UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2021
STAGWELL INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware | 001-13718 | 86-1390679 | ||
(State or Other Jurisdiction
of Incorporation) |
(Commission
File Number) |
(I.R.S. Employer
Identification No.) |
One World Trade Center, Floor 65, New York, NY 10007
(Address of principal executive offices and zip code)
(646) 429-1800
(Registrant’s Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Class A Subordinate Voting Shares, $0.001 par value | STGW | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition
On August 4, 2021, Stagwell Inc. (the “Company”) issued an earnings release reporting the standalone financial results of MDC Partners Inc. (“MDC”), the Company’s predecessor registrant prior to the business combination between MDC and certain subsidiaries of Stagwell Media LP that closed on August 2, 2021 (the “Business Combination”), for the three and six months ended June 30, 2021. A copy of this earnings release is attached as Exhibit 99.1 hereto. Following the issuance of this earnings release, the Company will host an earnings call in which MDC’s standalone financial results for the three and six months ended June 30, 2021 will be discussed. The investor presentation to be used for the call is attached as Exhibit 99.2 hereto.
On August 4, 2021, the Company also issued an earnings release reporting the standalone financial results of The Stagwell Group LLC (the “Stagwell Group”) for the three and six months ended June 30, 2021. The Stagwell Group includes certain subsidiaries of Stagwell Media LP that were contributed to MDC as part of the Business Combination. A copy of this earnings release is attached as Exhibit 99.3 hereto. Following the issuance of this earnings release, the Company will host an earnings call in which the Stagwell Group’s standalone financial results for the three and six months ended June 30, 2021 will be discussed. The investor presentation to be used for the call is attached as Exhibit 99.4 hereto.
The Company has posted the materials attached as Exhibit 99.1, 99.2, 99.3 and 99.4 on its website (www.stagwellglobal.com). The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this Current Report on Form 8-K.
The foregoing information (including the exhibits hereto) is being furnished under “Item 2.02 - Results of Operations and Financial Condition”. Such information (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
The foregoing information and the exhibits hereto contain forward-looking statements within the meaning of the federal securities laws. These statements are based on present expectations, and are subject to the limitations listed therein and in the Company’s other SEC reports, including that actual events or results may differ materially from those in the forward-looking statements.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.2 Investor presentation relating to MDC’s standalone results dated August 4, 2021.
99.4 Investor presentation relating to the Stagwell Group’s standalone results dated August 4, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed by the undersigned hereunto duly authorized.
Date: August 4, 2021 | Stagwell Inc. | |
By: | /s/ Frank Lanuto | |
Frank Lanuto | ||
Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE ISSUE
FOR: | Stagwell Inc. | CONTACT: | Michaela Pewarski | ||
One World Trade Center, Floor 65 | Stagwell Inc. | ||||
New York, NY 10007 | (646) 429-1812 | ||||
IR@StagwellGlobal.com |
STAGWELL INC. (NASDAQ: STGW) REPORTS STANDALONE MDC PARTNERS INC. RESULTS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2021
Strong quarterly revenue growth of 33% year-over-year to $346 million
Second quarter Net Income attributable to MDC Partners common shareholders of $1.7 million
Record second quarter Adjusted EBITDA of $60 million, up 67% from the prior period
SECOND QUARTER & YTD MDC PARTNERS INC. HIGHLIGHTS:
• | GAAP revenue of $345.6 million in the second quarter versus $259.7 million in the prior year period, an increase of 33.1%; and $653.2 million in the six months ended June 30, 2021 versus $587.4 million in the prior year period, an increase of 11.2%. |
• | Organic revenue increased 31.3% in the second quarter and 10.0% in the six months ended June 30, 2021. |
• | Net revenue of $298.4 million in the second quarter versus. $231.9 million in the prior year period, an increase of 28.7%; and $569.1 million in the six months ended June 30, 2021 versus $506.4 million in the prior year period, an increase of 12.4%. |
• | Organic net revenue increased 26.9% in the second quarter and 11.2% for the six months ended June 30, 2021. |
• | Net income attributable to MDC Partners common shareholders of $1.7 million in the second quarter of 2021 versus net loss of $4.1 million in the prior year period; and $2.6 million in the six months ended June 30, 2021 versus net loss of $6.5 million in the prior year period. |
• | Adjusted EBITDA for the three months ended June 30, 2021 was $60.3 million versus $36.2 million in the prior year period, an increase of 66.7%. Adjusted EBITDA Margin was 17.4%, compared to 13.9% in the prior year period. |
• | Adjusted EBITDA for the six months ended June 30, 2021 was $112.2 million versus $75.7 million in the prior year period, an increase of 48.2%. Adjusted EBITDA Margin was 17.2%, compared to 12.9% in the prior year period. |
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• | Covenant EBITDA (LTM) of $220.1 million in the second quarter, up from $193.3 million in the prior year period. |
• | Net New Business wins totaled $56.9 million in the second quarter against $20.5 million a year ago and totaled $128.5 million over the last twelve months. |
New York, NY, August 4, 2021 (NASDAQ: STGW) – Stagwell Inc. (“Stagwell”) today announced MDC Partners Inc. (“MDC Partners,” “legacy MDC” or the “Company”) financial results for the three and six months ended June 30, 2021.
"Stagwell is coming out of the gate firing on all cylinders. We are pleased to report industry-leading revenue growth and record second quarter Adjusted EBITDA at legacy MDC,” said Mark Penn, Chairman and Chief Executive Officer of Stagwell. “We are encouraged by the continued strength through the first half of the year and saw broad-based growth across the network. Our digital businesses saw another quarter of high double-digit growth and our creative agencies won considerable new business during the active second quarter pitch season. These results show the potential of our combined platform that brings together culture-moving creativity and leading-edge technology onto a single, integrated platform.”
Second Quarter and Year-to-Date 2021 MDC Partners Standalone Financial Results
Revenue for the second quarter of 2021 was $345.6 million versus $259.7 million for the second quarter 2020, an increase of 33.1%. The effect on revenue of foreign exchange was positive 1.8% and the organic revenue increase was 31.3%, inclusive of $19.0 million or 446 basis points from higher billable costs. Organic revenue increased primarily due to a continuation of the recovery in spending by clients begun in the first quarter.
Revenue in the second quarter of 2021 increased 12.4% sequentially from the first quarter, as revenue continues to rebound from the impact of the pandemic. Net New Business wins in the second quarter of 2021 totaled $56.9 million as we capitalized on a particularly active pitch season.
Net income attributable to MDC Partners common shareholders for the second quarter of 2021 was $1.7 million versus a net loss of $4.1 million for the second quarter of 2020. The increase was primarily due to higher revenues in the quarter, as well as the favorable impact of foreign exchange. Diluted income per share attributable to MDC Partners common shareholders for the second quarter of 2021 was $0.02 versus diluted loss per share of $0.06 for the second quarter of 2020.
Adjusted EBITDA for the second quarter of 2021 was $60.3 million versus $36.2 million for the second quarter of 2020, an increase of 66.7%, primarily due to higher revenues, partially offset by an increase in operating expense. This led to a 350 basis point increase in Adjusted EBITDA margin in the second quarter of 2021 to 17.4% from 13.9% in the second quarter of 2020.
Covenant EBITDA for the last twelve months (LTM) was $220.1 million as of June 30, 2021, up from $193.3 million in the second quarter of 2020.
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Revenue for the first six months of 2021 was $653.2 million versus $587.4 million in the prior year period. The effect on revenue of foreign exchange was positive 1.6%, the impact of non-GAAP acquisitions (dispositions), net was negative 0.4%, and the organic revenue increase was 10.0%.
Net income attributable to MDC Partners Inc. common shareholders for the first six months of 2021 was $2.6 million versus net loss of $6.5 million for the first six months of 2020. The increase was primarily due to higher revenues, partially offset by an increase in operating expenses. Diluted income per share attributable to MDC Partners common shareholders for the six months of 2021 was $0.03 versus diluted loss per share of $0.09 for the first six months of 2020.
Adjusted EBITDA for the first six months of 2021 was $112.2 million versus $75.7 million in the first six months of 2020, an increase of 48.2%. This lead to an Adjusted EBITDA Margin of 17.2% versus 12.9% in prior year period, an increase of 430 basis points.
Stagwell Inc. Financial Outlook
2021 financial guidance is as follows:
• | Revenue for 2021, on a pro forma basis giving effect to the combination as if it was completed on January 1, 2021, is estimated to be $2.135 to $2.180 billion, including an estimated $762 million for MDC for the seven-month period ending July 31, 2021. |
• | Adjusted EBITDA for 2021, on a pro forma basis giving effect to the combination as if it was completed on January 1, 2021, is estimated to be $342 to $357 million, including an estimated $128 million for MDC for the seven-month period ending July 31, 2021. |
• | Guidance assumes no impact from foreign exchange or acquisitions or dispositions. |
* Stagwell has excluded a quantitative reconciliation with respect to the Company’s 2021 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. |
Stagwell Inc. Conference Call
Management will host a video webcast and conference call on Wednesday, August 4, 2021, at 8:30 a.m. (ET) to discuss standalone results for Stagwell Marketing Group LLC and MDC Partners Inc for the three and six months ended June 30, 2021. The video webcast will be accessible at https://kvgo.com/openexchange-inc/mdca-stagwell-earnings-call. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the conference call.
A recording of the conference call will be accessible one hour after the call and available for ninety days at www.stagwellglobal.com.
About Stagwell Inc.
Stagwell is the challenger holding company built to transform marketing. We deliver scaled creative performance for the world’s most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, our 10,000+ specialists in 30+ countries are unified under a single purpose: to drive effectiveness and improve business results for our clients. Stagwell Inc. is the successor SEC Registrant to MDC Partners Inc. Join us at www.stagwellglobal.com.
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Non-GAAP Financial Measures
In addition to its MDC Partners Inc. reported results, Stagwell Inc 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 non-operating items 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 merger related costs, severance 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.
(5) Financial Guidance: The Company provides guidance on a non-GAAP basis as it cannot predict certain elements which are included in reported GAAP results.
Included in this earnings release are tables reconciling reported MDC Partners Inc. results to arrive at certain of these non-GAAP financial measures.
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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 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 “Transactions”) or the occurrence of difficulties in connection with the Transactions; |
• | adverse tax consequences in connection with the 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 attributes may result in increased tax costs; |
• | the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions; |
• | the impact of uncertainty associated with the Transactions on the Company’s businesses; |
• | direct or indirect costs associated with the Transactions, which could be greater than expected; |
• | risks associated with severe effects of international, national and regional economic conditions; |
• | the risk of parties challenging the Transactions or the impact of the 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, other risk factors described herein, and the additional risk factors outlined in more detail in the Company’s 2020 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2021 and accessible on the SEC’s website at www.sec.gov., under the caption “Risk Factors,” and in the Company’s other SEC filings.
