EX-99.1 2 a8-kexhibit991mdcax2020063.htm EXHIBIT 99.1 Exhibit


mdcpartners_image2020.jpg    

FOR IMMEDIATE ISSUE


FOR:    MDC Partners Inc.        CONTACT:    Erica Bartsch
330 Hudson Street, 10th Floor             Sloane & Company
New York, NY 10013                212-446-1875
IR@mdc-partners.com


MDC PARTNERS INC. REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

Company Responds Swiftly to Pandemic Conditions,
Dramatically Reduces Costs and Delivers Solid First Half Results


SECOND QUARTER & YTD HIGHLIGHTS:
•
Revenue of $259.7 million in the second quarter versus $362.1 million in the prior period, a decline of 28.3%; and $587.4 million YTD versus $690.9 million in the prior year period, a decline of 15.0%.
•
Organic revenue declined 26.4% in the second quarter and 12.9% YTD.
•
Net loss attributable to MDC Partners common shareholders was $4.1 million in the second quarter of 2020 versus $0.8 million in income a year ago, driven by non-cash impairment charges taken in the quarter.
•
Net loss attributable to MDC Partners common shareholders was $6.5 million in the six months ended June 30, 2020 versus $1.4 million a year ago, driven by non-cash impairment charges taken in the period.
•
Adjusted EBITDA for the three months ended June 30, 2020 was $36.2 million versus $46.4 million a year ago, a decline of 22.1%. Adjusted EBITDA Margin of 13.9%, compared to 12.8% in the prior year quarter.
•
Adjusted EBITDA for the six months ended June 30, 2020 was $75.7 million versus $67.9 million a year ago, an increase of 11.5%. Adjusted EBITDA Margin of 12.9%, compared to 9.8% a year ago.
•
Excluding Kingsdale and Sloane, Adjusted EBITDA decreased 20.9% in the second quarter and increased 17.2% in the first half of 2020 compared with the prior year period.
•
Covenant EBITDA (LTM) of $193.3 million versus $200.7 million at March 31, 2020, a decline of 3.7%.
•
Net New Business wins totaled $20.5 million in the second quarter, and $28.9 million in the six months ended June 30, 2020.

Page 1





New York, NY, August 6, 2020 (NASDAQ: MDCA) – MDC Partners Inc. (“MDC Partners” or the “Company”) today announced financial results for the three and six months ended June 30, 2020.
“Coming off of pace-setting growth in the first quarter, we weathered the current effects of COVID-19 on GDP, our clients and revenue with a diligent focus on cost reductions and restructuring actions that helped preserve the underlying economics of the business. This resulted in expanded margins and positions MDC to rebound even more strongly once we return to growth,” said Mark Penn, Chairman and Chief Executive Officer of MDC Partners.
“The expected declines in net revenue were met with better than expected controls on costs and strong liquidity. On a half-year basis, Adjusted EBITDA excluding divestitures increased 17 percent against prior year despite the revenue decline,” Mr. Penn added. 
Frank Lanuto, Chief Financial Officer, added, “We continued to operate with significant financial flexibility throughout the quarter. We extended our credit facility and retired $87 million in obligations in the second quarter, including semi-annual interest on our Notes, scheduled M&A obligations and partial bond repurchase.  We maintained a positive net cash position of $23 million at quarter end and reduced our leverage from 4.9x year ago to 4.6x.”
Lead Independent Director and Special Committee Chairman Irwin Simon commented, “The special committee is proceeding with its review of Stagwell’s recent merger proposal, assisted by independent advisors Moelis & Company and DLA Piper.  The committee will continue to act in the best interests of the Company and our shareholders as we evaluate the previously announced transaction proposed by Stagwell as well as all alternatives available to the Company.”

