MDC Partners Inc. Reports Results For The Three And Twelve Months Ended December 31, 2020

Rhea-AI Summary

MDC Partners reported a 14.1% decline in fourth quarter revenue, totaling $328.2 million, compared to $382.0 million in the previous year. For 2020, revenue fell 15.3% to $1.20 billion. Despite this, the company achieved a 15.8% sequential revenue growth from Q3 2020. The net loss attributable to shareholders was $243.2 million in 2020. Adjusted EBITDA increased by 1.8% to $177.3 million, driven by improved margins. For 2021, MDC expects 7-9% organic revenue growth and aims for adjusted EBITDA between $190 million and $200 million.

Positive

• 15.8% sequential revenue growth from Q3 2020.
• Adjusted EBITDA increased by 1.8% to $177.3 million.
• Adjusted EBITDA margin improved to 14.8%, up from 12.3%.

Negative

• Revenue declined by 14.1% compared to Q4 2019.
• Net loss increased to $243.2 million in 2020 from $17.6 million in 2019.
• Organic revenue declined by 13.9% in 2020.

Company Delivers 15.8% Sequential Revenue Growth in Fourth Quarter, Guides 7-9% Revenue Growth in 2021

FOURTH QUARTER & 2020 HIGHLIGHTS:

• Revenue of $328.2 million in the fourth quarter versus $382.0 million in the prior year period, a decline of 14.1%; and $1.20 billion in 2020 versus $1.42 billion in the prior year, a decline of 15.3%.
• Sequential revenue growth of 15.8% from the third quarter of 2020.
• Organic revenue declined 13.7% in the fourth quarter and 13.9% in 2020.
• Net loss attributable to MDC Partners Inc. common shareholders was $243.2 million (inclusive of principally non-cash impairment and other charges of $96.4 million and a $130 million non-cash income tax valuation allowance) in 2020 versus a net loss of $17.6 million in the prior year.
• Adjusted EBITDA of $177.3 million in 2020 versus $174.2 million in the prior year, an increase of 1.8%. Adjusted EBITDA Margin of 14.8% in 2020, increasing 250 basis points from 12.3% in the prior year.
• Excluding the sales of Kingsdale and Sloane, Adjusted EBITDA increased 5.2% in 2020 compared with the prior year.
• Covenant EBITDA of $190.1 million in 2020 versus $180.5 million in 2019, an improvement of 5.3%.
• Net New Business wins totaled $29.5 million in the fourth quarter and $90.3 million in 2020.

NEW YORK, March 2, 2021 /PRNewswire/ -- (NASDAQ: MDCA) – MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and twelve months ended December 31, 2020.

"MDC delivered 15.8% sequential revenue growth from the third quarter of 2020, $190 million of Covenant EBITDA in 2020, up 5.3% from prior year and $90 million of net new business in 2020," said Mark Penn, Chairman and Chief Executive Officer of MDC Partners. "The business continued to see a rebound from pandemic lows, with strong sequential improvement in revenue driven by double-digit growth in most client sectors led by Consumer Products, Technology and Healthcare. While COVID-19 headwinds remain, we expect the rebound to continue into 2021, with 7 to 9% organic revenue growth for the year."

"Building upon MDC's transformation over the last two years, we recently announced a strategic business combination with The Stagwell Group, which unites the award-winning creative talent of MDC's network with the advanced technology platform of Stagwell, unleashing the power of Talent & Technology around the world." 

Frank Lanuto, Chief Financial Officer, added, "Despite lower revenue in 2020, we expanded Adjusted EBITDA margins by 250 basis points. We continued to lower our leverage, down to 4.4x, and delivered $35 million in cash flow from operations in the quarter, ending the year with $61 million in cash and no revolver borrowings."