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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, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Services | $ | 345,605 | $ | 259,677 | $ | 653,190 | $ | 587,419 | ||||||||
Operating Expenses | ||||||||||||||||
Cost of services sold | 224,411 | 165,631 | 411,332 | 388,325 | ||||||||||||
Office and general expenses | 80,546 | 66,210 | 164,492 | 132,564 | ||||||||||||
Depreciation and amortization | 8,005 | 8,898 | 16,181 | 18,104 | ||||||||||||
Impairment and other losses | — | 18,840 | 875 | 19,001 | ||||||||||||
312,962 | 259,579 | 592,880 | 557,994 | |||||||||||||
Operating income | 32,643 | 98 | 60,310 | 29,425 | ||||||||||||
Other Income (expenses): | ||||||||||||||||
Interest expense and finance charges, net | (19,512 | ) | (15,942 | ) | (38,577 | ) | (31,553 | ) | ||||||||
Foreign exchange gain (loss) | 1,902 | 5,342 | 3,982 | (9,415 | ) | |||||||||||
Other, net | 842 | 5,883 | 1,456 | 22,217 | ||||||||||||
(16,768 | ) | (4,717 | ) | (33,139 | ) | (18,751 | ) | |||||||||
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 15,875 | (4,619 | ) | 27,171 | 10,674 | |||||||||||
Income tax expense (benefit) | 1,387 | (7,923 | ) | 2,689 | 5,577 | |||||||||||
Income before equity in earnings of non-consolidated affiliates | 14,488 | 3,304 | 24,482 | 5,097 | ||||||||||||
Equity in losses of non-consolidated affiliates | (151 | ) | (798 | ) | (644 | ) | (798 | ) | ||||||||
Net income | 14,337 | 2,506 | 23,838 | 4,299 | ||||||||||||
Net income attributable to the noncontrolling interest | (8,231 | ) | (3,101 | ) | (12,722 | ) | (3,892 | ) | ||||||||
Net income (loss) attributable to MDC Partners Inc. | 6,106 | (595 | ) | 11,116 | 407 | |||||||||||
Accretion on and net income allocated to convertible preference shares | (4,451 | ) | (3,509 | ) | (8,540 | ) | (6,949 | ) | ||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 1,655 | $ | (4,104 | ) | $ | 2,576 | $ | (6,542 | ) | ||||||
Income (loss) Per Common Share: | ||||||||||||||||
Basic | ||||||||||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 0.02 | $ | (0.06 | ) | $ | 0.03 | $ | (0.09 | ) | ||||||
Diluted | ||||||||||||||||
Net income (loss) attributable to MDC Partners Inc common shareholders | $ | 0.02 | $ | (0.06 | ) | $ | 0.03 | $ | (0.09 | ) | ||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||
Basic | 75,078,755 | 72,528,455 | 74,240,447 | 72,463,058 | ||||||||||||
Diluted | 78,459,483 | 72,528,455 | 77,001,526 | 72,463,058 |
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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, 2020 | $ | 259,677 | $ | 587,419 | ||||||||||||
Organic revenue (1) | 81,335 | 31.3 | % | 58,720 | 10.0 | % | ||||||||||
Non-GAAP acquisitions (dispositions), net | — | — | % | (2,101 | ) | (0.4 | )% | |||||||||
Foreign exchange impact | 4,593 | 1.8 | % | 9,152 | 1.6 | % | ||||||||||
Total Change | 85,928 | 33.1 | % | 65,771 | 11.2 | % | ||||||||||
June 30, 2021 | $ | 345,605 | $ | 653,190 |
(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.
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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, 2021
Integrated Networks - Group A | Integrated Networks - Group B | Media & Data Network | All Other | Corporate | Total | |||||||||||||||||||
Revenue: | $ | 117,984 | $ | 123,486 | $ | 37,517 | $ | 66,618 | $ | — | $ | 345,605 | ||||||||||||
Net income attributable to MDC Partners Inc. common shareholders | $ | 1,655 | ||||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 4,451 | |||||||||||||||||||||||
Net income attributable to the noncontrolling interest | 8,231 | |||||||||||||||||||||||
Equity in losses of non-consolidated affiliates | 151 | |||||||||||||||||||||||
Income tax expense | 1,387 | |||||||||||||||||||||||
Interest expense and finance charges, net | 19,512 | |||||||||||||||||||||||
Foreign exchange gain | (1,902 | ) | ||||||||||||||||||||||
Other, net | (842 | ) | ||||||||||||||||||||||
Operating income (loss) | $ | 14,273 | $ | 21,326 | $ | 5,052 | $ | 6,036 | $ | (14,044 | ) | $ | 32,643 | |||||||||||
Operating margin | 12.1 | % | 17.3 | % | 13.5 | % | 9.1 | % | 9.4 | % | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Depreciation and amortization | $ | 1,322 | $ | 3,589 | $ | 457 | $ | 1,452 | $ | 1,185 | $ | 8,005 | ||||||||||||
Impairment and other losses | — | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | 4,756 | 1,384 | 63 | 181 | 554 | 6,938 | ||||||||||||||||||
Deferred acquisition consideration | 5,382 | 49 | 102 | 79 | — | 5,612 | ||||||||||||||||||
Distributions from non-consolidated affiliates (1) | — | — | — | — | 463 | 463 | ||||||||||||||||||
Other items, net (2) | 1,517 | 196 | 1,221 | 483 | 3,202 | 6,619 | ||||||||||||||||||
Adjusted EBITDA (3) | $ | 27,250 | $ | 26,544 | $ | 6,895 | $ | 8,231 | $ | (8,640 | ) | $ | 60,280 | |||||||||||
Adjusted EBITDA margin | 23.1 | % | 21.5 | % | 18.4 | % | 12.4 | % | 17.4 | % |
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 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.
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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, 2021
Integrated Networks - Group A | Integrated Networks - Group B | Media & Data Network | All Other | Corporate | Total | |||||||||||||||||||
Revenue: | $ | 220,370 | $ | 234,637 | $ | 74,300 | $ | 123,883 | $ | — | $ | 653,190 | ||||||||||||
Net income attributable to MDC Partners Inc. common shareholders | $ | 2,576 | ||||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 8,540 | |||||||||||||||||||||||
Net income attributable to the noncontrolling interests | 12,722 | |||||||||||||||||||||||
Equity in losses of non-consolidated affiliates | 644 | |||||||||||||||||||||||
Income tax expense | 2,689 | |||||||||||||||||||||||
Interest expense and finance charges, net | 38,577 | |||||||||||||||||||||||
Foreign exchange gain | (3,982 | ) | ||||||||||||||||||||||
Other, net | (1,456 | ) | ||||||||||||||||||||||
Operating income (loss) | $ | 25,723 | $ | 41,236 | $ | 8,444 | $ | 10,693 | $ | (25,786 | ) | $ | 60,310 | |||||||||||
Operating margin | 11.7 | % | 17.6 | % | 11.4 | % | 8.6 | % | 9.2 | % | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Depreciation and amortization | $ | 2,616 | $ | 7,246 | $ | 929 | $ | 2,989 | $ | 2,401 | $ | 16,181 | ||||||||||||
Impairment and other losses | — | 875 | — | — | — | 875 | ||||||||||||||||||
Stock-based compensation | 1,128 | 2,337 | 84 | 242 | 1,184 | 4,975 | ||||||||||||||||||
Deferred acquisition consideration adjustments | 17,206 | 177 | 102 | (188 | ) | — | 17,297 | |||||||||||||||||
Distributions from non-consolidated affiliates (1) | — | — | — | — | 472 | 472 | ||||||||||||||||||
Other items, net (2) | 3,039 | 542 | 2,417 | 537 | 5,569 | 12,104 | ||||||||||||||||||
Adjusted EBITDA (3) | $ | 49,712 | $ | 52,413 | $ | 11,976 | $ | 14,273 | $ | (16,160 | ) | $ | 112,214 | |||||||||||
Adjusted EBITDA margin | 22.6 | % | 22.3 | % | 16.1 | % | 11.5 | % | 17.2 | % |
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 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.
Page 9
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, 2020
Integrated Networks - Group A | Integrated Networks - Group B | Media & Data Network | All Other | Corporate | Total | |||||||||||||||||||
Revenue: | $ | 82,735 | $ | 93,398 | $ | 28,551 | $ | 54,993 | $ | — | $ | 259,677 | ||||||||||||
Net loss attributable to MDC Partners Inc. common shareholders | $ | (4,104 | ) | |||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 3,509 | |||||||||||||||||||||||
Net income attributable to the noncontrolling interest | 3,101 | |||||||||||||||||||||||
Equity in losses of non-consolidated affiliates | 798 | |||||||||||||||||||||||
Income tax benefit | (7,923 | ) | ||||||||||||||||||||||
Interest expense and finance charges, net | 15,942 | |||||||||||||||||||||||
Foreign exchange gain | (5,342 | ) | ||||||||||||||||||||||
Other, net | (5,883 | ) | ||||||||||||||||||||||
Operating income (loss) | $ | 14,607 | $ | (7,717 | ) | $ | 46 | $ | 4,985 | $ | (11,823 | ) | $ | 98 | ||||||||||
Operating margin | 17.7 | % | (8.3 | )% | 0.2 | % | 9.1 | % | — | % | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Depreciation and amortization | $ | 1,566 | $ | 4,387 | $ | 807 | $ | 1,902 | $ | 236 | $ | 8,898 | ||||||||||||
Impairment and other losses | — | 17,468 | 35 | 208 | 1,129 | 18,840 | ||||||||||||||||||
Stock-based compensation | (105 | ) | 746 | 4 | 118 | 276 | 1,039 | |||||||||||||||||
Deferred acquisition consideration | 1,138 | 1,503 | — | (329 | ) | — | 2,312 | |||||||||||||||||
Distributions from non-consolidated affiliates (1) | — | — | — | — | 1,079 | 1,079 | ||||||||||||||||||
Other items, net (2) | — | — | — | — | 3,895 | 3,895 | ||||||||||||||||||
Adjusted EBITDA (3) | $ | 17,206 | $ | 16,387 | $ | 892 | $ | 6,884 | $ | (5,208 | ) | $ | 36,161 | |||||||||||
Adjusted EBITDA margin | 20.8 | % | 17.5 | % | 3.1 | % | 12.5 | % | 13.9 | % |
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 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.
Page 10
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, 2020
Integrated Networks - Group A | Integrated Networks - Group B | Media & Data Network | All Other | Corporate | Total | |||||||||||||||||||
Revenue | $ | 173,356 | $ | 211,105 | $ | 69,609 | $ | 133,349 | $ | — | $ | 587,419 | ||||||||||||
Net loss attributable to MDC Partners Inc. common shareholders | $ | (6,542 | ) | |||||||||||||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 6,949 | |||||||||||||||||||||||
Net income attributable to the noncontrolling interests | 3,892 | |||||||||||||||||||||||
Equity in earning 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 | (22,217 | ) | ||||||||||||||||||||||
Operating income (loss) | $ | 26,637 | $ | 9,444 | $ | 663 | $ | 12,842 | $ | (20,161 | ) | $ | 29,425 | |||||||||||
Operating margin | 15.4 | % | 4.5 | % | 1.0 | % | 9.6 | % | 5.0 | % | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Depreciation and amortization | $ | 3,307 | $ | 8,913 | $ | 1,615 | $ | 3,801 | $ | 468 | $ | 18,104 | ||||||||||||
Impairment and other losses | — | 17,629 | 35 | 208 | 1,129 | 19,001 | ||||||||||||||||||
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 (1) | — | — | — | — | 1,065 | 1,065 | ||||||||||||||||||
Other items, net (2) | — | — | — | — | 6,311 | 6,311 | ||||||||||||||||||
Adjusted EBITDA (3) | $ | 33,507 | $ | 33,523 | $ | 2,679 | $ | 16,788 | $ | (10,770 | ) | $ | 75,727 | |||||||||||
Adjusted EBITDA margin | 19.3 | % | 15.9 | % | 3.8 | % | 12.6 | % | 12.9 | % |
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 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.