Second Quarter and Year-to-Date 2020 Financial Results
Revenue for the second quarter of 2020 was $259.7 million versus $362.1 million for the second quarter of 2019, a decline of 28.3%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 0.8%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.1%, and organic revenue decline was 26.4%, inclusive of $29.1 million or 457 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net New Business wins in the second quarter of 2020 totaled $20.5 million.
Net loss attributable to MDC Partners common shareholders for the second quarter of 2020 was $4.1 million versus net income of $0.8 million for the second quarter of 2019. The decline was primarily due to lower revenues, partially offset by a reduction in expenses, which included a goodwill and lease impairment charge of $18.8 million, a gain of $7.4 million in connection with the repurchase of a portion of our senior notes and a tax benefit during the second quarter as compared to the same period in the prior year. Diluted loss per share attributable to MDC Partners common shareholders for the second quarter of 2020 was $0.06 versus diluted income per share of $0.01 for the second quarter of 2019.
Adjusted EBITDA for the second quarter of 2020 was $36.2 million versus $46.4 million for the second quarter of 2019, a decline of 22.1%, primarily due to lower revenues, partially offset by a reduction of expenses. This led to a 110 basis point increase in Adjusted EBITDA margin in the second quarter of 2020 to 13.9% from 12.8% in the second quarter of 2019.
Covenant EBITDA for the last twelve months (LTM) was $193.3 million as of June 30, 2020 versus $200.7 million at March 31, 2020, a decline of 3.7%. The change was primarily driven by the decline in Adjusted EBITDA.
Revenue for the first six months of 2020 was $587.4 million versus $690.9 million for the first six months of 2019, a decline of 15.0%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 0.7%, the

Page 2



impact of non-GAAP acquisitions (dispositions), net was negative 1.4%, and organic revenue decline was 12.9%, inclusive of $28.1 million or 239 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net New Business wins for the first six months of 2020 totaled $28.9 million.
Net loss attributable to MDC Partners common shareholders for the first six months of 2020 was $6.5 million versus $1.4 million for the first six months of 2019. This change was primarily due to the decline in revenue, partially offset by a reduction in expenses. Diluted loss per share attributable to MDC Partners common shareholders for the six months of 2020 was $0.09 versus diluted loss per share of $0.02 for the first six months of 2019.
Adjusted EBITDA for the first six months of 2020 was $75.7 million versus $67.9 million for the first six months of 2019, an increase of 11.5%. 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 310 basis point improvement in Adjusted EBITDA margin in the first six months of 2020 to 12.9% from 9.8% in the first six months of 2019.
 

Page 3



Financial Outlook
Given the uncertainties in the global business environment arising from the COVID-19 pandemic, the Company is not providing a 2020 outlook for Revenue and Covenant EBITDA at this time.

Conference Call
Management will host a conference call on Thursday, August 6, 2020, at 8:30 a.m. (ET) to discuss its results. The conference call will be accessible by dialing 1-862-298-0702 or toll free 1-888-390-3967. 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 business day after the conference call until 12:00 a.m. (ET), August 13, 2020, by dialing 1-754-333-7735 or toll free 1-888-539-4649 (passcode 153080), 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

Page 4



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.

Page 5



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;
•
developments involving the proposal by Stagwell Media LP to enter into a business combination with the Company;
•
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 2019 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2020 and accessible on the SEC’s website at www.sec.gov., under the caption “Risk Factors,” and in the Company’s other SEC filings.


Page 6



SCHEDULE 1
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in 000s, Except per Share Amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Revenue:
 

 
 

 
 
 
 
Services
$
259,678

 
$
362,130

 
$
587,420

 
$
690,921

Operating Expenses:
 
 
 
 
 
 
 
Cost of services sold
165,632

 
240,749

 
388,325

 
477,903

Office and general expenses
66,210

 
87,276

 
132,563

 
154,394

Depreciation and amortization
8,899

 
10,663

 
18,105

 
19,501

Impairment and other losses
18,839

 
—

 
19,000

 
—

 
259,580

 
338,688

 
557,993

 
651,798

Operating income
98

 
23,442

 
29,427

 
39,123

Other Income (Expenses):
 
 
 
 
 
 
 
Interest expense and finance charges, net
(15,941
)
 
(16,413
)
 
(31,553
)
 
(33,172
)
Foreign exchange gain (loss)
5,342

 
2,932

 
(9,415
)
 
8,374

Other, net
5,884

 
(746
)
 
22,218

 
(4,128
)
 
(4,715
)
 
(14,227
)
 
(18,750
)
 
(28,926
)
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates
(4,617
)
 
9,215

 
10,677

 
10,197

Income tax expense (benefit)
(7,923
)
 