Fourth Quarter and Year-to-Date 2020 Financial Results
Revenue for the fourth quarter of 2020 was $328.2 million versus $382.0 million for the fourth quarter of 2019, a decline of 14.1%. The effect on revenue of foreign exchange was positive 0.7%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.2%, and organic revenue decline was 13.7%. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net revenue (revenue less billable costs), was $271.4 million for the fourth quarter of 2020 versus $314.0 million for the fourth quarter of 2019, a decline of 13.6%. The effect on net revenue of foreign exchange was positive 0.8%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.2%, and organic net revenue decline was 13.0%.

Revenue in the fourth quarter of 2020 increased 15.8% sequentially from the third quarter of 2020 as client spending activity increased following the initial decline in the third quarter.

Net New Business wins in the fourth quarter of 2020 totaled $29.5 million.

Net loss attributable to MDC Partners Inc. common shareholders for the fourth quarter of 2020 was $237.1 million versus a net loss of $11.1 million for the fourth quarter of 2019. The increase was primarily due to the recognition of impairment charges and an income tax valuation allowance, as well as the decline in revenue. Diluted loss per share attributable to MDC Partners Inc. common shareholders for the fourth quarter of 2020 was $3.23 versus diluted loss per share of $0.15 for the fourth quarter of 2019.

Adjusted EBITDA for the fourth quarter of 2020 was $47.5 million versus $57.0 million for the fourth quarter of 2019, a decrease of 16.6%, primarily due to COVID-19 driven reductions in revenue. In addition, Adjusted EBITDA margin in the fourth quarter of 2020 was 14.5%, down from 14.9% in the fourth quarter of 2019.

Revenue in 2020 was $1.20 billion versus $1.42 billion in 2019, a decline of 15.3%. The effect on revenue of foreign exchange due to the rising US Dollar was negative 0.1%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.3%, and organic revenue decline was 13.9%. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net revenue (revenue less billable costs), was $1.02 billion in 2020 versus $1.19 billion in 2019, a decline of 13.9%. The effect on net revenue of foreign exchange was negative 0.2%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.4%, and organic net revenue decline was 12.3%.

Net New Business wins in 2020 totaled $90.3 million.

Net loss attributable to MDC Partners Inc. common shareholders in 2020 was $243.2 million, an increase versus a net loss of $17.6 million in 2019. The increase was primarily due to the recognition of impairment charges and an income tax valuation allowance, as well as the decline in revenue. Diluted loss per share attributable to MDC Partners Inc. common shareholders in 2020 was $3.34 versus a diluted loss per share of $0.25 in 2019.

Adjusted EBITDA in 2020 was $177.3 million versus $174.2 million in 2019, an increase of 1.8%. 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 250 basis point improvement in Adjusted EBITDA Margin in 2020 to 14.8% from 12.3% in 2019.

Covenant EBITDA for 2020 was $190.1 million versus $180.5 million in 2019, an increase of 5.3%. The change was primarily driven by the increase in Adjusted EBITDA.