Page 11
SCHEDULE 7
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA
(US$ in 000s)
2020 | 2021 | Covenant EBITDA (LTM) (1) | ||||||||||||||||||||||||||
Q2 | Q3 | Q4 | Q1 | Q2 | Q1-2021- LTM | Q2-2021 - LTM | ||||||||||||||||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | (4,104 | ) | $ | 360 | $ | (237,108 | ) | $ | 921 | $ | 1,655 | $ | (239,931 | ) | $ | (234,172 | ) | ||||||||||
Adjustments to reconcile to operating income (loss): | ||||||||||||||||||||||||||||
Accretion on and net income allocated to convertible preference shares | 3,509 | 3,716 | 3,651 | 4,089 | 4,451 | 14,965 | 15,907 | |||||||||||||||||||||
Net income attributable to the noncontrolling interest | 3,101 | 10,728 | 7,154 | 4,491 | 8,231 | 25,474 | 30,604 | |||||||||||||||||||||
Equity in losses of non-consolidated affiliates | 798 | 31 | 1,411 | 493 | 151 | 2,733 | 2,086 | |||||||||||||||||||||
Income tax expense (benefit) | (7,923 | ) | 1,452 | 109,526 | 1,302 | 1,387 | 104,357 | 113,667 | ||||||||||||||||||||
Interest expense and finance charges, net | 15,942 | 15,266 | 15,344 | 19,065 | 19,512 | 65,617 | 69,187 | |||||||||||||||||||||
Foreign exchange gain | (5,342 | ) | (2,159 | ) | (6,274 | ) | (2,080 | ) | (1,902 | ) | (15,855 | ) | (12,415 | ) | ||||||||||||||
Other, net | (5,883 | ) | (505 | ) | 2,223 | (614 | ) | (842 | ) | (4,779 | ) | 262 | ||||||||||||||||
Operating income (loss) | $ | 98 | $ | 28,889 | $ | (104,073 | ) | $ | 27,667 | $ | 32,643 | $ | (47,419 | ) | $ | (14,874 | ) | |||||||||||
Adjustments to reconcile to Adjusted EBITDA: | ||||||||||||||||||||||||||||
Depreciation and amortization | $ | 8,898 | $ | 9,332 | $ | 9,468 | $ | 8,176 | $ | 8,005 | $ | 35,874 | $ | 34,981 | ||||||||||||||
Impairment and other losses | 18,840 | 159 | 77,240 | 875 | — | 97,114 | 78,274 | |||||||||||||||||||||
Stock-based compensation | 1,039 | 6,459 | 3,611 | (1,963 | ) | 6,938 | 9,146 | 15,045 | ||||||||||||||||||||
Deferred acquisition consideration | 2,312 | 2,803 | 41,672 | 11,685 | 5,612 | 58,472 | 61,772 | |||||||||||||||||||||
Distributions from non-consolidated affiliates | 1,079 | 208 | 902 | 9 | 463 | 2,198 | 1,582 | |||||||||||||||||||||
Other items, net (2) | 3,895 | 6,208 | 18,725 | 5,485 | 6,619 | 34,313 | 37,037 | |||||||||||||||||||||
Adjusted EBITDA | $ | 36,161 | $ | 54,058 | $ | 47,545 | $ | 51,934 | $ | 60,280 | $ | 189,698 | $ | 213,817 | ||||||||||||||
Adjustments to reconcile to Covenant EBITDA: | ||||||||||||||||||||||||||||
Severance due to eliminated positions | 5,233 | 2,336 | 1,987 | 532 | 709 | 10,088 | 5,564 | |||||||||||||||||||||
Other adjustments, net (3) | 207 | 77 | 585 | 82 | 5 | 951 | 749 | |||||||||||||||||||||
Covenant EBITDA | $ | 41,601 | $ | 56,471 | $ | 50,117 | $ | 52,548 | $ | 60,994 | $ | 200,737 | $ | 220,130 |
(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 merger related costs, severance and other restructuring expenses. See Schedule 10 for a reconciliation of amounts.
(3) 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 12
SCHEDULE 8
MDC PARTNERS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in 000s)
June 30, 2021 | December 31, 2020 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 108,280 | $ | 60,757 | ||||
Accounts receivable, less allowance for doubtful accounts of $3,656 and $5,473 | 426,841 | 374,892 | ||||||
Expenditures billable to clients | 16,793 | 10,552 | ||||||
Other current assets | 31,312 | 40,938 | ||||||
Total Current Assets | 583,226 | 487,139 | ||||||
Fixed assets, at cost, less accumulated depreciation of $134,019 and $136,166 | 81,191 | 90,413 | ||||||
Right-of-use lease assets - operating leases | 198,556 | 214,188 | ||||||
Goodwill | 671,542 | 668,211 | ||||||
Other intangible assets, net | 29,405 | 33,844 | ||||||
Other assets | 23,258 | 17,517 | ||||||
Total Assets | $ | 1,587,178 | $ | 1,511,312 | ||||
LIABILITIES, RNCI, AND SHAREHOLDERS’ DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 158,136 | $ | 168,396 | ||||
Accruals and other liabilities | 250,070 | 274,968 | ||||||
Advance billings | 211,248 | 152,956 | ||||||
Current portion of lease liabilities - operating leases | 41,400 | 41,208 | ||||||
Current portion of deferred acquisition consideration | 59,612 | 53,730 | ||||||
Total Current Liabilities | 720,466 | 691,258 | ||||||
Long-term debt | 935,072 | 843,184 | ||||||
Long-term portion of deferred acquisition consideration | 8,056 | 29,335 | ||||||
Long-term lease liabilities - operating leases | 231,811 | 247,243 | ||||||
Other liabilities | 74,826 | 82,065 | ||||||
Total Liabilities | 1,970,231 | 1,893,085 | ||||||
Redeemable Noncontrolling Interests | 24,639 | 27,137 | ||||||
Commitments, Contingencies and Guarantees | ||||||||
Shareholder's Deficit: | ||||||||
Convertible preference shares, 145,000 authorized, issued and outstanding at June 30, 2021 and December 31, 2020 | 152,746 | 152,746 | ||||||
Common stock and other paid-in capital | 97,783 | 104,367 | ||||||
Accumulated deficit | (698,635 | ) | (709,751 | ) | ||||
Accumulated other comprehensive income | 39 | 2,739 | ||||||
MDC Partners Inc. Shareholders' Deficit | (448,067 | ) | (449,899 | ) | ||||
Noncontrolling interests | 40,375 | 40,989 | ||||||
Total Shareholders' Deficit | (407,692 | ) | (408,910 | ) | ||||
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Deficit | $ | 1,587,178 | $ | 1,511,312 |
Page 13
SCHEDULE 9
MDC PARTNERS INC.
UNAUDITED SUMMARY CASH FLOW DATA
(US$ in 000s)
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Net cash provided by (used in) operating activities | $ | 10,409 | $ | (33,681 | ) | |||
Net cash provided by (used in) investing activities | (9,574 | ) | 14,643 | |||||
Net cash provided by (used in) financing activities | 46,898 | (1,434 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (210 | ) | (981 | ) | ||||
Net increase in cash and cash equivalents | $ | 47,523 | $ | (21,453 | ) | |||
Cash and cash equivalents at beginning of period | 60,757 | 106,933 | ||||||
Cash and cash equivalents at end of period | $ | 108,280 | $ | 85,480 | ||||
Supplemental disclosures: | ||||||||
Cash income taxes paid | $ | 7,901 | $ | 2,566 | ||||
Cash interest paid | $ | 32,806 | $ | 28,736 |
Note: Actuals may not foot due to rounding.
Page 14
SCHEDULE 10
MDC PARTNERS INC.
UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
(US$ in 000s)
2020 | 2021 | |||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | YTD | |||||||||||||||||||||||||
NON-GAAP DISPOSITIONS, NET | ||||||||||||||||||||||||||||||||
Foreign exchange impact | $ | (248 | ) | $ | — | $ | — | $ | — | $ | (248 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Contribution to organic revenue (growth) decline (1) | (411 | ) | — | — | — | (411 | ) | — | — | — | ||||||||||||||||||||||
Prior year revenue from dispositions (2) | (5,024 | ) | (4,106 | ) | (4,076 | ) | (4,447 | ) | (17,653 | ) | (2,101 | ) | — | (2,101 | ) | |||||||||||||||||
Non-GAAP Dispositions | $ | (5,683 | ) | $ | (4,106 | ) | $ | (4,076 | ) | $ | (4,447 | ) | $ | (18,312 | ) | $ | (2,101 | ) | $ | — | $ | (2,101 | ) |
2020 | 2021 | |||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | YTD | |||||||||||||||||||||||||
OTHER ITEMS, NET | ||||||||||||||||||||||||||||||||
Severance and other restructuring expenses | $ | 1,334 | $ | 2,969 | $ | 3,270 | $ | 1,072 | $ | 8,645 | $ | 2,345 | $ | 2,632 | $ | 4,977 | ||||||||||||||||
Merger costs | 1,082 | 926 | 2,938 | 17,653 | 22,599 | 3,140 | 3,987 | 7,127 | ||||||||||||||||||||||||
Total other items, net | $ | 2,416 | $ | 3,895 | $ | 6,208 | $ | 18,725 | $ | 31,244 | $ | 5,485 | $ | 6,619 | $ | 12,104 |
2020 | 2021 | |||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | YTD | |||||||||||||||||||||||||
CAPITAL EXPENDITURES, NET | ||||||||||||||||||||||||||||||||
Capital expenditures | $ | (1,546 | ) | $ | (2,143 | ) | $ | (24,188 | ) | $ | (9,426 | ) | $ | (37,303 | ) | $ | (516 | ) | $ | (1,567 | ) | $ | (2,083 | ) |
Net revenue, primarily consisting of fees, commissions and performance incentives, represents the amount of our gross billings excluding billable expenses charged to a client. Net revenue of $298,368 (exclusive of billable expenses of $47,237) for the quarter ended June 30, 2021, increased from $231,911 (exclusive of billable expenses of $27,766) from the quarter ended June 30, 2020.
(1) 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.
(2) 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 15
Exhibit 99.2
Management Presentation Legacy MDC Partners Standalone Second Quarter 2021 Results August 4, 2021
2 This presentation contains forward - looking statements . Statements in this presentation 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 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 “Transactions”) or the occurrence of difficulties in connection with the Transactions ; • adverse tax consequences in connection with the 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 attributes may result in increased tax costs ; • the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions ; • the impact of uncertainty associated with the Transactions on the Company’s businesses ; • direct or indirect costs associated with the Transactions, which could be greater than expected ; • risks associated with severe effects of international, national and regional economic conditions ; • the risk of parties challenging the Transactions or the impact of the 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 ; FORWARD LOOKING STATEMENTS & OTHER INFORMATION
3 • 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 . FORWARD LOOKING STATEMENTS & OTHER INFORMATION (Cont.)
