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MDC Partners Inc. Reports Results For The Three And Nine Months Ended September 30, 2012

NEW YORK, Nov. 5, 2012 /PRNewswire/ --

THIRD QUARTER HIGHLIGHTS:

  • Revenue increased to $267.8 million versus $235.7 million in Q3 2011, an increase of 13.6%
  • Organic revenue increased 6.7% for Q3 2012
  • EBITDA increased to $33.7 million versus $17.3 million in Q3 2011, an increase of 94.7%
  • EBITDA margin increased 530 basis points to 12.6% versus 7.3% in Q3 2011
  • Free Cash Flow (as defined) increased to $17.4 million versus an outflow of ($3.7) million in Q3 2011
  • Net new business wins of $23.4 million for Q3 2012

NINE MONTHS HIGHLIGHTS:

  • Revenue increased to $777.3 million versus $686.3 million in the nine months ended September 30, 2011, an increase of 13.2%
  • Organic revenue increased 7.2% year to date for 2012
  • EBITDA increased to $73.4 million versus $66.7 million in the nine months ended September 30, 2011, an increase of 10.0%
  • Free Cash Flow improved to $24.2 million versus $15.7 million in the nine months ended September 30, 2011, an increase of 54.2%
  • Net new business wins of $103.2 million in the nine months ended September 30, 2012, an increase of 36.4%

MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended September 30, 2012. 

Miles S. Nadal, Chairman and Chief Executive Officer of MDC Partners, said, "We are very pleased with our third quarter financial performance.  Following a three-year period of investment in our business, our results in the third quarter, and particularly our growth in EBITDA and margin, are proof that our plan to broaden our service offering and to build new platforms that represent the future of the industry is working.  We are well on our way to continued margin expansion in the periods to come as we leverage the investments we have made."


Guidance for 2012 is maintained as follows:

 
















Implied






2012


Year over Year






Guidance


Change

Revenue





 $1,050 - $1,075 million 


 +11.3% to +14.0% 

EBITDA





 $110 - $115 million 


 +21.2% to +26.7% 

Free Cash Flow 





 $35 - $40 million 


 +50.8% to +72.3% 

  + Change in Working Capital and Other





 +$25 million 



Total Free Cash Flow





 $60 - $65 million 


 +10.6% to +19.8% 









Implied EBITDA Margin





10.5% - 10.7%


+90 to +110 basis points









 

Consolidated revenue for the third quarter of 2012 was $267.8 million, an increase of 13.6% compared to $235.7 million in the third quarter of 2011.  EBITDA (as defined) for the third quarter of 2012 was $33.7 million, an increase of 94.7% compared to $17.3 million in the third quarter of 2011, as the company realized 530 basis points of EBITDA margin expansion from the leveraging of prior investments in growth initiatives.  Loss attributable to MDC Partners in the third quarter was ($14.5) million compared to a loss of ($19.6) million in the third quarter of 2011.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the third quarter of 2012 was ($0.45) compared to ($0.65) per share in the same period of 2011.  Free cash flow from operations (as defined) was $17.4 million in the third quarter of 2012, compared with an outflow of ($3.7) million in the third quarter of 2011. 

For the nine month period ended September 30, 2012, consolidated revenue was $777.3 million, an increase of 13.2% compared to $686.3 million in the nine months ended September 30, 2011.  EBITDA (as defined) for the nine months ended 2012 increased 10.0% to $73.4 million compared to $66.7 million in the same period of 2011.  Loss attributable to MDC Partners in the nine months ended 2012 was ($60.9) million compared to a loss of ($26.9) million in the nine months ended 2011.  Diluted loss per share from continuing operations attributable to MDC Partners common shareholders for the nine months ended 2012 was ($1.89) compared to a loss of ($0.86) per share in the same period of 2011.  Free cash flow from operations (as defined) was $24.2 million in the nine months ended 2012, compared with $15.7 million in the same period of 2011. 

David Doft, CFO of MDC Partners, said, "We are making significant progress reducing our balance sheet leverage, which was at 3.46 times net debt-to-pro-forma-EBITDA as of the end of the quarter.  Our focus over the next several quarters is to bring our leverage down further, and we expect it to be between 3.0 and 3.5 times net debt-to-pro-forma-EBITDA by year-end and 2.5 to 3 times net debt-to-pro-forma-EBITDA by the end of 2013.  We believe that a stronger balance sheet in conjunction with expanding EBITDA and margin growth will result in stronger equity returns for shareholders over time."