Financial Outlook

2021 financial guidance is updated 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 2020 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 Tuesday, March 2, 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 within one hour after the end of the conference call until 12:00 a.m. (ET), March 7, 2021, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10151483), 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, onetime 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 and the additional risk factors outlined in more detail in the Company's Annual Report on Form 10-K 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 December 31,								Twelve Months Ended December 31,
	2020				2019				2020				2019
Revenue:
Services	$	328,168			$	381,975			$	1,199,011			$	1,415,803
Operating Expenses:
Cost of services sold	209,043				260,725				769,899				961,076
Office and general expenses	136,490				94,219				341,565				328,339
Depreciation and amortization	9,468				9,460				36,905				38,329
Impairment and other losses	77,240				6,655				96,399				8,599
	432,241				371,059				1,244,768				1,336,343
Operating income (loss)	(104,073)				10,916				(45,757)				79,460
Other Income (Expenses):
Interest expense and finance charges, net	(15,344)				(15,658)				(62,163)				(64,942)
Foreign exchange gain (loss)	6,274				4,349				(982)				8,750
Other, net	(2,223)				2,158				20,500				(2,401)
	(11,293)				(9,151)				(42,645)				(58,593)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates	(115,366)				1,765				(88,402)				20,867
Income tax expense	109,526				4,024				116,555				10,316
Income (loss) before equity in earnings of non-consolidated affiliates	(224,892)				(2,259)				(204,957)				10,551
Equity in earnings (losses) of non-consolidated affiliates	(1,411)				—				(2,240)				352
Net income (loss)	(226,303)				(2,259)				(207,197)				10,903
Net income attributable to the noncontrolling interest	(7,154)				(5,419)				(21,774)				(16,156)
Net loss attributable to MDC Partners Inc.	(233,457)				(7,678)				(228,971)				(5,253)
Accretion on and net income allocated to convertible preference shares	(3,651)				(3,373)				(14,179)				(12,304)
Net loss attributable to MDC Partners Inc. common shareholders	$	(237,108)			$	(11,051)			$	(243,150)			$	(17,557)
Loss Per Common Share:
Basic
Net loss attributable to MDC Partners Inc. common shareholders	$	(3.23)			$	(0.15)			$	(3.34)			$	(0.25)
Diluted
Net loss attributable to MDC Partners Inc. common shareholders	$	(3.23)			$	(0.15)			$	(3.34)			$	(0.25)
Weighted Average Number of Common Shares Outstanding:
Basic	73,312,906				72,149,204				72,862,178				69,132,100
Diluted	73,312,906				72,149,204				72,862,178				69,132,100

 

SCHEDULE 2
MDC PARTNERS INC.
UNAUDITED REVENUE RECONCILIATION
(US$ in 000s, except percentages)
	Three Months Ended							Twelve Months Ended
	Revenue $				% Change			Revenue $				% Change
December 31, 2019	$	381,975						$	1,415,803
Organic revenue (1)	(52,180)				(13.7)	%		(197,466)				(13.9)	%
Non-GAAP acquisitions (dispositions), net	(4,447)				(1.2)	%		(18,312)				(1.3)	%
Foreign exchange impact	2,820				0.7	%		(1,014)				(0.1)	%
Total change	(53,807)				(14.1)	%		(216,792)				(15.3)	%
December 31, 2020	$	328,168						$	1,199,011

(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 December 31, 2020
	Integrated Networks - Group A				Integrated Networks - Group B				Media & Data Network				All Other				Corporate				Total
Revenue	$	119,228			$	112,325			$	35,834			$	60,781			$	—			$	328,168
Net loss attributable to MDC Partners Inc. common shareholders																					$	(237,108)
Adjustments to reconcile to operating loss:
Accretion on and net income allocated to convertible preference shares																					3,651
Net income attributable to the noncontrolling interests																					7,154
Equity in losses of non-consolidated affiliates																					1,411
Income tax expense																					109,526
Interest expense and finance charges, net																					15,344
Foreign exchange gain																					(6,274)
Other, net																					2,223
Operating income (loss)	$	(25,040)			$	1,501			$	(10,501)			$	(41,066)			$	(28,967)			$	(104,073)
margin	(21.0)		%		1.3		%		(29.3)		%		(67.6)		%						(31.7)		%
Adjustments:
Depreciation and amortization	1,559				3,478				1,975				1,743				713				9,468
Impairment and other losses	6,391				13,998				11,725				45,126				—				77,240
Stock-based compensation	1,700				803				—				(35)				1,143				3,611
Deferred acquisition consideration adjustments	39,682				1,153				—				837				—				41,672
Distributions from non- consolidated affiliates (1)	—				—				—				—				902				902
Other items, net (2)	985				243				798				214				16,485				18,725
Adjusted EBITDA (3)	$	25,277			$	21,176			$	3,997			$	6,819			$	(9,724)			$	47,545
Adjusted EBITDA margin	21.2		%		18.9		%		11.2		%		11.2		%						14.5		%