2,088

 
5,577

 
2,837

Income before equity in earnings of non-consolidated affiliates
3,306

 
7,127

 
5,100

 
7,360

Equity in earnings (losses) of non-consolidated affiliates
(798
)
 
206

 
(798
)
 
289

Net income
2,508

 
7,333

 
4,302

 
7,649

Net income attributable to the noncontrolling interest
(3,101
)
 
(3,043
)
 
(3,892
)
 
(3,472
)
Net income (loss) attributable to MDC Partners Inc.
(593
)
 
4,290

 
410

 
4,177

Accretion on and net income allocated to convertible preference shares
(3,509
)
 
(3,515
)
 
(6,949
)
 
(5,625
)
Net income (loss) attributable to MDC Partners Inc. common shareholders
$
(4,102
)
 
$
775

 
$
(6,539
)
 
$
(1,448
)
Income (loss) Per Common Share:
 

 
 

 
 
 
 
Basic
 

 
 

 
 
 
 
Net income (loss) attributable to MDC Partners Inc. common shareholders
$
(0.06
)
 
$
0.01

 
$
(0.09
)
 
$
(0.02
)
Diluted
 
 
 
 
 
 
 
Net income (loss) attributable to MDC Partners Inc. common shareholders
$
(0.06
)
 
$
0.01

 
$
(0.09
)
 
$
(0.02
)
Weighted Average Number of Common Shares Outstanding:
 

 
 

 
 
 
 
Basic
72,528,455

 
71,915,832

 
72,463,058

 
66,118,749

Diluted
72,528,455

 
72,024,689

 
72,463,058

 
66,118,749





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SCHEDULE 2
MDC PARTNERS INC.
UNAUDITED REVENUE RECONCILIATION
(US$ in 000s, except percentages)


 
Three Months Ended
 
Six Months Ended
 
Revenue $
 
% Change
 
Revenue $
 
% Change
June 30, 2019
$
362,130

 
 
 
$
690,921

 
 
Organic revenue (1)
(95,437
)
 
(26.4
)%
 
(89,003
)
 
(12.9
)%
Non-GAAP acquisitions (dispositions), net
(4,106
)
 
(1.1
)%
 
(9,789
)
 
(1.4
)%
Foreign exchange impact
(2,909
)
 
(0.8
)%
 
(4,709
)
 
(0.7
)%
Total change
(102,452
)
 
(28.3
)%
 
(103,501
)
 
(15.0
)%
June 30, 2020
$
259,678

 
 
 
$
587,420

 
 

(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



Page 8



SCHEDULE 3
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)
For the Three Months Ended June 30, 2020

Integrated Networks - Group A

Integrated Networks - Group B
 
Media & Data Network
 
All Other
 
Corporate
 
Total
Revenue
$
82,735

 
$
93,398


$
28,551


$
54,994


$
—


$
259,678


 
 









Net loss attributable to MDC Partners Inc. common shareholders
 
 
 
 
 
 
 
 
 

$
(4,102
)
Adjustments to reconcile to operating income (loss):
 
 
 
 
 
 
 
 
 

 
Accretion on convertible preference shares
 
 
 
 
 
 
 
 
 

3,509

Net income attributable to the noncontrolling interests
 
 
 
 
 
 
 
 
 

3,101

Equity in losses of non-consolidated affiliates
 
 
 
 
 
 
 
 
 

798

Income tax benefit
 
 
 
 
 
 
 
 
 

(7,923
)
Interest expense and finance charges, net
 
 
 
 
 
 
 
 
 

15,941

Foreign exchange gain
 
 
 
 
 
 
 
 
 

(5,342
)
Other, net
 
 
 
 
 
 
 
 
 

(5,884
)
Operating income (loss)
$
14,605

 
$
(7,717
)

$
46


$
4,987


$
(11,823
)

$
98

margin
17.7
%
 
(8.3
)%

0.2
%

9.1
%

 

—
%

 
 














Adjustments:
 
 














Depreciation and amortization
$
1,566

 
$
4,387


$
807


$
1,903


$
236


$
8,899

Impairment and other losses
—

 
17,468


35


207


1,129


18,839

Stock-based compensation
(105
)
 
746


4


118


276


1,039

Deferred acquisition consideration adjustments
1,139

 
1,503


—


(330
)

—


2,312

Distributions from non-consolidated affiliates (2)
—

 
—

 
—

 
—


1,079


1,079

Other items, net (3)
—

 
—

 
—

 
—


3,895


3,895

Adjusted EBITDA (1)
$
17,205

 
$
16,387


$
892


$
6,885


$
(5,208
)

$
36,161

Adjusted EBITDA margin
20.8
%
 
17.5
 %

3.1
%

12.5
%

 

13.9
%

(1) 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.

