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THIRD QUARTER HIGHLIGHTS:
• Revenue increased to $238.2 million versus $178.6 million in Q3 2010, an increase of 33.4%
• Organic revenue increased 17.9% for Q3 2011
• EBITDA decreased to $16.3 million versus $20.6 million in Q3 2010, a decrease of 21.1%
• EBITDA margins declined to 6.8% versus 11.5% in Q3 2010
• Free Cash Flow before working capital was an outflow of ($4.7) million versus $8.7 million in Q3 2010
• Total Free Cash Flow including working capital was $9.5 million versus $38.0 million in Q3 2010
• Net new business wins of $28.9 million for Q3 2011
YEAR TO DATE HIGHLIGHTS:
• Revenue increased to $696.2 million versus $484.4 million in 2010, an increase of 43.7%
• Organic revenue increased 21.5% for YTD 2011
• Revenues for 2011 are now expected to be $915 to $930 million
• EBITDA increased to $63.5 million versus $48.5 million in 2010, an increase of 30.9%
• EBITDA margins declined to 9.1% versus 10.0% in 2010
• EBITDA for 2011 is now expected to be $90 to $100 million
• Free Cash Flow before working capital was $12.6 million versus $13.1 million for YTD 2010
• Total Free Cash Flow including working capital was an outflow of ($2.2) million versus $41.8 million for YTD 2010
• Total Free Cash Flow for 2011 is now expected to be $43 to $53 million
NEW YORK, NY (November 1, 2011) – MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and nine months ended September 30, 2011.
“Our exceptional organic revenue growth and strong new business pipeline are the result of the transformational work that we continue to do for our clients every day,” said Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners. “We did, however, see some slowing of existing client work as well as some modest delays in new projects and campaigns. This, combined with our aggressive investment strategy, caused us to adjust our EBITDA guidance for the year. Despite this revision, we remain in an enviable position and are on track to post year-over-year revenue and EBITDA growth for the full-year 2011. Our partner companies continue to execute very well and we have built and developed platforms and staffed up in areas that represent the future of our industry. As a result, we are bullish on the long-term prospects of our business and are confident that in 2012 we will deliver market leading organic revenue results and a meaningful improvement in profitability.”
Guidance for 2011 is revised as follows:
Consolidated revenue for the third quarter of 2011 was $238.2 million, an increase of 33.4% compared to $178.6 million in the third quarter of 2010. EBITDA (as defined) for the third quarter of 2011 was $16.3 million compared to $20.6 million in the third quarter of 2010, representing a decrease of 21.1%. Loss attributable to MDC Partners in the third quarter was ($19.6) million compared to a loss of ($10.9) million in the third quarter of 2010. Diluted earnings per share from continuing operations attributable to MDC Partners common shareholders for the third quarter of 2011 was a loss of ($0.67) compared to a loss of ($0.36) per share in the same period of 2010. Free Cash Flow (as defined) was an outflow of ($4.7) million in the third quarter of 2011, compared to $8.7 million in the third quarter of 2010.
For the nine months ended September 30, 2011, consolidated revenue was $696.2 million, an increase of 43.7% compared to $484.4 million in the same period of 2010. EBITDA (as defined) for the first nine months of 2011 was $63.5 million compared to $48.5 million in the first three quarters of 2010, representing an increase of 30.9%. Loss attributable to MDC Partners in the first nine months of 2011 was consistent with 2010 at ($26.9) million. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the first nine months of 2011 was a loss of ($0.93) compared to a loss of ($0.89) per share in the same period of 2010. Free Cash Flow (as defined) was $12.6 million in the first three quarters of 2011, compared to $13.1 million in the first three quarters of 2010.
“Our business performed well this quarter as our organic revenue growth proves that clients are more often turning to us for a more effective and efficient use of their marketing expenditures,” said David Doft, Chief Financial Officer. “We continue to aggressively invest in our business, and the acquisitions we have made to date are performing ahead of plan. While our investment strategy will result in compressed margins in the short-term, we believe it is a necessary step toward creating significant returns to our shareholders over time, and more specifically, achieving our long-term target of growing faster than the industry with margin expansion to 15-17% over the next several years.”
Management will host a conference call on Wednesday, November 2, 2011 at 8:00 a.m. (ET) to discuss results. The conference call will be accessible by dialing 1-412-317-6760 or toll free 1-866-524-3160. An investor presentation has been posted on our website www.mdc-partners.com and will be referred to during the conference call.
A recording of the conference call will be available until Wednesday, November 16, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (conference number 10006110) or by visiting our website at www.mdc-partners.com.
About MDC Partners Inc.
MDC is a Business Transformation Organization that utilizes technology, marketing communications, data analytics and insights and strategic consulting solutions to drive meaningful returns on Marketing and Communications Investments for multinational clients in the United States, Canada, Europe, and the Caribbean.
MDC’s durable competitive advantage is to Empower the Most Talented Entrepreneurial Thought Leaders to Drive Business Success to new levels of Achievement, for both our Clients and our Shareholders, reinforcing MDC’s reputation as “The Place Where Great Talent Lives.”
MDC Partners’ Class A shares are publicly traded on NASDAQ under the symbol “MDCA” and on the Toronto Stock Exchange under the symbol “MDZ.A”.
Non-GAAP Financial Measures
In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as “non-GAAP financial measures.” Management believes that such non-GAAP financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company’s results. These non-GAAP financial measures relate to: (1) presenting EBITDA and EBITDA margin (as defined) for the three and nine months ended September 30, 2011 and 2010; and (2) presenting Total Free Cash Flow, Free Cash Flow and Free Cash Flow per Share (as defined) for the three and nine months ended September 30, 2011 and 2010. 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, earnings guidance, recent business and economic trends, potential acquisitions, estimates of amounts for deferred acquisition consideration and “put” option rights, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
• risks associated with severe effects of national and regional economic downturn;
• the Company’s ability to attract new clients and retain existing clients;
• the spending patterns and financial success of the Company’s clients;
• the Company’s ability to retain and attract key employees;
• the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to “put” option right and deferred acquisition consideration;
• the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; and
• foreign currency fluctuations.
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, from borrowings under its credit facility and through incurrence of bridge or other debt financing, any 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.
Chief Financial Officer