4 SUMMARY • Organic revenue increased 31 . 3 % in the second quarter and 10 . 0 % YTD . • Net income attributable to MDC Partners common shareholders of $ 1 . 7 million in the second quarter of 2021 versus net loss of $ 4 . 1 million in the prior year period ; and net income of $ 2 . 6 million in the six months ended June 30 , 2021 versus net loss of $ 6 . 5 million in the prior year period • Adjusted EBITDA of $ 60 . 3 million versus $ 36 . 2 million in the prior year period, an increase of 66 . 7 % ; and $ 112 . 2 million for six months ended June 30 , 2021 versus $ 75 . 7 million in the prior year period, an increase of 48 . 2 % • Net revenue of $ 298 . 4 million in the second quarter versus $ 231 . 9 million in the prior year period, an increase of 28 . 7 % ; and $ 569 . 1 million in the six months ended June 30 , 2021 versus $ 506 . 4 million in the prior year period, an increase of 12 . 4 % • Net new business wins of $ 56 . 9 million in the second quarter and $ 128 . 5 million over the last twelve months • Covenant EBITDA (LTM) of $ 220 . 1 million, up from $ 193 . 3 million in the second quarter of 2020 Note: See appendix for definitions of Non - GAAP Financial Measures
5 ----- DRAFT ----- • Revenue of $ 345 . 6 million versus $ 259 . 7 million in the prior year period, an increase of 33 . 1 % • Organic revenue increased by 31 . 3 % versus the prior year period . • Organic revenue was favorably impacted by 446 basis points from billable pass - through costs • Net revenue of $ 298 . 4 million in the first quarter versus $ 231 . 9 million in the prior year period, an increase of 28 . 7 % • Organic net revenue increased 26 . 9 % versus the prior year period • Net income attributable to MDC Partners common shareholders of $ 1 . 7 million in the second quarter of 2021 versus net loss of $ 4 . 1 million in the prior year period • Adjusted EBITDA of $ 60 . 3 million versus $ 36 . 2 million in the prior year period, an increase of 66 . 7 % • Adjusted EBITDA Margin was 17 . 4 % vs . 13 . 9 % in prior year period, an increase of 350 basis points • Covenant EBITDA (LTM) of $ 220 . 1 million, up from $ 193 . 3 million in the second quarter of 2020 • Net new business wins of $ 56 . 9 million in the second quarter versus $ 20 . 5 million a year ago and totaled $ 128 . 5 million over the last twelve months • Leverage of 4 . 1 x, improved from 4 . 6 x a year ago and in line with the first quarter of 2021 SECOND QUARTER 2021 FINANCIAL HIGHLIGHTS Note: See appendix for definitions of Non - GAAP Financial Measures
6 ----- DRAFT ----- • Revenue of $ 653 . 2 million versus $ 587 . 4 million in the prior year period • Organic revenue increased by 10 . 0 % versus the prior year period . Organic revenue was unfavorably impacted by 118 basis points from billable pass through costs • Adjusted EBITDA was $ 112 . 2 million versus $ 75 . 7 million in the prior year period, an increase of 48 . 2 % • Adjusted EBITDA Margin was 17 . 2 % vs . 12 . 9 % in prior year, an increase of 430 basis points • Net new business wins of $ 67 . 1 million SIX MONTHS 2021 FINANCIAL HIGHLIGHTS Note: See appendix for definitions of Non - GAAP Financial Measures
7 CONSOLIDATED REVENUE AND EARNINGS (US$ in millions, except percentages) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change Revenue $ 345.6 $ 259.7 33.1 % $ 653.2 $ 587.4 11.2 % Operating Expenses Cost of services sold 224.4 165.6 35.5 % 411.3 388.3 5.9 % Office and general expenses 80.5 66.2 21.7 % 164.5 132.6 24.1 % Depreciation and amortization 8.0 8.9 (10.0 ) % 16.2 18.1 (10.6 ) % Impairment and other losses — 18.8 (100.0 ) % 0.9 19.0 (95.4 ) % Operating income 32.6 0.1 NM % 60.3 29.4 NM % Interest expense and finance charges, net (19.5 ) (15.9 ) (38.6 ) (31.6 ) Foreign exchange gain (loss) 1.9 5.3 4.0 (9.4 ) Other, net 0.8 5.9 1.5 22.2 Income tax expense (benefit) 1.4 (7.9 ) 2.7 5.6 Equity in losses of non - consolidated affiliates (0.2 ) (0.8 ) (0.6 ) (0.8 ) Net income 14.3 2.5 23.8 4.3 Net income attributable to the noncontrolling interest (8.2 ) (3.1 ) (12.7 ) (3.9 ) Accretion on and net income allocated to convertible preference shares (4.5 ) (3.5 ) (8.5 ) (6.9 ) Net income (loss) attributable to MDC Partners Inc. common shareholders $ 1.7 $ (4.1 ) $ 2.6 $ (6.5 ) Note: See appendix for definitions of Non - GAAP Financial Measures Note: Actuals may not foot due to rounding
8 Organic revenue increased 31.3% in the second quarter of 2021 versus the prior year period. Organic revenue increased by 10.0 % f or the first six months of 2021 versus the prior year period. REVENUE SUMMARY (US$ in millions, except percentages) Three Months Ended Six Months Ended Revenue $ % Change Revenue $ % Change June 30, 2020 $ 259.7 $ 587.4 Organic revenue 81.3 31.3 % 58.7 10.0 % Non - GAAP acquisitions (dispositions), net — — % (2.1 ) (0.4 ) % Foreign exchange impact 4.6 1.8 % 9.2 1.6 % Total Change 85.9 33.1 % 65.8 11.2 % June 30, 2021 $ 345.6 $ 653.2 Note: Actuals may not foot due to rounding
9 REVENUE BY GEOGRAPHY AND SEGMENT Note: Actuals may not foot due to rounding (US$ in millions, except percentages) 2020 2021 Q2 Q3 Q4 Q1 Q2 Total Total Organic Revenue Total Total Organic Revenue Total Total Organic Revenue Total Total Organic Revenue Total Total Organic Revenue Revenue Growth Growth (Decline) Revenue Growth Growth (Decline) Revenue Growth Growth (Decline) Revenue Growth Growth (Decline) Revenue Growth Growth (Decline) United States $ 210.3 (26.1 )% (24.7 )% $ 228.3 (16.0 )% (14.5 )% $ 256.5 (13.6 )% (12.1 )% $ 242.6 (8.3 )% (7.5 )% $ 277.5 31.9 % 31.9 % Canada 16.6 (32.4 )% (28.9 )% 20.3 (21.6 )% (20.9 )% 26.8 (17.0 )% (18.4 )% 22.7 24.1 % 17.5 % 23.0 38.4 % 28.3 % North America 227.0 (26.6 )% (25.0 )% 248.6 (16.5 )% (15.0 )% 283.2 (13.9 )% (12.7 )% 265.2 (6.2 )% (5.9 )% 300.5 32.4 % 31.7 % Other 32.7 (38.1 )% (34.2 )% 34.9 (23.1 )% (25.4 )% 44.9 (15.3 )% (19.8 )% 42.4 (5.7 )% (13.2 )% 45.1 37.7 % 28.8 % Total $ 259.7 (28.3 )% (26.4 )% $ 283.4 (17.3 )% (16.4 )% $ 328.2 (14.1 )% (13.7 )% $ 307.6 (6.2 )% (6.9 )% $ 345.6 33.1 % 31.3 % Integrated Networks - Group A $ 82.7 (19.9 )% (19.2 )% $ 87.1 (12.3 )% (12.7 )% $ 119.2 2.9 % 2.3 % $ 102.4 13.0 % 11.8 % $ 118.0 42.6 % 41.1 % Integrated Networks - Group B 93.4 (30.0 )% (29.0 )% 112.2 (13.1 )% (12.8 )% 112.3 (17.5 )% (17.7 )% 111.2 (5.6 )% (6.3 )% 123.5 32.2 % 31.0 % Media & Data Network 28.6 (27.6 )% (26.7 )% 33.6 (7.3 )% (7.3 )% 35.8 (15.7 )% (16.1 )% 36.8 (10.4 )% (12.2 )% 37.5 31.4 % 29.2 % All Other 55.0 (36.1 )% (30.7 )% 50.6 (35.4 )% (31.2 )% 60.8 (30.6 )% (27.3 )% 57.3 (26.9 )% (26.6 )% 66.6 21.1 % 18.3 % Total $ 259.7 (28.3 )% (26.4 )% $ 283.4 (17.3 )% (16.4 )% $ 328.2 (14.1 )% (13.7 )% $ 307.6 (6.2 )% (6.9 )% $ 345.6 33.1 % 31.3 %
10 REVENUE BY GEOGRAPHY AND SEGMENT Note : Actuals may not foot due to rounding (US$ in millions, except percentages) Six Months Ended June 30, 2020 2021 Total Total Organic Revenue Total Total Organic Revenue Revenue Growth Growth (Decline) Revenue Growth Growth (Decline) United States $ 474.9 (13.3 )% (12.2 )% $ 520.1 9.5 % 10.0 % Canada 34.9 (25.7 )% (16.0 )% 45.6 30.9 % 22.7 % North America 509.8 (14.3 )% (12.5 )% 565.8 11.0 % 10.8 % Other 77.7 (19.4 )% (15.4 )% 87.4 12.6 % 4.5 % Total $ 587.4 (15.0 )% (12.9 )% $ 653.2 11.2 % 10.0 % Integrated Networks - Group A $ 173.4 (2.1 )% (1.5 )% $ 220.4 27.1 % 25.8 % Integrated Networks - Group B 211.1 (20.8 )% (20.0 )% 234.6 11.1 % 10.2 % Media & Data Network 69.6 (15.8 )% (15.1 )% 74.3 6.7 % 4.8 % All Other 133.3 (19.0 )% (12.5 )% 123.9 (7.1 )% (8.1 )% Total $ 587.4 (15.0 )% (12.9 )% $ 653.2 11.2 % 10.0 %
11 Top 10 clients increased to 24% of revenue versus 22% a year ago (largest <4.9%) REVENUE BY CLIENT INDUSTRY Q2 2021 QTD Q2 2021 YTD Above 10% Food & Beverage, Consumer Products, Communications, Technology, Healthcare, Financials, Transportation/Lodging, Other Food & Beverage, Consumer Products, Technology, Healthcare, Financials, Other 0% to 10% Retail and Automotive N/A Below 0% N/A Retail, Communications, Automotive, Transportation and Travel/Lodging Year - over - Year Growth by Category Q2 2021 Mix
12 ADJUSTED EBITDA 1 Adjusted EBITDA is a non - GAAP financial measure. See appendix for the definition Note: Actuals may not foot due to rounding. (US$ in millions, except percentages) % Change 2020 2021 Q2 2021 vs. Q2 2020 Q2 Q3 Q4 Q1 Q2 Integrated Networks - Group A $ 17.2 $ 21.0 $ 25.3 $ 22.5 $ 27.3 58.4 % Integrated Networks - Group B 16.4 29.6 21.2 25.9 26.5 62.0 % Media & Data Network 0.9 3.0 4.0 5.1 6.9 NM % All Other 6.9 7.1 6.8 6.0 8.2 19.6 % Corporate (5.2 ) (6.7 ) (9.7 ) (7.5 ) (8.6 ) 65.9 % Adjusted EBITDA (1) $ 36.2 $ 54.1 $ 47.5 $ 51.9 $ 60.3 66.7 % Adjusted EBITDA margin 13.9 % 19.1 % 14.5 % 16.9 % 17.4 %
13 ADJUSTED EBITDA (1) Adjusted EBITDA is a non - GAAP financial measure. See appendix for the definition. Note: Actuals may not foot due to rounding. (US$ in millions, except percentages) Six Months Ended June 30, 2021 2020 % Change Integrated Networks - Group A $ 49.7 $ 33.5 48.4 % Integrated Networks - Group B 52.4 33.5 56.3 % Media & Data Network 12.0 2.7 NM % All Other 14.3 16.8 (15.0 ) % Corporate (16.2 ) (10.8 ) 50.0 % Adjusted EBITDA (1) $ 112.2 $ 75.7 48.2 % Adjusted EBITDA margin 17.2 % 12.9 %