(2) 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).

(3) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

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 the reorganization, we reassessed our reportable segments to align our external reporting with how we

Page 9



operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments.

Note: Actuals may not foot due to rounding.



Page 10



SCHEDULE 4
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)
For the Six Months Ended June 30, 2020

Integrated Networks - Group A

Integrated Networks - Group B

Media & Data Network

All Other

Corporate

Total
Revenue
$
173,356

 
$
211,105


$
69,609


$
133,350


$
—


$
587,420


 
 









Net loss attributable to MDC Partners Inc. common shareholders
 
 








$
(6,539
)
Adjustments to reconcile to operating income (loss):
 
 








 
Accretion on convertible preference shares
 
 








6,949

Net income attributable to the noncontrolling interests
 
 








3,892

Equity in losses of non-consolidated affiliates
 
 








798

Income tax expense
 
 








5,577

Interest expense and finance charges, net
 
 








31,553

Foreign exchange loss
 
 








9,415

Other, net
 
 








(22,218
)
Operating income (loss)
$
26,637

 
$
9,444


$
663


$
12,844


$
(20,161
)

$
29,427

margin
15.4
%
 
4.5
%

1.0
%

9.6
%




5.0
%

 
 









Adjustments:
 
 









Depreciation and amortization
$
3,307

 
$
8,913


$
1,615


$
3,802


$
468


$
18,105

Impairment and other losses
—

 
17,629


35


207


1,129


19,000

Stock-based compensation
1,856

 
1,646


(9
)

198


418


4,109

Deferred acquisition consideration adjustments
1,707

 
(4,109
)

375


(261
)

—


(2,288
)
Distributions from non-consolidated affiliates (2)
—

 
—

 
—

 
—


1,065


1,065

Other items, net (3)
—

 
—

 
—

 
—


6,311


6,311

Adjusted EBITDA (1)
$
33,507

 
$
33,523


$
2,679


$
16,790


$
(10,770
)

$
75,729

Adjusted EBITDA margin
19.3
%
 
15.9
%

3.8
%

12.6
%

 

12.9
%

(1) 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.

(2) 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).

(3) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

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 the reorganization, we reassessed our reportable segments to align our external reporting with how we
operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments.

Note: Actuals may not foot due to rounding.



Page 11



SCHEDULE 5
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)

For the Three Months Ended June 30, 2019

Integrated Networks - Group A

Integrated Networks - Group B

Media & Data Network

All Other

Corporate

Total
Revenue
$
103,248

 
$
133,394

 
$
39,456

 
$
86,032

 
$
—

 
$
362,130

 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to MDC Partners Inc. common shareholders
 
 
 
 
 
 
 
 
 
 
$
775

Adjustments to reconcile to operating income (loss):
 
 
 
 
 
 
 
 
 
 
 
Accretion on convertible preference shares
 
 
 
 
 
 
 
 
 
 
3,515

Net income attributable to the noncontrolling interests
 
 
 
 
 
 
 
 
 
 
3,043

Equity in earnings of non-consolidated affiliates
 
 
 
 
 
 
 
 
 
 
(206
)
Income tax expense
 
 
 
 
 
 
 
 
 
 
2,088

Interest expense and finance charges, net
 
 
 
 
 
 
 
 
 
 
16,413

Foreign exchange gain
 
 
 
 
 
 
 
 
 
 
(2,932
)
Other, net
 
 
 
 
 
 
 
 
 
 
746

Operating income (loss)
$
14,963

 
$
17,338


$
278


$
7,494


$
(16,631
)

$
23,442

margin
14.5
%
 
13.0
%


0.7
%


8.7
%




6.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
$
2,348

 
$
4,318


$
1,335


$
2,441


$
221


$
10,663

Stock-based compensation
639

 
1,627


6


170


1,192


3,634

Deferred acquisition consideration adjustments
291

 
1,565


(615
)

832


—


2,073

Distributions from non-consolidated affiliates (2)
—

 
—

—

—

—

—


31


31

Other items, net (3)
—

 
—

—

—

—

—


6,594


6,594

Adjusted EBITDA (1)
$
18,241

 
$
24,848


$
1,004


$
10,937


$
(8,593
)

$
46,437

Adjusted EBITDA margin
17.7
%
 
18.6
%


2.5
%

12.7
%




12.8
%

(1) 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.

