
$
32,647
    
-
 
$
158,275
  
                                 
Operating Income (Loss) as Reported
  
$
8,012
  
$
2,296
  
$
2,681
    
($4,914
)
$
8,075
  
                                 
Add:
                                
Depreciation and amortization
    
5,943
   
1,879
   
817
   
69
   
8,708
 
Stock-based compensation
    
571
   
35
   
221
   
1,036
   
1,863
 
                                 
EBITDA *
    
14,526
   
4,210
   
3,719
   
(3,809
)
  
18,646
 
                                 
Less: Minority Interests
    
(1,815
)
  
(130
)
  
(924
)
  
-
   
(2,869
)
                                 
MDC's Share of EBITDA**
  
$
12,711
  
$
4,080
  
$
2,795
    
($3,809
)
$
15,777
  
*
EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation.
**
MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less minority interests.
 
 
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA*
(US$ in 000s)

For the Three Months EndedJune 30, 2007
 
   
Strategic
 
Customer
 
Specialized
          
   
Marketing
  
Relationship
  
Communication
 
 
 
 
 
  
  
Services
 
Management
 
Services
 
Corporate
 
Total
  
                       
Revenue
  
$
78,445
  
$
25,681
  
$
30,371
    
-
 
$
134,497
  
                                 
Operating Income (Loss) as Reported
  
$
8,844
  
$
454
  
$
3,722
    
($5,503
)
$
7,517
  
                                 
Add:
                                
Depreciation and amortization
    
3,876
   
1,530
   
439
   
71
   
5,916
 
Stock-based compensation
    
482
   
22
   
124
   
925
   
1,553
 
                                 
EBITDA*
    
13,202
   
2,006
   
4,285
   
(4,507
)
  
14,986
 
                                 
Less: Minority Interests
    
(4,250
)
  
(13
)
  
(1,156
)
  
-
   
(5,419
)
                                 
MDC's Share of EBITDA**
  
$
8,952
  
$
1,993
  
$
3,129
    
($4,507
)
$
9,567
  
*
EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation.
**
MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less minority interests.
 
 
SCHEDULE 3
 
 
 
 
 
 
 
 
 
 
 
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA*
(US$ in 000s)

For the Six Months Ended June 30, 2008
 
   
Strategic
 
Customer
 
Specialized
 
 
 
 
 
 
 
Marketing
 
Relationship
 
Communication
 
 
 
 
 
 
 
Services
 
Management
 
Services
  
Corporate
  
Total
   
                       
Revenue
  
$
166,766
  
$
71,506
  
$
62,693
    
-
 
$
300,965
  
                                 
Operating Income (Loss) as Reported
  
$
8,742
  
$
3,522
  
$
5,024
    
($9,363
)
$
7,925
  
                                 
Add:
                                
Depreciation and amortization
    
13,235
   
3,705
   
1,707
   
135
   
18,782
 
Stock-based compensation
    
1,017
   
67
   
474
   
2,303
   
3,861
 
                                 
EBITDA *
    
22,994
   
7,294
   
7,205
   
(6,925
)
  
30,568
 
                                 
Less: Minority Interests
    
(2,484
)
  
(187
)
  
(2,305
)
  
-
   
(4,976
)
                                 
MDC's Share of EBITDA**
  
$
20,510
  
$
7,107
  
$
4,900
    
($6,925
)
$
25,592
  
*
EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation.
**
MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation less minority interests.
 