14 COVENANT EBITDA 2020 2021 Covenant EBITDA (LTM) (1) (US$ in millions) Q2 Q3 Q4 Q1 Q2 Q1 - 2021 - LTM Q2 - 2021 - LTM Net income (loss) attributable to MDC Partners Inc. common shareholders $ (4.1 ) $ 0.4 $ (237.1 ) $ 0.9 $ 1.7 $ (239.9 ) $ (234.2 ) Adjustments to reconcile to operating income (loss): Accretion on and net income allocated to convertible preference shares 3.5 3.7 3.7 4.1 4.5 15.0 15.9 Net income attributable to the noncontrolling interest 3.1 10.7 7.2 4.5 8.2 25.5 30.6 Equity in losses of non - consolidated affiliates 0.8 — 1.4 0.5 0.2 2.7 2.1 Income tax expense (benefit) (7.9 ) 1.5 109.5 1.3 1.4 104.4 113.7 Interest expense and finance charges, net 15.9 15.3 15.3 19.1 19.5 65.6 69.2 Foreign exchange gain (5.3 ) (2.2 ) (6.3 ) (2.1 ) (1.9 ) (15.9 ) (12.4 ) Other, net (5.9 ) (0.5 ) 2.2 (0.6 ) (0.8 ) (4.8 ) 0.3 Operating income (loss) $ 0.1 $ 28.9 $ (104.1 ) $ 27.7 $ 32.6 $ (47.4 ) $ (14.9 ) Adjustments to reconcile to Adjusted EBITDA: Depreciation and amortization $ 8.9 $ 9.3 $ 9.5 $ 8.2 $ 8.0 $ 35.9 $ 35.0 Impairment and other losses 18.8 0.2 77.2 0.9 — 97.1 78.3 Stock - based compensation 1.0 6.5 3.6 (2.0 ) 6.9 9.1 15.0 Deferred acquisition consideration 2.3 2.8 41.7 11.7 5.6 58.5 61.8 Distributions from non - consolidated affiliates 1.1 0.2 0.9 — 0.5 2.2 1.6 Other items, net (2) 3.9 6.2 18.7 5.5 6.6 34.3 37.0 Adjusted EBITDA $ 36.2 $ 54.1 $ 47.5 $ 51.9 $ 60.3 $ 189.7 $ 213.8 Adjustments to reconcile to Covenant EBITDA: Severance due to eliminated positions 5.2 2.3 2.0 0.5 0.7 10.1 5.6 Other adjustments, net (3) 0.2 0.1 0.6 0.1 — 1.0 0.7 $ 41.6 $ 56.5 $ 50.1 $ 52.5 $ 61.0 $ 200.7 $ 220.1 ( 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 merger related costs, severance expense, other restructuring expenses and costs associated with the Company's strategic review process . (3) Other adjustments, net primarily includes one - time professional fees and costs associated with real estate consolidation. Note: Actuals may not foot due to rounding.
15 SUMMARY OF CASH FLOW (US$ in millions) Six Months Ended June 30, 2021 2020 Net cash provided by (used in) operating activities $ 10.4 $ (33.7 ) Net cash provided by (used in) investing activities (9.6 ) 14.6 Net cash provided by (used in) financing activities 46.9 (1.4 ) Effect of exchange rate changes on cash and cash equivalents (0.2 ) (1.0 ) Net increase in cash and cash equivalents 47.5 (21.5 ) Cash and cash equivalents at beginning of period 60.8 106.9 Cash and cash equivalents at end of period $ 108.3 $ 85.5 Supplemental disclosures: Cash income taxes paid $ 7.9 $ 2.6 Cash interest paid $ 32.8 $ 28.7 Note: Actuals may not foot due to rounding.
16 2021 FINANCIAL OUTLOOK 2021 financial guidance is as follows : • Revenue for 2021 , on a pro forma basis giving effect to the combination as if it was completed on January 1 , 2021 , is estimated to be $ 2 . 135 to $ 2 . 180 billion, including an estimated $ 762 million for MDC for the seven - month period ending July 31 , 2021 . • Adjusted EBITDA for 2021 , on a pro forma basis giving effect to the combination as if it was completed on January 1 , 2021 , is estimated to be $ 342 to $ 357 million, including an estimated $ 128 million for MDC for the seven - month period ending July 31 , 2021 . • Guidance assumes no impact from foreign exchange or acquisitions or dispositions . * Stagwell has excluded a quantitative reconciliation with respect to the Company’s 2021 guidance under the “unreasonable eff ort s” exception in Item 10(e)(1)(i)(B) of Regulation S - K See "Non - GAAP Financial Measures" below for additional information. 2021 Outlook Commentary*
17 APPENDIX
18 REVENUE TRENDING SCHEDULE Note: See appendix for definitions of Non - GAAP Financial Measures Note: Actuals may not foot due to rounding (US$ in thousands, except percentages) 2020 2021 Q1 Q2 Q3 Q4 YTD Q1 Q2 YTD Revenue United States $ 264,561 $ 210,342 $ 228,256 $ 256,477 $ 959,636 $ 242,580 $ 277,542 $ 520,122 Canada 18,256 16,609 20,299 26,766 81,930 22,650 22,992 45,642 North America 282,817 226,951 248,555 283,243 1,041,566 265,230 300,534 565,764 Other 44,925 32,726 34,869 44,925 157,445 42,355 45,071 87,426 Total $ 327,742 $ 259,677 $ 283,424 $ 328,168 $ 1,199,011 $ 307,585 $ 345,605 $ 653,190 % of Revenue United States 80.7 % 81.0 % 80.5 % 78.2 % 80.1 % 78.9 % 80.3 % 79.6 % Canada 5.6 % 6.4 % 7.2 % 8.2 % 6.8 % 7.4 % 6.7 % 7.0 % North America 86.3 % 87.4 % 87.7 % 86.4 % 86.9 % 86.3 % 87.0 % 86.6 % Other 13.7 % 12.6 % 12.3 % 13.6 % 13.1 % 13.7 % 13.0 % 13.4 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Total Growth % United States 0.6 % (26.1 )% (16.0 )% (13.6 )% (14.0 )% (8.3 )% 31.9 % 9.5 % Canada (18.4 )% (32.4 )% (21.6 )% (17.0 )% (22.0 )% 24.1 % 38.4 % 30.9 % North America (0.9 )% (26.6 )% (16.5 )% (13.9 )% (14.7 )% (6.2 )% 32.4 % 11.0 % Other 3.5 % (38.1 )% (23.1 )% (15.3 )% (19.1 )% (5.7 )% 37.7 % 12.6 % Total (0.3 ) % (28.3 ) % (17.3 ) % (14.1 ) % 15.3 % (6.2 ) % 33.1 % 11.2 % Organic Revenue Growth (Decline) % United States 1.3 % (24.7 )% (14.5 )% (12.1 )% (12.7 )% (7.5 )% 31.9 % 10.0 % Canada (1.7 )% (28.9 )% (20.9 )% (18.4 )% (17.9 )% 17.5 % 28.3 % 22.7 % North America 1.1 % (25.0 )% (15.0 )% (12.7 )% (13.2 )% (5.9 )% 31.7 % 10.8 % Other 7.6 % (34.2 )% (25.4 )% (19.8 )% (18.9 )% (13.2 )% 28.8 % 4.5 % Total 2.0 % (26.4 ) % (16.4 ) % (13.7 ) % (13.9 ) % (6.9 ) % 31.3 % 10.0 % Growth % from Foreign Exchange United States 0.0 % (0.0 )% 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Canada (0.1 )% (3.4 )% (0.7 )% 1.4 % (0.6 )% 6.5 % 10.1 % 8.2 % North America — % (0.3 )% (0.1 )% 0.1 % — % 0.4 % 0.7 % 0.6 % Other (4.1 )% (3.9 )% 2.3 % 4.5 % (0.2 )% 7.5 % 8.9 % 8.1 % Total (0.5 ) % (0.8 ) % 0.3 % 0.7 % (0.1 ) % 1.4 % 1.8 % 1.6 % Growth % from Acquisitions (Dispositions), net United States (0.8 )% (1.4 )% (1.5 )% (1.5 )% (1.3 )% (0.8 )% 0.0 % (0.4 )% Canada (16.6 )% 0.0 % 0.0 % 0.0 % (3.5 )% 0.0 % 0.0 % 0.0 % North America (2.0 )% (1.3 )% (1.4 )% (1.4 )% (1.5 )% (0.7 )% 0.0 % (0.4 )% Other 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Total (1.7 ) % (1.1 ) % (1.2 ) % (1.2 ) % (1.3 ) % (0.6 ) % — % (0.4 ) %
19 ADJUSTED EBITDA TRENDING SCHEDULE (1 ) Adjusted EBITDA is a non - GAAP financial measure. See appendix for the definition. Note: Actuals may not foot due to rounding (US$ in thousands) 2020 2021 Q1 Q2 Q3 Q4 YTD Q1 Q2 YTD PARTNER FIRMS Revenue: $ 327,742 $ 259,677 $ 283,424 $ 328,168 $ 1,199,011 $ 307,585 $ 345,605 $ 653,190 Operating income (loss) 37,665 11,921 43,651 (75,106 ) 18,131 39,409 46,687 86,096 Depreciation and amortization 8,974 8,662 9,133 8,755 35,524 6,960 6,820 13,780 Impairment and other losses 161 17,711 159 77,240 95,271 875 — 875 Stock - based compensation 2,928 763 5,038 2,468 11,197 (2,593 ) 6,384 3,791 Deferred acquisition consideration (4,600 ) 2,312 2,803 41,672 42,187 11,685 5,612 17,297 Other items, net — — — 2,240 2,240 3,118 3,417 6,535 Adjusted EBITDA (1) $ 45,128 $ 41,369 $ 60,784 $ 57,269 $ 204,550 $ 59,454 $ 68,920 $ 128,374 CORPORATE GROUP Revenue: $ — $ — $ — $ — $ — $ — $ — Operating loss (8,338 ) (11,823 ) (14,762 ) (28,967 ) (63,890 ) (11,742 ) (14,044 ) (25,786 ) Depreciation and amortization 232 236 199 713 1,380 1,216 1,185 2,401 Impairment and other losses — 1,129 — — 1,129 — — — Stock - based compensation 142 276 1,421 1,143 2,982 630 554 1,184 Distributions from non - consolidated affiliates (14 ) 1,079 208 902 2,175 9 463 472 Other items, net 2,416 3,895 6,208 16,485 29,004 2,367 3,202 5,569 Adjusted EBITDA (1) $ (5,562 ) $ (5,208 ) $ (6,726 ) $ (9,724 ) $ (27,220 ) $ (7,520 ) $ (8,640 ) $ (16,160 ) TOTAL Revenue: $ 327,742 $ 259,677 $ 283,424 $ 328,168 $ 1,199,011 $ 307,585 $ 345,605 $ 653,190 Operating income (loss) 29,327 98 28,889 (104,073 ) (45,759 ) 27,667 32,643 60,310 Depreciation and amortization 9,206 8,898 9,332 9,468 36,904 8,176 8,005 16,181 Impairment and other losses 161 18,840 159 77,240 96,400 875 — 875 Stock - based compensation 3,070 1,039 6,459 3,611 14,179 (1,963 ) 6,938 4,975 Deferred acquisition consideration (4,600 ) 2,312 2,803 41,672 42,187 11,685 5,612 17,297 Distributions from non - consolidated affiliates (14 ) 1,079 208 902 2,175 9 463 472 Other items, net 2,416 3,895 6,208 18,725 31,244 5,485 6,619 12,104 Adjusted EBITDA (1) $ 39,566 $ 36,161 $ 54,058 $ 47,545 $ 177,330 $ 51,934 $ 60,280 $ 112,214
20 RECONCILIATIONS (1) Contributions to organic revenue represents the change in revenue, measured on a constant currency basis, relative to the com pa rable pre - acquisition period for acquired businesses that is included in the Company's organic revenue growth (decline) calculation. (2) Prior year revenue from dispositions reflects the incremental impact on revenue for the comparable period after the Company's d isposition 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. (US$ in thousands) 2020 2021 Q1 Q2 Q3 Q4 YTD Q1 Q2 YTD NON - GAAP DISPOSITIONS, NET Foreign exchange impact $ (248 ) $ — $ — $ — $ (248 ) $ — $ — $ — Contribution to organic revenue (1) (411 ) — — — (411 ) — — — Prior year revenue from dispositions (2) (5,024 ) (4,106 ) (4,076 ) (4,447 ) (17,653 ) (2,101 ) — (2,101 ) Non - GAAP dispositions, net $ (5,683 ) $ (4,106 ) $ (4,076 ) $ (4,447 ) $ (18,312 ) $ (2,101 ) $ — $ (2,101 ) OTHER ITEMS, NET Severance and other restructuring expenses $ 1,334 $ 2,969 $ 3,270 $ 1,072 $ 8,645 $ 2,345 $ 2,632 $ 4,977 Merger costs 1,082 926 2,938 17,653 22,599 3,140 3,987 7,127 Total other items, net $ 2,416 $ 3,895 $ 6,208 $ 18,725 $ 31,244 $ 5,485 $ 6,619 $ 12,104 CAPITAL EXPENDITURES, NET Capital expenditures $ (1,546 ) $ (2,143 ) $ (24,188 ) $ (9,426 ) $ (37,303 ) $ (516 ) $ (1,567 ) $ (2,083 ) Net revenue, primarily consisting of fees, commissions and performance incentives, represents the amount of our gross billing s e xcluding billable expenses charged to a client. Net revenue of $298,368 (exclusive of billable expenses of $47,237) for the quarter ended June 30, 2021, increased from $231,911 (exclusive of billable expenses of $27,766) for the quarter ended June 30, 2020.