(2) 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).

(3) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

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 the reorganization, we reassessed our reportable segments to align our external reporting with how we operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments.

Note: Actuals may not foot due to rounding.


Page 12



SCHEDULE 6
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(US$ in 000s, except percentages)
For the Six Months Ended June 30, 2019

Integrated Networks - Group A

Integrated Networks - Group B

Media & Data Network

All Other

Corporate

Total
Revenue
$
176,987

 
$
266,564


$
82,688


$
164,682


$
—


$
690,921

 
 
 








 
Net loss attributable to MDC Partners Inc. common shareholders
 
 








$
(1,448
)
Adjustments to reconcile to operating income (loss):
 
 








 
Accretion on convertible preference shares
 
 








5,625

Net income attributable to the noncontrolling interests
 
 








3,472

Equity in earning of non-consolidated affiliates
 
 








(289
)
Income tax expense
 
 








2,837

Interest expense and finance charges, net
 
 








33,172

Foreign exchange gain
 
 








(8,374
)
Other, net
 
 








4,128

Operating income (loss)
$
11,112

 
$
36,700


$
(1,371
)

$
14,135


$
(21,453
)

$
39,123

margin
6.3
%
 
13.8
%

(1.7
)%

8.6
%



5.7
%

 
 














Adjustments:
 
 














Depreciation and amortization
$
4,289

 
$
8,092


$
2,328


$
4,354


$
438


$
19,501

Stock-based compensation
4,234

 
2,491


6


256


(381
)

6,606

Deferred acquisition consideration adjustments
(478
)
 
(4,156
)

73


(1,009
)

—


(5,570
)
Distributions from non-consolidated affiliates (2)
—

 
—

 
—

 
—


31


31

Other items, net (3)
—

 
—

 
—

 
—


8,220


8,220

Adjusted EBITDA (1)
$
19,157

 
$
43,127


$
1,036


$
17,737


$
(13,145
)

$
67,911

Adjusted EBITDA margin
10.8
%
 
16.2
%

1.3
 %

10.8
%




9.8
%

(1) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, other asset impairment, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein.

(2) 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).

(3) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.

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 the reorganization, we reassessed our reportable segments to align our external reporting with how we operate the Networks under our new organizational structure. Prior periods presented have been recast to reflect the change in reportable segments.

Note: Actuals may not foot due to rounding.



Page 13



SCHEDULE 7
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA
(US$ in 000s)

 
2019
 
2020
 
 Covenant EBITDA (LTM) (1)
 
Q2
 
Q3
 
Q4
 
Q1
 
Q2
 
Q1-2020- LTM
 
Q2-2020 - LTM
Net income (loss) attributable to MDC Partners Inc. common shareholders
$
776

 
$
(5,058
)
 
$
(10,488
)
 
$
(2,437
)
 
$
(4,102
)
 
$
(17,207
)
 
$
(22,085
)
Adjustments to reconcile to operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
Accretion on and net income allocated to convertible preference shares
3,515

 
3,306

 
3,373

 
3,440

 
3,509

 
13,634

 
13,628

Net income attributable to the noncontrolling interests
3,043

 
7,265

 
5,419

 
791

 
3,101

 
16,518

 
16,576

Equity in losses (earnings) of non-consolidated affiliates
(206
)
 
(63
)
 
—

 
—

 
798

 
(269
)
 
735

Income tax expense (benefit)
2,088

 
3,457

 
4,241

 
13,500

 
(7,923
)
 
23,286

 
13,275

Interest expense and finance charges, net
16,413

 
16,110

 
15,658

 
15,612

 
15,941

 
63,793

 
63,321

Foreign exchange loss (gain)
(2,932
)
 
3,973

 
(4,349
)
 
14,757

 
(5,342
)
 
11,449

 
9,039

Other, net
745

 
431

 
(2,158
)
 