Conference Call

Management will host a conference call on Monday, November 5, 2012 at 4:30 p.m. (EST) to discuss results.  The conference call will be accessible by dialing 1-412-858-4600 or toll free 1-800-860-2442.  An investor presentation has been posted on our website www.mdc-partners.com and will be referred to during the conference call.

A recording of the conference call will be available one hour after the call until 9:00 a.m. November 19, 2012, by dialing 1-412-317-0088 or toll free 1-877-344-7529 (passcode 10019812) or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC is a Business Transformation Organization that utilizes technology, marketing communications, data analytics and insights and strategic consulting solutions to drive meaningful returns on Marketing and Communications Investments for multinational clients in the United States, Canada, Europe, Latin America and the Caribbean. 

MDC's durable competitive advantage is to Empower the Most Talented Entrepreneurial Thought Leaders to Drive Business Success to new levels of Achievement, for both our Clients and our Shareholders, reinforcing MDC's reputation as "The Place Where Great Talent Lives." 

MDC Partners' Class A shares are publicly traded on NASDAQ under the symbol "MDCA" and on the Toronto Stock Exchange under the symbol "MDZ.A".

Non-GAAP Financial Measures

In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures."  Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to: (1) presenting EBITDA and EBITDA margin (as defined) for the three and nine months ended September 30, 2012 and 2011; and (2) presenting Total Free Cash Flow, Free Cash Flow and Free Cash Flow per Share (as defined) for the three and nine months ended September 30, 2012 and 2011.  Included in this earnings release are tables reconciling MDC's reported results to arrive at these non-GAAP financial measures.


This press release contains forward-looking statements. The Company's representatives may also make forward-looking statements orally from time to time. Statements in this press release that are not historical facts, including statements about the Company's beliefs and expectations, earnings guidance, recent business and economic trends, potential acquisitions, estimates of amounts for deferred acquisition consideration and "put" option rights, constitute forward-looking statements.  These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section.  Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties.  A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

  • risks associated with severe effects of international, national and regional economic downturn;
  • the Company's ability to attract new clients and retain existing clients;
  • the spending patterns and financial success of the Company's clients;
  • the Company's ability to retain and attract key employees;
  • the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to "put" option right and deferred acquisition consideration;
  • the successful completion and integration of acquisitions which complement and expand the Company's business capabilities; and
  • foreign currency fluctuations.

The Company's business strategy includes ongoing efforts to engage in material acquisitions of ownership interests in entities in the marketing communications services industry.  The Company intends to finance these acquisitions by using available cash from operations, from borrowings under its credit facility and through incurrence of bridge or other debt financing, any of which may increase the Company's leverage ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate ownership.  At any given time the Company may be engaged in a number of discussions that may result in one or more material acquisitions.  These opportunities require confidentiality and may involve negotiations that require quick responses by the Company.  Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of the Company's securities. 

Investors should carefully consider these risk factors and the additional risk factors outlined in more detail in the Annual Report on Form 10-K under the caption "Risk Factors" and in the Company's other SEC filings.

 

SCHEDULE 1








MDC PARTNERS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ in 000s, except share and per share amounts)










Three Months Ended September 30,


Nine Months Ended September 30,



2012

2011


2012

2011















Revenue


$267,817

$235,706


$777,269

$686,335








Operating Expenses:







Cost of services sold


180,888

173,526


546,117

489,207

Office and general expenses


73,168

55,373


207,297

152,093

Depreciation and amortization


12,435

9,778


36,071

29,645



266,491

238,677


789,485

670,945








Operating profit (loss)


1,326

(2,971)


(12,216)

15,390








Other Income (Expenses):







Other expense, net


(433)

(3,112)


(1,242)

(2,350)

Interest expense 


(11,594)

(10,800)


(34,420)

(31,030)

Interest income


70

51


183

152








Loss from continuing operations before income taxes







  and equity in affiliates


(10,631)

(16,832)


(47,695)

(17,838)








Income tax expense (recovery)


2,207

(42)


6,014

904








Loss from continuing operations before equity in affiliates


(12,838)

(16,790)


(53,709)

(18,742)

Equity in earnings (loss) of non-consolidated affiliates


93

(120)


399

214








Loss from continuing operations


(12,745)

(16,910)


(53,310)

(18,528)

Loss from discontinued operations, net of taxes


(630)

(608)


(3,153)

(1,869)

Net loss


(13,375)

(17,518)


(56,463)

(20,397)

Net income attributable to the noncontrolling interests


(1,121)

(2,056)


(4,428)

(6,537)

Net loss attributable to MDC Partners Inc.