21 AVAILABLE LIQUIDITY 1 1 Subject to available borrowings under the Credit Facility. Note: Actuals may not foot due to rounding (US$ in millions) June 30, 2021 December 31, 2020 Commitment Under Facility $ 211.5 $ 211.5 Drawn 88.6 — Undrawn Letters of Credit 19.5 18.7 Undrawn Commitments Under Facility (1) $ 103.4 $ 192.8 Total Cash & Cash Equivalents 108.3 60.8 Liquidity $ 211.6 $ 253.6
22 CURRENT CREDIT PICTURE 1 These ratios and measures are not based on generally accepted accounting principles and are not presented as alternatives measures of operating performance or liquidity . Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one - time charges, and other items, as defined in the Credit Agreement . They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non - compliance with such covenants could have a material adverse effect on the Company . 2 Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one - time charges, and other items, as defined in the Credit Agreement . 3 Total Senior Leverage is a measure that includes borrowings under the Credit Agreement, outstanding letters of credit, less cash held in depository accounts, as defined in the Credit Agreement 4 Net Debt is a measure that includes borrowings under the Credit Agreement, the Senior Notes, other outstanding debt and letters of credit, less cash held in depository accounts, as defined in the Credit Agreement . Net Debt does not include Deferred Acquisition Consideration, and it does not include minority interest . 5 Based on borrowings as of June 30 , 2021 . Excludes letters of credit, and Deferred Acquisition Consideration . Note : Actuals may not foot due to rounding Current Debt Maturity Profile (5) $211.5 million Credit Facility Covenants (1) (US$ in millions) June 30, 2021 Covenants I. Total Senior Leverage Ratio 0.18 Maximum per covenant 2.00 II. Total Leverage Ratio 4.14 Maximum per covenant 5.50 III. Fixed Charges Ratio 2.44 Minimum per covenant 1.00 IV. Earnings before interest, taxes, depreciation and amortization (in millions) (2) $220.1 Minimum per covenant (in millions) $120.0 Debt Calculation Total Senior Leverage, net (3) $40.5 Net Debt (4) $910.7 Credit Facility 2024 Senior Notes
23 DEFINITION OF NON - GAAP FINANCIAL MEASURES In addition to its MDC Partners Inc reported results, Stagwell Inc . has included in its earnings release and supplemental management presentation certain financial results that the Securities and Exchange Commission defines as "non - GAAP financial measures . " Management believes that such non - GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results . Such non - GAAP financial measures include the following : Organic Revenue : 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 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 acquisitions 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 dispositions as if they had been disposed of during the equivalent period in the prior year . Net New Business : Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period . 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 non - operating items 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 merger related costs, 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 . 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 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 Credit Agreement . Included in this earnings release are tables reconciling reported MDC Partners Inc . results to arrive at certain of these non - GAAP financial measures . Note: A reconciliation of non - GAAP to US GAAP reported results has been provided by the Company in the tables included herein.
MDC Partners One World Trade Center, Floor 65 New York, NY 10007 646 - 429 - 1800 www.stagwellglobal.com
Exhibit 99.3
FOR IMMEDIATE RELEASE
FOR: | Stagwell Marketing Group. | CONTACT: | Beth Sidhu | ||
1808 Eye St NW | Stagwell Marketing Group | ||||
Washington, DC 20006 | 202-423-4414 | ||||
Beth@stagwellgroup.com |
STAGWELL MARKETING GROUP LLC REPORTS STANDALONE RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
Results show significant growth including a 29.1% increase in GAAP revenue to $209.6m and a 39.5% increase in net revenue to $181.8m for Q2 2021 vs Q2 2020.
After adjusting for acquisitions, foreign exchange effects, and the election cycle, GAAP revenue for the quarter grew 43.9% with net revenue growth of 42.0%.
Second quarter net income increased to $18.7 million, representing 285.1% growth over Q2 2020.
Adjusted EBITDA increased 91.5% in Q2 2021 vs Q2 2020.
STAGWELL MARKETING GROUP HIGHLIGHTS: 2nd QUARTER AND YTD JUNE 30, 2021
2nd Quarter 2021:
• | GAAP revenue was $209.6 million, representing growth of $47.2 million, or 29.1%, compared to Q2 2020 of $162.3 million. |
◦ | GAAP revenue organic growth was $38.7 million, or 23.8%. |
◦ | Adjusting for acquisitions, foreign exchange effects, and the election cycle, GAAP revenue organic growth for the quarter is 43.9%. |
• | Net revenue was $181.8 million, representing growth of $51.5 million, or 39.5%, compared to Q2 2020 of $130.4 million. |
◦ | Net revenue organic growth was $43.0 million, or 33.0%. |
◦ | Adjusting for acquisitions, foreign exchange effects, and the election cycle, net revenue organic growth for the quarter is 42.0%. |
• | Net income was $18.7 million, representing growth of $13.8 million, or 285.1%, compared to the prior year period. |
• | Adjusted EBITDA was $38.7 million, representing growth of $18.5 million, or 91.5%, compared to the prior year period. |
Year to Date June 30, 2021:
• | GAAP revenue was $390.8 million, representing growth of $43.9 million, or 12.7%, compared to YTD 2020 of $346.9 million. |
◦ | GAAP revenue organic growth was $25.9 million, or 7.5%. |
◦ | Adjusting for acquisitions, foreign exchange effects, and the election cycle, GAAP revenue organic growth for the quarter is 24.0%. |
Page 1
• | Net revenue was $339.9 million, representing growth of $58.7 million, or 20.9%, compared to YTD 2020 of $281.2 million. |
◦ | Net revenue organic growth was $40.8 million, or 14.5%. |
◦ | Adjusting for acquisitions, foreign exchange effects, and the election cycle, net revenue organic growth for the quarter is 26.1%. |
• | Net income was $23.3 million, representing growth of $5.9 million, or 34.2%, compared to the prior year period. |
• | Adjusted EBITDA was $62.6 million, representing growth of $20.7 million, or 49.5%, compared to the prior year period. |
• | Cash provided by operating activities of $39.2 million, a decrease of $7.6 million, or 16.2%, principally due to increased working capital requirement resulting from revenue growth. |
Washington, DC, August 4, 2021 – Stagwell Marketing Group, which formally merged with MDC Partners to form Stagwell Inc. (Nasdaq: STGW) on August 2, announced standalone financial results for Stagwell Marketing Group LLC (“Stagwell” or the “Company”) for the three and six months ended June 30, 2021.
Current Stagwell Inc. President and former Stagwell Group Partner Jay Leveton stated, “The standalone Stagwell Marketing Group quarterly results show industry-leading, double digit net revenue growth across every one of our business segments. As the impact of the pandemic recedes, marketers are investing in research and data analytics to better understand changes among their stakeholders and improve how they connect with them through digital channels -- areas where Stagwell companies excel. We have excellent momentum as we launch Stagwell Inc.”
Current Stagwell Inc. COO and former Stagwell Group CFO Ryan Greene commented, “In the second quarter of 2021, due to its digital first nature, Stagwell’s net revenue grew robustly at 39.5% and EBITDA increased 91.5% as did net income, by 285.1% year over year. At a time when legacy holding companies are working to recover to 2019 pre-pandemic revenue levels, Stagwell’s GAAP revenue this past quarter is more than 20% higher and EBITDA is over 40% higher versus Q2 2019.”
Second Quarter and Year-to-Date 2021 Stagwell Marketing Group Standalone Financial Results
GAAP revenue for the second quarter of 2021 increased $47.2 million, or 29.1%, to $209.6 million. This included organic revenue growth of $38.7 million, or 23.8%. Inorganic revenue was $7.5 million and we reported a foreign exchange impact on GAAP revenue of approximately $1.0 million. Our GAAP revenue includes third-party direct costs, which are expenses incurred with third-party vendors when Stagwell acts as the principal when performing services for its clients. Third-party direct costs were $27.7 million as compared to $32.0 million for the second quarter of 2020, which represents a decrease of 13.3%.