(16,334
)
 
(5,884
)
 
(17,316
)
 
(23,945
)
Operating income
$
23,442

 
$
29,421

 
$
11,696

 
$
29,329

 
$
98

 
$
93,888

 
$
70,544

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to reconcile to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
$
10,663

 
$
9,368

 
$
9,460

 
$
9,206

 
$
8,899

 
$
38,697

 
$
36,933

Impairment and other losses
—

 
1,944

 
5,875

 
161

 
18,839

 
7,980

 
26,819

Stock-based compensation
3,634

 
6,026

 
18,408

 
3,070

 
1,039

 
31,138

 
28,543

Deferred acquisition consideration adjustments
2,073

 
1,943

 
9,030

 
(4,600
)
 
2,312

 
8,446

 
8,685

Distributions from non-consolidated affiliates
31

 
(202
)
 
2,219

 
(14
)
 
1,079

 
2,034

 
3,082

Other items, net (2)
6,594

 
705

 
349

 
2,416

 
3,895

 
10,064

 
7,365

Adjusted EBITDA
$
46,437

 
$
49,205

 
$
57,037

 
$
39,568

 
$
36,161

 
$
192,247

 
$
181,971

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to reconcile to Covenant EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
Proforma dispositions (3)
$
(729
)
 
$
(996
)
 
$
(1,294
)
 
$
(124
)
 
$
—

 
$
(3,143
)
 
$
(2,414
)
Severance due to eliminated positions
2,346

 
1,956

 
3,221

 
2,133

 
5,233

 
9,656

 
12,543

Other adjustments, net (4)
989

 
228

 
368

 
357

 
207

 
1,942

 
1,160

Covenant adjusted EBITDA
$
49,043

 
$
50,393

 
$
59,332

 
$
41,934

 
$
41,601

 
$
200,702

 
$
193,260


(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 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.


Page 14



SCHEDULE 8
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
 
June 30,
2020
 
December 31,
2019
 
 
 
 
ASSETS
 

 
 

Current Assets:
 

 
 

Cash and cash equivalents
$
85,483

 
$
106,933

Accounts receivable, less allowance for doubtful accounts of $1,875 and $3,304
359,306

 
449,288

Expenditures billable to clients
19,426

 
30,133

Other current assets
66,318

 
35,613

Total Current Assets
530,533

 
621,967

Fixed assets, at cost, less accumulated depreciation of $134,529 and $129,579
70,787

 
81,054

Right of use assets - operating leases
238,230

 
223,622

Goodwill
706,946

 
731,691

Other intangible assets, net
48,904

 
54,893

Deferred tax assets
82,695

 
88,486

Other assets
27,356

 
30,179

Total Assets
$
1,705,451

 
$
1,831,892

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT
 

 
 

Current Liabilities:
 

 
 

Accounts payable
$
148,349

 
$
200,148

Accruals and other liabilities
264,572

 
357,162

Advance billings
136,196

 
171,742

Current portion of lease liabilities - operating leases
38,377

 
48,659

Current portion of deferred acquisition consideration
36,655

 
45,521

Total Current Liabilities
624,149

 
823,232

Long-term debt
922,537

 
887,630

Long-term portion of deferred acquisition consideration
2,597

 
29,699

Long-term lease liabilities - operating leases
267,559

 
219,163

Other liabilities
36,503

 
25,771

Total Liabilities
1,853,345

 
1,985,495

Redeemable Noncontrolling Interests
36,710

 
36,973

Commitments, Contingencies, and Guarantees
 
 
 
Shareholders’ Deficit:
 
 
 
Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2020 and December 31, 2019
152,746

 
152,746

Common stock and other paid-in capital
98,234

 
101,469

Accumulated deficit
(480,369
)
 
(480,780
)
Accumulated other comprehensive loss (income)
4,627

 
(4,269
)
MDC Partners Inc. Shareholders' Deficit
(224,762
)
 
(230,834
)
Noncontrolling interests
40,158

 
40,258

Total Shareholders' Deficit
(184,604
)
 
(190,576
)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit
$
1,705,451

 
$
1,831,892


Page 15



SCHEDULE 9
MDC PARTNERS INC.
UNAUDITED SUMMARY CASH FLOW DATA
(US$ in 000s)