($14,496)

($19,574)


($60,891)

($26,934)








Loss Per Common Share:







Basic and Diluted:







Loss from continuing operations attributable to MDC







   Partners Inc. common shareholders


($0.45)

($0.65)


($1.89)

($0.86)

Discontinued operations attributable to MDC







   Partners Inc. common shareholders


($0.02)

($0.02)


($0.10)

($0.07)

Loss attributable to MDC Partners Inc.







   common shareholders


($0.47)

($0.67)


($1.99)

($0.93)















Weighted Average Number of Common Shares:







Basic and Diluted


31,051,561

29,158,703


30,606,146

29,051,450






















 

SCHEDULE 2










MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended September 30, 2012




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$176,672


$91,145


-


$267,817





































Operating income (loss) as reported


$8,158


($214)


($6,618)


$1,326

margin


4.6%


-0.2%




0.5%










Add:









Depreciation and amortization


7,813


4,292


330


12,435

Stock-based compensation


2,769


2,009


355


5,133

Acquisition deal costs


213


160


438


811

Deferred acquisition consideration adjustments to P&L


10,964


2,667


-


13,631

Profit distributions from affiliates


-


-


376


376










EBITDA *


$29,917


$8,914


($5,119)


$33,712

margin


16.9%


9.8%




12.6%




























* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,
  stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.














 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Three Months Ended September 30, 2011




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$146,130


$89,576


-


$235,706














































Operating income (loss) as reported


($183)


$6,726


($9,514)


(2,971)

margin


-0.1%


7.5%




-1.3%










Add:









Depreciation and amortization


5,353


4,200


225


9,778

Stock-based compensation


2,173


1,608


3,990


7,771

Acquisition deal costs


52


251


494


797

Deferred acquisition consideration adjustments to P&L


2,871


(1,027)


-


1,844

Profit distributions from affiliates


-


-


100


100










EBITDA*


$10,266


$11,758


($4,705)


$17,319

margin


7.0%


13.1%




7.3%




























* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,
  stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.























 

 

SCHEDULE 3










MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Nine Months Ended September 30, 2012




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$520,518


$256,751


-


$777,269




























Operating income (loss) as reported


$22,044


($2,057)


($32,203)


($12,216)

margin


4.2%


-0.8%




-1.6%










Add:









Depreciation and amortization


21,738


13,326


1,007


36,071

Stock-based compensation


6,602


5,587


14,181


26,370

Acquisition deal costs


863


448


1,170


2,481

Deferred acquisition consideration adjustments to P&L


17,820


2,306


-


20,126

Profit distributions from affiliates


-


-


542


542










EBITDA *


$69,067


$19,610


($15,303)


$73,374

margin


13.3%


7.6%




9.4%




























* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization, 
  stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.














 

 

MDC PARTNERS INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO EBITDA

(US$ in 000s, except percentages)










For the Nine Months Ended September 30, 2011




















Strategic 


Performance







Marketing


Marketing







Services


Services


Corporate


Total





































Revenue


$442,580


$243,755


-


$686,335














































Operating income (loss) as reported


$30,840


$11,594


($27,044)


$15,390

margin


7.0%


4.8%




2.2%










Add:









Depreciation and amortization


16,342


12,857


446


29,645

Stock-based compensation


3,896


2,591


11,333


17,820

Acquisition deal costs


451


635


1,352


2,438

Deferred acquisition consideration adjustments to P&L


3,428


(2,562)


-


866

Profit distributions from affiliates


-


-


548


548










EBITDA*


$54,957


$25,115


($13,365)


$66,707

margin


12.4%


10.3%




9.7%




























* EBITDA is a non-GAAP measure, but as shown above it represents operating income (loss) plus depreciation and amortization,
  stock-based compensation, acquisition deal costs, deferred acquisition consideration adjustments and profit distributions from affiliates.














 

 

SCHEDULE 4







MDC PARTNERS INC.