Net revenue for the second quarter of 2021, after deducting third-party direct costs, was $181.8 million compared to $130.4 million for the same period in 2020. This represents an increase of $51.5 million or 39.5%. This included organic revenue growth of $43.0 million, or 33.0%. The organic revenue increase was primarily attributable to double-digit organic growth across nearly all non-political segments. Inorganic revenue of $7.5 million included acquisitions that expanded our digital transformation and digital platform management offerings. We also recorded a foreign exchange impact on net revenue of $1.0 million.
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Net income for the second quarter of 2021 was $18.7 million as compared to net income of $4.8 million in the second quarter of 2020, an increase of $13.8 million, or 285.1%. Our operating expenses increased $30.5 million, which related to additional people and client delivery expenses incurred in support of the revenue growth noted above plus additional costs connected to acquired brands. Additionally, general expenses increased $11.4 million across a number of brands and our non-operating expenses increased by $2.9 million, which primarily related to increased provision for income taxes.
Adjusted EBITDA for the second quarter of 2021 was $38.7 million compared to $20.2 million in the second quarter of 2020, an increase of $18.5 million, or 91.5%. The increase was driven by the strong revenue performance that was partially offset by the increase in operating expenses noted above. Our Adjusted EBITDA margin was 18.5% on GAAP revenue and 21.3% on net revenue, up from 12.5% and 15.5% respectively in the second quarter of 2020.
GAAP revenue for the first six months of 2021 increased $43.9 million, or 12.7%, to $390.8 million. This included organic revenue growth of $25.9 million, or 7.5%. Inorganic revenue was $17.1 million, and we recorded a foreign exchange impact on GAAP revenue of $0.9 million. The organic revenue growth was primarily attributable to a $26.2 million increase in organic revenues from our Digital – Marketing segment that were partially offset by an organic revenue decline of $18.6 million from our Communications, Public Affairs and Advocacy and Digital – Content segments. All remaining segments reported organic revenue growth of $18.4 million. Inorganic revenue totaled $17.1 million and included $15.0 million from investments that expanded our digital transformation offerings and $2.2 million from investments that expanded our strategic corporate communications offering. Third-party direct costs were $50.9 million as compared to $65.7 million for the first six months of 2020, which represents a decrease of 22.5%.
Net revenue for the first six months of 2021, after deducting third-party direct costs, was $339.9 million as compared to $281.2 million for the first six months of 2020, which represents an increase of $58.7 million or 20.9%. This included organic revenue growth of $40.8 million, or 14.5%. All segments except for Digital – Content, which remained impacted by travel restrictions put in place in response to COVID, reported double digit organic growth. Inorganic revenue was $17.1 million and included $15.0 million from investments that expanded our digital transformation offerings and $2.1 million from investments that expanded our strategic corporate communications offering. We also recorded a foreign exchange impact on net revenue of $0.9 million.
Net income for the first six months of 2021 was $23.3 million as compared to net income of $17.3 million in the first six months of 2020, an increase of $5.9 million, or 34.2%. Our operating expenses increased $31.9 million, which related to additional operating expenses incurred by our existing brands in support of the revenue growth noted above plus additional costs connected to acquired brands. General expenses increased $20.4 million across several brands and our non-operating expenses (net of other income) increased by $6.1 million, which primarily related to increased provision for income taxes of 3.4 million and a decrease in other income reported in prior period not repeated in the current period of $2.2 million.
Adjusted EBITDA for the first six months of 2021
was $62.6 million as compared to $41.8 million in the first six months of 2020, an increase of $20.7 million, or 49.5%. Again, the increase
was driven by the strong revenue performance that was partially offset by the increase in operating expenses noted above. In addition,
the adjusted EBITDA margin was 16.0% on GAAP revenue and 18.4% on net revenue, up from 12.1% and 14.9% respectively in the first six months
of 2020.
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Stagwell Inc. Conference Call
Management will host a video webcast and conference call on Wednesday, August 4, 2021, at 8:30 a.m. (ET) to discuss standalone results for Stagwell Marketing Group LLC and MDC Partners Inc. for the three and six months ended June 30, 2021.The video webcast will be accessible at https://kvgo.com/openexchange-inc/mdca-stagwell-earnings-call. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the conference call.
A recording of the conference call will be accessible one hour after the call and available for ninety days at www.stagwellglobal.com.
About Stagwell Marketing Group
The Stagwell Marketing Group is the first and only independent, digital-first, and fully-integrated organization of size & scale servicing brands across the continuum of marketing services. Collaborative by design, Stagwell is not weighed down by legacy points of view and its people are united in their desire to innovate, evolve, grow and deliver superior results for their clients. Stagwell’s high growth brands include experts in four categories: digital transformation and marketing, research and insights, marketing communications, and content and media. Stagwell Media LP (“Stagwell Media), is a private equity fund that owns all interests in Stagwell Marketing Group LLC through a wholly owned holding company named Stagwell Marketing Group Holdings LLC. Stagwell Media, Stagwell Marketing Group LLC and its businesses are managed by The Stagwell Group, a registered investment advisor. The address of Stagwell is 1808 Eye Street, Floor 6, Washington, D.C., 20006.
As of the date hereof, Stagwell Agency Holdings and its affiliates, including Stagwell Media, and joint actors beneficially own 50,000 Series 6 preferred shares (representing 100% of the outstanding Series 6 preferred shares), 14,425,714 Class A common shares (representing 18.7% of the outstanding Class A common shares) and 179,970,051 voting-only Class C common shares (representing 100% of the outstanding voting-only Class C common shares) of Stagwell Inc., collectively representing 75.6% of the issued and outstanding voting shares of Stagwell Inc., as calculated on an as-converted basis.
Non-GAAP Financial Measures
Stagwell has included in this press release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following:
Net Revenue: “Net Revenue” is GAAP Revenue adjusted to exclude certain third-party direct costs when the Company acts as principal for the services rendered in the client arrangement.
Inorganic Revenue: “Inorganic Revenue” consists of (i) for acquisitions during the current year, the revenue effect from such acquisitions 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.
Organic Revenue: Organic revenue is calculated by subtracting both the foreign exchange and acquisition (disposition) components from total revenue. “Organic revenue growth” and “organic revenue decline” refers to the positive or negative changes in revenue that were not attributable to the effects of foreign exchange or acquired run rate revenue from acquisitions. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Company’s Brands that have been held throughout each of the comparable periods presented, and (b) inorganic revenue.
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Adjusted EBITDA: Adjusted EBITDA is a non-GAAP financial measure that represents net income adjusted for (a) interest expense, (b) provision for income taxes, (c) depreciation and amortization expense, (d) other income (expenses), (e) equity in earnings (losses) of unconsolidated affiliates, (f) deferred acquisition consideration adjustments, and (g) other items, net. Other items, net includes items such as acquisition-related expenses, other non-recurring items and other restructuring costs.
Included in the Company’s press release and supplemental management presentation are tables reconciling Stagwell’s GAAP results to arrive at certain of these non-GAAP financial measures.
Page 1
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 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 “Transactions”) or the occurrence of difficulties in connection with the Transactions; |
• | adverse tax consequences in connection with the 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 attributes may result in increased tax costs; |
• | the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions; |
• | the impact of uncertainty associated with the Transactions on the Company’s businesses; |
• | direct or indirect costs associated with the Transactions, which could be greater than expected; |
• | risks associated with severe effects of international, national and regional economic conditions; |
• | the risk of parties challenging the Transactions or the impact of the 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. |
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Investors
should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail
in MDC’s initial Form S-4, filed with the Securities and Exchange Commission (the “SEC”) on February 8, 2021, Amendment
No.1 filed on March 29, 2021, Amendment No.2 filed on April 22, 2021, Amendment No.3 filed on April 30, 2021, and the Prospectus Supplement
filed July 8, 2021, all of which are accessible on the SEC’s website at www.sec.gov.
SCHEDULE 1
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net Revenue | $ | 181,845 | $ | 130,356 | $ | 339,918 | $ | 281,192 | ||||||||
Third-party vendor costs | 27,715 | 31,974 | 50,884 | 65,681 | ||||||||||||
Revenue | $ | 209,560 | $ | 162,330 | $ | 390,802 | $ | 346,873 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of services sold | 122,074 | 103,296 | 234,073 | 224,054 | ||||||||||||
Office and general expenses | 52,674 | 41,243 | 104,952 | 84,515 | ||||||||||||
Depreciation and amortization | 10,381 | 10,108 | 21,331 | 19,864 | ||||||||||||
Total operating expenses | 185,129 | 154,647 | 360,356 | 328,433 | ||||||||||||
Operating income | 24,431 | 7,683 | 30,446 | 18,440 | ||||||||||||
Other expenses, net: | ||||||||||||||||
Interest expense, net | (1,935 | ) | (1,976 | ) | (3,286 | ) | (2,887 | ) | ||||||||
Other expense, net | (486 | ) | (691 | ) | 122 | 2,336 | ||||||||||
Income before taxes and equity in earnings (losses) of unconsolidated affiliates | 22,010 | 5,016 | 27,282 | 17,889 | ||||||||||||
Provision for income taxes | (3,348 | ) | (134 | ) | (4,021 | ) | (593 | ) | ||||||||
Income before equity in earnings (losses) of unconsolidated affiliates | 18,662 | 4,882 | 23,261 | 17,296 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates | (3 | ) | (37 | ) | 1 | 42 | ||||||||||
Net income | 18,659 | 4,845 | 23,262 | 17,338 | ||||||||||||
Less: Net income attributable to noncontrolling interests | 1,470 | 1,671 | 2,623 | 2,809 | ||||||||||||
Less: Net (loss) income attributable to redeemable noncontrolling interests | (156 | ) | (1,097 | ) | (1,071 | ) | (1,789 | ) | ||||||||
Net income attributable to Member | $ | 17,345 | $ | 4,271 | $ | 21,710 | $ | 16,318 |
(1) | Net Revenue: GAAP Revenue adjusted to exclude certain third-party direct costs when we act as a principal for the services rendered in the client arrangement. |
Note: Actuals may not foot due to rounding.
Page 3
SCHEDULE 2
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED REVENUE RECONCILIATION
(in thousands) | Quarter on Quarter Change | Year to Date | ||||||||||||||
(2nd Quarter) | (2nd Quarter) | |||||||||||||||
GAAP REVENUE | Revenue | % Change | Revenue | % Change | ||||||||||||
June 30, 2020 | $ | 162,330 | $ | 346,873 | ||||||||||||
Organic Revenue | 38,712 | 23.8 | % | 25,899 | 7.5 | % | ||||||||||
Inorganic Revenue(1) | 7,477 | 4.6 | % | 17,136 | 4.9 | % | ||||||||||
Foreign exchange impact | 1,041 | 0.6 | % | 894 | 0.3 | % | ||||||||||
Total Change | 47,230 | 29.1 | % | 43,929 | 12.7 | % | ||||||||||
June 30, 2021 | $ | 209,560 | $ | 390,802 |
Quarter on Quarter Change | Year to Date | |||||||||||||||
(2nd Quarter) | (2nd Quarter) | |||||||||||||||
NET REVENUE(1) | Revenue | % Change | Revenue | % Change | ||||||||||||
June 30, 2020 | $ | 130,356 | $ | 281,192 | ||||||||||||
Organic Revenue | 43,011 | 33.0 | % | 40,771 | 14.5 | % | ||||||||||
Inorganic Revenue(1) | 7,437 | 5.7 | % | 17,061 | 6.1 | % | ||||||||||
Foreign exchange impact | 1,041 | 0.8 | % | 894 | 0.3 | % | ||||||||||
Total Change | 51,489 | 39.5 | % | 58,726 | 20.9 | % | ||||||||||
June 30, 2021 | $ | 181,845 | $ | 339,918 |
(1) | “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and inorganic components from total revenue growth. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Company’s Brands that have been held throughout each of the comparable periods presented, and (b) “inorganic revenue”. |
(2) | Net Revenue: GAAP Revenue adjusted to exclude certain third-party costs when we act as a principal for the services rendered in the client arrangement. |
Note: Actuals may not foot due to rounding.
