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SECOND QUARTER HIGHLIGHTS:
• Reported revenue increased 0.1% to $337.0 million; Organic revenue growth of 0.3%, 20 basis points negative impact from decreased billable pass-through costs
• Net income attributable to MDC Partners of $1.2 million vs $29.6 million
• Adjusted EBITDA decreased 11.8% to $41.9 million, with margins of 12.4% (See Schedules 2 and 3)
• Company revises 2016 financial guidance to reflect lowered full year expectations
• Reported revenue increased 1.1% to $646.1 million; Organic revenue growth of 1.2%, 120 basis point negative impact from decreased billable pass-through costs
• Net loss attributable to MDC Partners of ($22.1) million vs. ($2.5) million
• Adjusted EBITDA decreased 5.0% to $74.7 million, with margins of 11.6% (See Schedules 4 and 5)
• Net New Business wins totaled $36.9 million in Q2 and $56.8 million year-to-date
New York, NY, July 28, 2016 (NASDAQ: MDCA) – MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and six months ended June 30, 2016.
Scott Kauffman, Chairman and Chief Executive Officer of MDC Partners, said, “This was a challenging quarter for our business. While our financial results in the second quarter were below our expectations, there’s no doubt that we have a very strong underlying business that is positioned for meaningful growth in the second half of the year and beyond. Our partners are building deep relationships with blue chip, increasingly global clients, including net new business of $57 million year-to-date. Our media business is beginning to break through, and our partners are attracting innovative talent with several recent significant hires. Importantly, we continue to take strategic actions that are making our business stronger and more efficient. We are confident that the steps we are taking, combined with the strength of our partners, will quickly return us to an attractive run rate, leading to solid shareholder returns.”
David Doft, CFO of MDC Partners, said, “We believe that it is prudent to revise our full-year 2016 guidance to reflect our softer-than-anticipated second quarter results. At the midpoint, our annual guidance implies a revenue increase of 5.9% and an Adjusted EBITDA increase of 6.2% as we continue to anticipate that there will be an acceleration in growth in the third and fourth quarters as recently won accounts come online. In addition, our recent payment of approximately $84 million of deferred acquisition consideration in the second quarter was a meaningful step toward strengthening our balance sheet. Notwithstanding our financial results thus far this year, we remain confident in the strength of our business model.”
Second Quarter and Year-to-Date Financial Results
Revenue for the second quarter of 2016 was $337.0 million, an increase of 0.1%, compared to $336.6 million in the second quarter of 2015. The effect of foreign currency translation was negative 0.7%, the impact of net acquisitions was positive 0.6%, and the resulting organic revenue growth was 0.3%. Organic revenue growth for the period was negatively impacted by 20 basis points from decreased billable pass-through costs incurred on client’s behalf from certain of our partner firms acting as principal.
Net income attributable to MDC Partners in the second quarter of 2016 was $1.2 million compared to $29.6 million in the second quarter of 2015. Diluted income per share from continuing operations attributable to MDC Partners common shareholders for the second quarter of 2016 was $0.02 compared to $0.56 per share in the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 was $41.9 million, a decrease of 11.8% compared to $47.5 million in the second quarter of 2015. Adjusted EBITDA Available for General Capital Purposes was $16.2 million in the second quarter of 2016, a decrease of 41.5%, compared to $27.8 million in the second quarter of 2015.
Revenue for the first six months of 2016 was $646.1 million, an increase of 1.1%, compared to $638.8 million in the first six months of 2015. The effect of foreign currency translation was negative 1.0%, the impact of net acquisitions was positive 0.9%, and the resulting organic revenue growth was 1.2%. Organic revenue growth for the period was negatively impacted by 120 basis points from decreased billable pass-through costs incurred on client’s behalf from certain of our partner firms acting as principal.
Net loss attributable to MDC Partners in the first six months of 2016 was ($22.1) million compared to ($2.5) million in the first six months of 2015. Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the first six months of 2016 was ($0.44) compared to income of $0.05 per share in the first six months of 2015. Adjusted EBITDA for the first six months of 2016 was $74.7 million, a decrease of 5.0%, compared to $78.6 million in the first six months of 2015. Adjusted EBITDA Available for General Capital Purposes was $29.0 million in the first six months of 2016, a decrease of 23.8%, compared to $38.0 million in the first six months of 2015.
MDC Partners Announces $0.21 per Share Quarterly Cash Dividend
MDC Partners today also announced that its Board of Directors has declared a cash dividend of $0.21 per share on all of its outstanding Class A shares and Class B shares. The quarterly dividend will be payable on or about August 24, 2016, to shareholders of record at the close of business on August 10, 2016.
Management will host a conference call on Thursday, July 28, 2016, at 4:30 p.m. (ET) to discuss 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 www.mdc-partners.com and may be referred to during the conference call.
A recording of the conference call will be available one hour after the call until 12:00 a.m. (ET), August 4, 2016, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10090304), or by visiting our website at www.mdc-partners.com.
About MDC Partners Inc.
MDC Partners is one of the fastest-growing and most influential marketing and communications networks in the world. Its 50+ advertising, public relations, branding, digital, social and event marketing agencies are responsible for some of the most memorable and engaging campaigns for the world’s most respected brands. As “The Place Where Great Talent Lives,” MDC Partners is known for its unique partnership model, empowering the most entrepreneurial and innovative talent to drive competitive advantage and business growth for clients. By leveraging technology, data analytics, insights, and strategic consulting solutions, MDC Partners drives measurable results and optimizes 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 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 for the three and six months ended June 30, 2016, and 2015, include the following:
(1) Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of the following calculation: (i) the change in revenue during the relevant time period, less (ii) for each business acquired in the current year, the incremental impact on revenue for the comparable period prior to the Company’s ownership of such acquired business, less revenue from each business acquired by the Company in the previous year through the twelve month anniversary of the Company’s ownership, plus (iii) for each business disposed of in the current year, 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 Company’s disposition, less (iv) foreign exchange impacts.
(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 measure that represents operating profit plus depreciation and amortization, stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items.
(4) Adjusted EBITDA Available for General Capital Purposes: Adjusted EBITDA Available for General Capital Purposes is a non-GAAP measure that represents Adjusted EBITDA less net income attributable to the noncontrolling interests, capital expenditures net of landlord reimbursements, cash taxes, and cash interest, net & other.
(5) Net Bank Debt or Net Debt: Debt due pertaining to the revolving credit facility plus debt pertaining to the Senior Notes less total cash and cash equivalents.
Included in this earnings release are tables reconciling MDC Partners’ reported results to arrive at certain of these non-GAAP financial measures.