 
MDC PARTNERS INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA*
(US$ in 000s)
 
For the Six Months Ended June 30, 2007
 
   
Strategic
 
Customer
 
Specialized
 
 
 
 
 
 
 
Marketing
 
Relationship
 
Communication
 
 
 
 
 
  
  
Services
 
Management
 
Services
 
Corporate
 
Total
  
                       
Revenue
  
$
149,008
  
$
49,249
  
$
54,320
    
-
 
$
252,577
  
                                 
Operating Income (Loss) as Reported
  
$
14,691
  
$
937
  
$
4,910
    
($10,959
)
$
9,579
  
                                 
Add:
                                
Depreciation and amortization
    
7,643
   
3,080
   
866
   
138
   
11,727
 
Stock-based compensation
    
971
   
48
   
248
   
2,202
   
3,469
 
                                 
EBITDA*
    
23,305
   
4,065
   
6,024
   
(8,619
)
  
24,775
 
                                 
Less: Minority Interests
    
(7,966
)
  
(27
)
  
(1,717
)
  
-
   
(9,710
)
                                 
MDC's Share of EBITDA**
  
$
15,339
  
$
4,038
  
$
4,307
    
($8,619
)
$
15,065
  
*
EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, and stock-based compensation.
**
MDC's Share of EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization and stock-based compensation less minority interests.
 

SCHEDULE 4
 
 
 
 
 
 
MDC PARTNERS INC.
FREE CASH FLOW
(US$ in 000s)
 
   
Three Months Ended June 30,
 
Six Months Ended June 30,
 
   
 
2008
  
2007
 
2008
 
2007
  
MDC EBITDA
  
$
15,777
  
$
9,567
  
$
25,592
  
$
15,065
  
Capital Expenditures
    
(4,416
)
  
(3,844
)
  
(8,639
)
  
(7,346
)
Cash Taxes
    
(593
)
  
(482
)
  
(873
)
  
(1,046
)
Cash Interest, net
    
(4,209
)
  
(1,647
)
  
(6,694
)
  
(4,957
)
                           
Free Cash Flow
  
$
6,559
  
$
3,594
  
$
9,386
  
$
1,716
  
 
 
 
 
 
SCHEDULE 5
 
MDC PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
 
 
 
(unaudited)
 
 
 
 
 
June 30,
 
December 31,
 
  
  
2008
  
2007
  
           
Assets
              
Current Assets:
              
Cash and cash equivalents
  
$
18,510
  
$
10,410
  
Accounts receivable, net
    
148,468
   
135,260
 
Expenditures billable to clients
    
28,781
   
19,409
 
Prepaid expenses
    
6,159
   
5,937
 
Other current assets
    
2,441
   
2,422
 
Total Current Assets
    
204,359
   
173,438
 
               
Fixed assets
    
48,018
   
47,440
 
Investment in affiliates
    
1,748
   
1,434
 
Goodwill
    
227,772
   
217,726
 
Other intangible assets, net
    
47,566
   
55,399
 
Deferred tax assets
    
8,331
   
9,175
 
Other assets
    
14,877
   
16,086
 
Total Assets
  
$
552,671
  
$
520,698
  
               
               
Liabilities and Shareholders' Equity
              
Current Liabilities:
              
Accounts payable
  
$
76,895
  
$
65,839
  
Accrued and other liabilities
    
77,176
   
74,668
 
Advance billings
    
70,227
   
50,988
 
Current portion of long term debt
    
1,896
   
1,796
 
Deferred acquisition consideration
    
2,442
   
2,511
 
Total Current Liabilities
    
228,636
   
195,802
 
               
Revolving credit facility
    
6,801
   
1,901
 
Long-term debt
    
115,856
   
115,662
 
Convertible notes
    
44,131
   
45,395
 
Other liabilities
    
8,779
   
8,267
 
Deferred tax liabilities
    
552
   
819
 
Total Liabilities
    
404,755
   
367,846
 
 
              
Minority Interests
    
25,893
   
24,919
 
               
Shareholders' Equity:
              
Common stock
    
213,018
   
207,959
 
Share capital to be issued
    
-
   
214
 
Additional paid in capital
   
26,822
   
26,743
 
Accumulated deficit
    
(120,835
)
  
(112,969
)
Stock subscription receivable
    
(354
)
  
(357
)
Accumulated other comprehensive income
    
3,372
   
6,343
 
Total Shareholders' Equity
    
122,023
   
127,933
 
 
              
Total Liabilities and Shareholders' Equity
  
$
552,671
  
$
520,698