 
Six Months Ended June 30,
 
2020
 
2019
Net cash used in operating activities
$
(33,678
)
 
$
(40,237
)
Net cash provided by investing activities
14,643

 
9,818

Net cash provided by (used in) financing activities
(1,434
)
 
25,712

Effect of exchange rate changes on cash, cash equivalents, and cash held in trusts
(981
)
—

4

Net decrease in cash, cash equivalents, and cash held in trusts including cash classified within assets held for sale
$
(21,450
)
—

$
(4,703
)
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 decrease in cash and cash equivalents
(21,450
)
 
(3,569
)
Cash and cash equivalents at beginning of period
106,933



30,873

Cash and cash equivalents at end of period
$
85,483



$
27,304

Supplemental disclosures:
 

 
 

Cash income taxes paid
$
2,566


$
3,494

Cash interest paid
$
28,736


$
31,643


Note: Actuals may not foot due to rounding.


Page 16



SCHEDULE 10
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
(US$ in 000s)
 
2019
 
2020
 
Q1
Q2
Q3
Q4
YTD
 
Q1
Q2
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

(246
)
224

 
(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
)
(9,130
)
Non-GAAP acquisitions (dispositions), net
$
9,852

$
(4,218
)
$
(2,437
)
$
(4,758
)
$
(1,561
)
 
$
(5,683
)
$
(4,106
)
$
(9,789
)
 
 
 
 
 
 
 
 
 
 
 
2019
 
2020
 
Q1
Q2
Q3
Q4
YTD
 
Q1
Q2
YTD
OTHER ITEMS, NET
 
 
 
 
 
 
 
 
 
Severance and other restructuring expenses
$
—

$
6,703

$
705

$
—

$
7,408

 
$
1,334

$
2,969

$
4,303

Strategic review process costs
1,626

(109
)
—

349

1,866

 
1,082

926

2,008

Total other items, net
$
1,626

$
6,594

$
705

$
349

$
9,274

 
$
2,416

$
3,895

$
6,311

 
 
 
 
 
 
 
 
 
 
 
2019
 
2020
 
Q1
Q2
Q3
Q4
YTD
 
Q1
Q2
YTD
CASH INTEREST, NET & OTHER
 
 
 
 
 
 
 
 
 
Cash interest paid
$
(1,629
)
$
(30,014
)
$
(882
)
$
(29,698
)
$
(62,223
)
 
$
(145
)
$
(28,591
)
$
(28,736
)
Bond interest accrual adjustment
(14,625
)
14,625

(14,625
)
14,625

—

 
(14,625
)
13,894

(731
)
Adjusted cash interest paid
(16,254
)
(15,389
)
(15,507
)
(15,073
)
(62,223
)
 
(14,770
)
(14,697
)
(29,467
)
Interest income
149

138

165

162

614

 
114

190

304

Total cash interest, net & other
$
(16,105
)
$
(15,251
)
$
(15,342
)
$
(14,911
)
$
(61,609
)
 
$
(14,656
)
$
(14,507
)
$
(29,163
)
 
 
 
 
 
 
 
 
 
 
 
2019
 
2020
 
Q1
Q2
Q3
Q4
YTD
 
Q1
Q2
YTD
CAPITAL EXPENDITURES, NET
 
 
 
 
 
 
 
 
 
Capital expenditures
$
(3,606
)
$
(4,317
)
$
(5,863
)
$
(4,810
)
$
(18,596
)
 
$
(1,546
)
$
(2,144
)
$
(3,690
)
 
 
 
 
 
 
 
 
 
 
 
2019
 
2020
 
Q1
Q2
Q3
Q4
YTD
 
Q1
Q2
YTD
MISCELLANEOUS OTHER DISCLOSURES
 
 
 
 
 
 
 
 
 
Net income attributable to the noncontrolling interests
$
429

$
3,043

$
7,265

$
5,419

$
16,156

 
$
791

$
3,101

$
3,892

Cash taxes
$
1,677

$
1,817

$
137

$
(1,335
)
$
2,296

 
$
849

$
1,717

$
2,566


(1) GAAP revenue from prior year acquisitions for 2020 and 2019 relates to acquisitions which occurred in 2019 and 2018, respectively.

(2) 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.

(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.

Page 17