FREE CASH FLOW

(US$ in 000s, except share and per share amounts)














Three Months Ended September 30,


Nine Months Ended September 30,


2012

2011


2012

2011

EBITDA

$33,712

$17,319


$73,374

$66,707

Net Income Attributable to Noncontrolling Interests

(1,121)

(2,056)


(4,428)

(6,537)

Capital Expenditures, net (1)

(4,736)

(9,145)


(13,679)

(16,168)

Cash Taxes

(572)

(29)


(919)

(164)

Cash Interest, net & Other

(9,871)

(9,744)


(30,138)

(28,142)







Free Cash Flow (2)

$17,412

($3,655)


$24,210

$15,696







Changes in Working Capital (3)

17,742

14,257


96,421

(14,811)

Total Free Cash Flow (2)

$35,154

$10,602


$120,631

$885







Diluted Common Shares Outstanding

31,051,561

29,158,703


30,606,146

29,051,450







Total Free Cash Flow per Share (2)

$1.13

$0.36


$3.94

$0.03







(1) Capital Expenditures, net represents capital expenditures net of landlord reimbursements.




(2) Free Cash Flow and Total Free Cash Flow are non-GAAP measures.  As shown above, Free Cash Flow represents EBITDA less net income attributable to noncontrolling interests, less capital expenditures, less cash taxes, less net cash interest (including interest paid and other)




(3) Changes in Working Capital includes cash acquired in acquisitions.










 

 

SCHEDULE 5






MDC PARTNERS INC.

CONSOLIDATED BALANCE SHEETS

(US$ in 000s)













September 30,


December 31,



2012


2011






Assets





Current Assets:





Cash and cash equivalents


$72,799


$8,096

Accounts receivable, net


313,540


238,592

Expenditures billable to clients


52,554


39,067

Other current assets


17,634


12,657

Total Current Assets


456,527


298,412






Fixed assets, net


51,852


47,737

Investment in affiliates


18


99

Goodwill


718,196


605,244

Other intangible assets, net


75,985


57,980

Deferred tax assets


15,500


15,380

Other assets


33,663


30,893

Total Assets


$1,351,741


$1,055,745











Liabilities and Shareholders' Equity (Deficit)





Current Liabilities:





Accounts payable


$311,023


$178,282

Accrued and other liabilities


87,682


72,930

Advance billings


127,636


122,021

Current portion of long term debt


1,871


1,238

Current portion of deferred acquisition consideration

82,765


51,829

Total Current Liabilities


610,977


426,300






Long-term debt


469,780


383,936

Long-term portion of deferred acquisition consideration

85,804


85,394

Other liabilities


49,778


14,900

Deferred tax liabilities


55,248


50,724

Total Liabilities


1,271,587


961,254






Redeemable Noncontrolling Interests


100,455


107,432






Shareholders' Equity (Deficit)





Common shares


253,245


228,209

Shares to be issued


424


424

Charges in excess of capital


(58,234)


(45,102)

Accumulated deficit


(292,165)


(231,274)

Stock subscription receivable


(55)


(55)

Accumulated other comprehensive loss


(933)


(4,658)

MDC Partners Inc. Shareholders' Deficit


(97,718)


(52,456)

Noncontrolling Interests


77,417


39,515

Total Deficit


(20,301)


(12,941)






Total Liabilities, Redeemable Noncontrolling 





   Interests and Deficit


$1,351,741


$1,055,745
















 

 

SCHEDULE 6





MDC PARTNERS INC.

SUMMARY CASH FLOW DATA

(US$ in 000s)











Nine Months Ended September 30,



2012

2011





Cash flows provided by (used in) continuing operating activities


$18,119

($3,770)

Discontinued operations


(2,313)

(2,411)

Net cash provided by (used in) operating activities


15,806

(6,181)





Net cash provided by (used in) continuing investing activities


13,727

(37,660)

Discontinued operations


46

(252)

Net cash provided by (used in) investing activities


13,773

(37,912)





Net cash provided by continuing financing activities


35,143

41,162





Effect of exchange rate changes on cash and cash equivalents


(19)

(673)





Net increase (decrease) in cash and cash equivalents


$64,703

($3,604)





 

CONTACT:

David Doft


Chief Financial Officer


646-429-1818


ddoft@mdc-partners.com

 

(Logo:  http://photos.prnewswire.com/prnh/20120221/NY57031LOGO )

SOURCE MDC Partners Inc.

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