(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 11 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 Twelve Months Ended December 31, 2020
	Integrated Networks - Group A				Integrated Networks - Group B				Media & Data Network				All Other				Corporate				Total
Revenue	$	379,648			$	435,589			$	139,015			$	244,759			$	—			$	1,199,011
Net loss attributable to MDC Partners Inc. common shareholders																					$	(243,150)
Adjustments to reconcile to operating income (loss):
Accretion on and net income allocated to convertible preference shares																					14,179
Net income attributable to the noncontrolling interests																					21,774
Equity in losses of non-consolidated affiliates																					2,240
Income tax expense																					116,555
Interest expense and finance charges, net																					62,163
Foreign exchange loss																					982
Other, net																					(20,500)
Operating income (loss)	$	14,297			$	34,581			$	(7,724)			$	(23,021)			$	(63,890)			$	(45,757)
margin	3.8		%		7.9		%		(5.6)		%		(9.4)		%						(3.8)		%
Adjustments:
Depreciation and amortization	6,467				17,204				4,376				7,478				1,380				36,905
Impairment and other losses	6,391				31,784				11,760				45,335				1,129				96,399
Stock-based compensation	7,580				3,191				122				304				2,982				14,179
Deferred acquisition consideration adjustments	44,073				(2,706)				375				445				—				42,187
Distributions from non- consolidated affiliates (1)	—				—				—				—				2,175				2,175
Other items, net (2)	985				243				798				214				29,004				31,244
Adjusted EBITDA (3)	$	79,793			$	84,297			$	9,707			$	30,755			$	(27,220)			$	177,332
Adjusted EBITDA margin	21.0		%		19.4		%		7.0		%		12.6		%						14.8		%

(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 11 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 ADJUSTED EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended December 31, 2019
	Integrated Networks - Group A				Integrated Networks - Group B				Media & Data Network				All Other				Corporate				Total
Revenue	$	115,814			$	136,095			$	42,527			$	87,539			$	—			$	381,975
Net loss attributable to MDC Partners Inc. common shareholders																					$	(11,051)
Adjustments to reconcile to operating loss:
Accretion on and net income allocated to convertible preference shares																					3,373
Net income attributable to the noncontrolling interests																					5,419
Income tax expense																					4,024
Interest expense and finance charges, net																					15,658
Foreign exchange gain																					(4,349)
Other, net																					(2,158)
Operating income (loss)	$	6,677			$	9,226			$	3,416			$	6,800			$	(15,203)			$	10,916
margin	5.8		%		6.8		%		8.0		%		7.8		%						2.9		%
Adjustments:
Depreciation and amortization	2,139				3,940				971				2,172				238				9,460
Impairment and other losses	4,879				—				929				—				847				6,655
Stock-based compensation	15,856				1,072				42				10				1,428				18,408
Deferred acquisition consideration adjustments	2,140				5,213				—				1,677				—				9,030
Distributions from non- consolidated affiliates (1)	—				—				—				—				2,219				2,219
Other items, net (2)	—				—				—				—				349				349
Adjusted EBITDA (3)	$	31,691			$	19,451			$	5,358			$	10,659			$	(10,122)			$	57,037
Adjusted EBITDA margin	27.4		%		14.3		%		12.6		%		12.2		%						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 11 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 Twelve Months Ended December 31, 2019
	Integrated Networks - Group A				Integrated Networks - Group B				Media & Data Network				All Other				Corporate				Total
Revenue	$	392,101			$	531,717			$	161,451			$	330,534			$	—			$	1,415,803
Net loss attributable to MDC Partners Inc. common shareholders																					$	(17,557)
Adjustments to reconcile to operating income (loss):
Accretion on and net income allocated to convertible preference shares																					12,304
Net income attributable to the noncontrolling interests																					16,156
Equity in earnings of non-consolidated affiliates																					(352)
Income tax expense																					10,316
Interest expense and finance charges, net																					64,942
Foreign exchange gain																					(8,750)
Other, net																					2,401
Operating income (loss)	$	35,230			$	61,417			$	2,376			$	26,205			$	(45,768)			$	79,460
margin	9.0		%		11.6		%		1.5		%		7.9		%						5.6		%
Additional adjustments to reconcile to Adjusted EBITDA:
Depreciation and amortization	8,559				15,904				4,303				8,695				868				38,329
Impairment and other losses	4,879				1,933				929				11				847				8,599
Stock-based compensation	24,420				4,303				63				374				1,880				31,040
Deferred acquisition consideration adjustments	1,734				1,261				75				2,333				—				5,403
Distributions from non- consolidated affiliates (1)	—				(250)				—				—				2,298				2,048
Other items, net (2)	—				—				—				—				9,274				9,274
Adjusted EBITDA (3)	$	74,822			$	84,568			$	7,746			$	37,618			$	(30,601)			$	174,153
Adjusted EBITDA margin	19.1		%		15.9		%		4.8		%		11.4		%						12.3		%

(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 11 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)
	2020																Covenant EBITDA (LTM) (1)
	Q1				Q2				Q3				Q4				Q4-2020 - LTM
Net income (loss) attributable to MDC Partners Inc. common shareholders	$	(2,437)			$	(4,102)			$	360			$	(237,108)			$	(243,287)
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				14,316
Net income attributable to the noncontrolling interests	791				3,101				10,728				7,154				21,774
Equity in losses of non-consolidated affiliates	—				798				31				1,411				2,240
Income tax expense (benefit)	13,500				(7,923)				1,452				109,526				116,555
Interest expense and finance charges, net	15,612				15,941				15,266				15,344				62,163
Foreign exchange loss (gain)	14,757				(5,342)				(2,159)				(6,274)				982
Other, net	(16,334)				(5,884)				(505)				2,223				(20,500)
Operating income (loss)	29,329				98				28,889				(104,073)				(45,757)
Adjustments to reconcile to Adjusted EBITDA:
Depreciation and amortization	9,206				8,899				9,332				9,468				36,905
Impairment and other losses	161				18,839				159				77,240				96,399
Stock-based compensation	3,070				1,039				6,459				3,611				14,179
Deferred acquisition consideration adjustments	(4,600)				2,312				2,803				41,672				42,187
Distributions from non-consolidated affiliates	(14)				1,079				208				902				2,175
Other items, net (2)	2,416				3,895				6,208				18,725				31,244
Adjusted EBITDA	39,568				36,161				54,058				47,545				177,332
Adjustments to reconcile to Covenant EBITDA:
Proforma dispositions (3)	(124)				—				—				—				(124)
Severance due to eliminated positions	2,133				5,233				2,336				1,987				11,689
Other adjustments, net (4)	357				207				77				585				1,226
Covenant adjusted EBITDA	$	41,934			$	41,601			$	56,471			$	50,117			$	190,123

(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 11 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 RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA
(US$ in 000s)
	2019																Covenant EBITDA (LTM) (1)
	Q1				Q2				Q3				Q4				Q4-2019 LTM
Net income (loss) attributable to MDC Partners Inc. common shareholders	$	(2,496)			$	1,048			$	(5,058)			$	(11,051)			$	(17,557)
Adjustments to reconcile to operating income:
Accretion on and net income allocated to convertible preference shares	2,383				3,242				3,306				3,373				12,304
Net income attributable to the noncontrolling interests	429				3,043				7,265				5,419				16,156
Equity in (earnings) of non-consolidated affiliates	(83)				(206)				(63)				—				(352)
Income tax expense	746				2,089				3,457				4,024				10,316
Interest expense and finance charges, net	16,761				16,413				16,110				15,658				64,942
Foreign exchange loss (gain)	(5,442)				(2,932)				3,973				(4,349)				(8,750)
Other, net	3,383				745				431				(2,158)				2,401
Operating income	15,681				23,442				29,421				10,916				79,460
Adjustments to reconcile to Adjusted EBITDA:
Depreciation and amortization	8,838				10,663				9,368				9,460				38,329
Impairment and other losses	—				—				1,944				6,655				8,599
Stock-based compensation	2,972				3,634				6,026				18,408				31,040
Deferred acquisition consideration adjustments	(7,643)				2,073				1,943				9,030				5,403
Distributions from non-consolidated affiliates	—				31				(202)				2,219				2,048
Other items, net (2)	1,626				6,594				705				349				9,274
Adjusted EBITDA	21,474				46,437				49,205				57,037				174,153
Adjustments to reconcile to Covenant EBITDA:
Proforma acquisitions/dispositions (3)	(2,701)				(729)				(996)				(1,294)				(5,720)
Severance due to eliminated positions	1,534				2,346				1,956				3,221				9,057
Other adjustments, net (4)	1,412				989				228				368				2,997
	$	21,719			$	49,043			$	50,393			$	59,332			$	180,487

(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 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 9
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
	December 31, 2020				December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	60,757			$	106,933
Accounts receivable, less allowance for doubtful accounts of $5,473 and $3,304	374,892				449,288
Expenditures billable to clients	10,552				30,133
Other current assets	40,939				35,613
Total Current Assets	487,140				621,967
Fixed assets, at cost, less accumulated depreciation of $136,166 and $129,579	90,413				81,054
Right-of-use assets - operating leases	214,188				223,622
Goodwill	668,211				731,691
Other intangible assets, net	33,844				54,893
Deferred tax assets	179				84,900
Other assets	17,339				30,179
Total Assets	$	1,511,314			$	1,828,306
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable	$	168,398			$	200,148
Accruals and other liabilities	274,968				353,575
Advance billings	152,956				171,742
Current portion of lease liabilities - operating leases	41,208				48,659
Current portion of deferred acquisition consideration	53,730				45,521
Total Current Liabilities	691,260				819,645
Long-term debt	843,184				887,630
Long-term portion of deferred acquisition consideration	29,335				29,699
Long-term lease liabilities - operating leases	247,243				219,163
Other liabilities	82,065				25,771
Total Liabilities	1,893,087				1,981,908
Redeemable Noncontrolling Interests	27,137				36,973
Commitments, Contingencies, and Guarantees
Shareholders' Deficit:
Convertible preference shares, 145,000 authorized, issued and outstanding at December 31, 2020 and 2019	152,746				152,746
Common stock and other paid-in capital	104,367				101,469
Accumulated deficit	(709,751)				(480,779)
Accumulated other comprehensive income (loss)	2,739				(4,269)
MDC Partners Inc. Shareholders' Deficit	(449,899)				(230,833)
Noncontrolling interests	40,989				40,258
Total Shareholders' Deficit	(408,910)				(190,575)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit	$	1,511,314			$	1,828,306

 

SCHEDULE 10
MDC PARTNERS INC.
UNAUDITED SUMMARY CASH FLOW DATA
(US$ in 000s)
	Twelve Months Ended December 31,
	2020				2019
Net cash provided by operating activities	$	32,559			$	86,539
Net cash provided by (used in)  investing activities	(8,287)				115
Net cash used in financing activities	(73,426)				(11,729)
Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts	2,978				1
Net increase (decrease) in cash, and cash equivalents	$	(46,176)			$	74,926
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 increase (decrease) in cash and cash equivalents	(46,176)				76,060
Cash and cash equivalents at beginning of period	106,933				30,873
Cash and cash equivalents at end of period	$	60,757			$	106,933
Supplemental disclosures:
Cash income taxes paid	$	7,946			$	2,296
Cash interest paid	$	57,752			$	62,223

Note: Actuals may not foot due to rounding

 

SCHEDULE 11
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF COMPONENTS OF NON- GAAP MEASURES
(US$ in 000s)
	2019																2020
	Q1			Q2			Q3			Q4			YTD				Q1			Q2			Q3			Q4			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			(248)			222				(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)			(4,447)			(17,653)
Non-GAAP acquisitions (dispositions), net	$	9,852		$	(4,218)		$	(2,437)		$	(4,760)		$	(1,563)			$	(5,683)		$	(4,106)		$	(4,076)		$	(4,447)		$	(18,312)
	2019																2020
	Q1			Q2			Q3			Q4			YTD				Q1			Q2			Q3			Q4			YTD
OTHER ITEMS, NET
Severance and other restructuring expenses	$	—		$	6,703		$	705		$	—		$	7,408			$	1,334		$	2,969		$	3,270		1,072			$	8,645
Strategic review process costs	1,626			(109)			—			349			1,866				1,082			926			2,938			17,653			22,599
Total other items, net	$	1,626		$	6,594		$	705		$	349		$	9,274			$	2,416		$	3,895		$	6,208		$	18,725		$	31,244
	2019																2020
	Q1			Q2			Q3			Q4			YTD				Q1			Q2			Q3			Q4			YTD
CASH INTEREST, NET & OTHER
Cash interest paid	$	(1,629)		$	(30,014)		$	(882)		$	(29,698)		$	(62,223)			$	(145)		$	(28,591)		$	(575)		$	(28,441)		$	(57,752)
Bond interest accrual adjustment	(14,625)			14,625			(14,625)			14,625			—				(14,625)			13,894			(14,035)			14,376			(390)
Adjusted cash interest paid	(16,254)			(15,389)			(15,507)			(15,073)			(62,223)				(14,770)			(14,697)			(14,610)			(14,065)			(58,142)
Interest income	149			138			165			162			614				114			190			114			99			517
Total cash interest, net & other	$	(16,105)		$	(15,251)		$	(15,342)		$	(14,911)		$	(61,609)			$	(14,656)		$	(14,507)		$	(14,496)		$	(13,966)		$	(57,625)
	2019																2020
	Q1			Q2			Q3			Q4			YTD				Q1			Q2			Q3			Q4			YTD
CAPITAL EXPENDITURES, NET
Capital expenditures	$	(3,606)		$	(4,317)		$	(5,863)		$	(4,810)		$	(18,596)			$	(1,546)		$	(2,144)		$	(24,187)		$	(9,426)		$	(37,303)
	2019																2020
	Q1			Q2			Q3			Q4			YTD				Q1			Q2			Q3			Q4			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		$	7,154		$	21,774
Cash taxes	$	1,677		$	1,817		$	137		$	(1,335)		$	2,296			$	849		$	1,717		$	134		$	5,246		$	7,946

(1)  GAAP revenue from prior year acquisitions for 2019 relate to acquisitions which occurred 2018.

(2) Contribution to organic revenue growth (decline) 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.

 

CONTACT:	Erica Bartsch
	Sloane & Company
	212-446-1875
	IR@mdc-partners.com

 

 

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SOURCE MDC Partners Inc.

FAQ

What was MDC Partners' revenue in Q4 2020?

MDC Partners reported revenue of $328.2 million in Q4 2020.

How much did MDC Partners' revenue decline in 2020?

MDC Partners' revenue declined by 15.3%, totaling $1.20 billion in 2020.

What is MDC Partners' growth outlook for 2021?

MDC Partners expects organic revenue growth of 7-9% in 2021.

What was the net loss for MDC Partners in 2020?

The net loss attributable to MDC Partners' shareholders was $243.2 million in 2020.

What is the expected adjusted EBITDA for MDC Partners in 2021?

MDC Partners expects adjusted EBITDA to be between $190 million and $200 million for 2021.