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SCHEDULE 3
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED MANAGEMENT ADJUSTED RESULTS
Communications,
Public Affairs and Advocacy ("CPAA")
Normalization Adjustment |
Revenue | |||||||||||||||||||||||||||
As Reported | Reporting Periods Calculations | As Reported | ||||||||||||||||||||||||||
For
the three months ending
June 30, |
plus the
difference |
|||||||||||||||||||||||||||
GAAP
REVENUE
As Reported |
2019 | 2020 |
Average
of CPAA Periods Reported |
Difference
between current period reported and Average |
between
current period reported and Average of CPAA Periods Reported |
%
Change |
||||||||||||||||||||||
i | ii | iii | iv = (ii + iii) / 2 | v = ii - iv | vi = v + i | |||||||||||||||||||||||
June 30, 2020 | $ | 162,330 | $ | 25,681 | $ | 52,423 | $ | 39,052 | $ | (13,371 | ) | $ | 148,959 | |||||||||||||||
Organic Revenue | 38,712 | 26,742 | (3,843 | ) | 65,453 | 43.9 | % | |||||||||||||||||||||
Inorganic Revenue(1) | 7,477 | - | - | 7,477 | 5.0 | % | ||||||||||||||||||||||
Foreign exchange impact | 1,041 | - | - | 1,041 | 0.7 | % | ||||||||||||||||||||||
Total Change | 47,230 | 26,742 | (3,843 | ) | 73,971 | 49.7 | % | |||||||||||||||||||||
June 30, 2021 | $ | 209,560 | $ | 52,423 | $ | 48,580 | $ | 50,501 | $ | 13,371 | $ | 222,930 |
As Reported |
Reporting
Periods
Calculations |
Net Revenue | ||||||||||||||||||||||||||
For
the three months
ending June 30, |
As Reported
plus the |
|||||||||||||||||||||||||||
Net
Revenue
As Reported |
2019 | 2020 | Average of CPAA Periods Reported |
Difference
between current period reported and Average |
difference
between current period reported and Average of CPAA Periods Reported |
%
Change |
||||||||||||||||||||||
i | ii | iii | iv = (ii + iii) / 2 | v = ii - iv | vi = v + i | |||||||||||||||||||||||
June 30, 2020 | $ | 130,356 | $ | 16,354 | $ | 26,045 | $ | 21,200 | $ | (4,846 | ) | $ | 125,511 | |||||||||||||||
Organic Revenue | 43,011 | 9,691 | 4,964 | 52,702 | 42.0 | % | ||||||||||||||||||||||
Inorganic Revenue(1) | 7,437 | - | - | 7,437 | 5.9 | % | ||||||||||||||||||||||
Foreign exchange impact | 1,041 | - | - | 1,041 | 0.8 | % | ||||||||||||||||||||||
Total Change | 51,489 | 9,691 | 4,964 | 61,180 | 48.7 | % | ||||||||||||||||||||||
June 30, 2021 | $ | 181,845 | $ | 26,045 | $ | 31,009 | $ | 28,527 | $ | 4,846 | $ | 186,691 |
Page 5
Communications,
Public Affairs and Advocacy ("CPAA")
Normalization Adjustment |
GAAP | |||||||||||||||||||||||||||
As Reported | Revenue | |||||||||||||||||||||||||||
For
the six months ending
June 30, |
Reporting
Periods
Calculations |
As Reported
plus the |
||||||||||||||||||||||||||
GAAP
REVENUE As Reported |
2019 | 2020 |
Average
of
CPAA Periods Reported |
Difference
between current period reported and Average |
difference
between
current period reported and Average of CPAA Periods Reported |
%
Change |
||||||||||||||||||||||
i | ii | iii | iv = (ii + iii) / 2 | v = ii - iv | vi = v + i | |||||||||||||||||||||||
June 30, 2020 | $ | 346,873 | $ | 53,567 | $ | 104,662 | $ | 79,115 | $ | (25,548 | ) | $ | 321,325 | |||||||||||||||
Organic Revenue | 25,899 | 51,095 | (14,966 | ) | 76,994 | 24.0 | % | |||||||||||||||||||||
Inorganic Revenue(1) | 17,136 | - | 2,183 | 17,136 | 5.3 | % | ||||||||||||||||||||||
Foreign exchange impact | 894 | - | - | 894 | 0.3 | % | ||||||||||||||||||||||
Total Change | 43,929 | 51,095 | (12,783 | ) | 95,024 | 29.6 | % | |||||||||||||||||||||
June 30, 2021 | $ | 390,802 | $ | 104,662 | $ | 91,879 | $ | 98,270 | $ | 25,548 | $ | 416,349 |
As Reported | Reporting Periods Calculations | Net Revenue As Reported | ||||||||||||||||||||||||||
For
the six months ending
June 30, |
plus the difference | |||||||||||||||||||||||||||
between | ||||||||||||||||||||||||||||
Net
Revenue
As Reported |
2019 | 2020 |
Average
of CPAA Periods Reported |
Difference
between current period reported and Average |
current
period
reported and Average of CPAA Periods Reported |
%
Change |
||||||||||||||||||||||
i | ii | iii | iv = (ii + iii) / 2 | v = ii - iv | vi = v + i | |||||||||||||||||||||||
June 30, 2020 | $ | 281,192 | $ | 31,302 | $ | 60,088 | $ | 45,695 | $ | (14,393 | ) | $ | 266,799 | 2 | ||||||||||||||
Organic Revenue | 40,771 | 28,786 | (9,463 | ) | 69,558 | 26.1 | % | |||||||||||||||||||||
Inorganic Revenue(1) | 17,061 | - | 2,127 | 17,061 | 6.4 | % | ||||||||||||||||||||||
Foreign exchange impact | 894 | - | - | 894 | 0.3 | % | ||||||||||||||||||||||
Total Change | 58,726 | 28,786 | (7,337 | ) | 87,513 | 32.8 | % | |||||||||||||||||||||
June 30, 2021 | $ | 339,918 | $ | 60,088 | $ | 52,751 | $ | 56,420 | $ | 14,393 | $ | 354,312 |
(1) | “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and inorganic components from total revenue growth. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Company’s Brands that have been held throughout each of the comparable periods presented, and (b) “inorganic revenue”. |
(2) | Net Revenue: Pro Forma GAAP Revenue adjusted to exclude certain third-party costs when we act as a principal for the services rendered in the client arrangement. |
Note: Actuals may not foot due to rounding.
Page 6
SCHEDULE 4
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) |
June 30, 2021
(Unaudited) |
December 31, 2020
|
||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and restricted cash | $ | 73,450 | $ | 92,457 | ||||
Accounts receivable, net | 196,821 | 225,733 | ||||||
Expenditures billable to clients | 15,909 | 11,063 | ||||||
Other current assets | 37,701 | 36,433 | ||||||
Total current assets | 323,881 | 365,686 | ||||||
Investments | 1,865 | 14,256 | ||||||
Property and equipment, net | 37,842 | 35,614 | ||||||
Goodwill | 352,469 | 351,725 | ||||||
Intangible assets, net | 171,130 | 186,035 | ||||||
Right-of-use assets – operating leases | 53,997 | 57,752 | ||||||
Other assets | 2,578 | 2,787 | ||||||
Total assets | $ | 943,762 | $ | 1,013,855 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 108,734 | $ | 147,826 | ||||
Accruals and other liabilities | 87,620 | 89,562 | ||||||
Current maturities of long-term debt | 497 | 994 | ||||||
Advanced billings | 70,049 | 66,418 | ||||||
Current portion of operating lease liabilities | 19,280 | 19,579 | ||||||
Current portion of deferred acquisition consideration | 8,767 | 12,579 | ||||||
Total current liabilities | 294,947 | 336,958 | ||||||
Long-term debt, net | 184,319 | 198,024 | ||||||
Long-term portion of deferred acquisition consideration | 7,516 | 5,268 | ||||||
Long-term portion of operating lease liabilities | 49,435 | 52,606 | ||||||
Deferred tax liabilities, net | 16,232 | 16,050 | ||||||
Other liabilities | 7,345 | 5,802 | ||||||
Total liabilities | 559,794 | 614,708 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interest | 2,626 | 604 | ||||||
Member’s equity | 350,395 | 358,756 | ||||||
Noncontrolling interest | 30,947 | 39,787 | ||||||
Total equity | 381,342 | 398,543 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 943,762 | $ | 1,013,855 |
Page 7
SCHEDULE 5
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED SUMMARY CASH FLOW DATA
Six Months Ended June 30 | ||||||||
(in thousands, except percentages) | 2021 | 2020 | ||||||
Net cash provided by operating activities | $ | 39,218 | $ | 46,813 | ||||
Net cash used in investing activities | (7,288 | ) | (7,908 | ) | ||||
Net cash used in financing activities | (52,710 | ) | (23,653 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1,773 | 380 | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (19,007 | ) | 15,632 | |||||
Cash, cash equivalents and restricted cash at the beginning of the period | 92,457 | 63,860 | ||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 73,450 | $ | 79,492 | ||||
Supplemental cash flow information: | ||||||||
Cash interest paid | (4,649 | ) | (4,490 | ) | ||||
Income taxes paid | (3,047 | ) | (1,310 | ) | ||||
Non-cash investing and financing activities: | ||||||||
Acquisitions of business | - | (23,720 | ) | |||||
Net unrealized gain (loss) on investments | - | (4,999 | ) | |||||
Contributions by Member | 12,122 | 83,242 | ||||||
Distributions to Member | (13,000 | ) | - | |||||
Payment of deferred acquisition consideration | (7,080 | ) | (64,322 | ) |
Page 8
SCHEDULE 6
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net Income | $ | 18,659 | $ | 4,845 | $ | 23,262 | $ | 17,338 | ||||||||
Interest expense, net | 1,935 | 1,976 | 3,286 | 2,887 | ||||||||||||
Provision for income taxes | 3,348 | 134 | 4,021 | 593 | ||||||||||||
Depreciation and amortization | 10,381 | 10,108 | 21,331 | 19,864 | ||||||||||||
EBITDA | 34,323 | 17,063 | 51,900 | 40,682 | ||||||||||||
Management Adjustments | ||||||||||||||||
Other (expense) income, net | 833 | 688 | 224 | (2,336 | ) | |||||||||||
Equity in losses of unconsolidated affiliate | 3 | 37 | (1 | ) | (42 | ) | ||||||||||
Acquisition-related expenses | 1,297 | 440 | 3,942 | 1,135 | ||||||||||||
Deferred acquisition consideration expenses | 2,098 | 1,144 | 6,034 | 1,121 | ||||||||||||
Other non-recurring items | 161 | - | 461 | - | ||||||||||||
Other restructuring costs | - | 846 | - | 1,289 | ||||||||||||
Adjusted EBITDA | $ | 38,715 | $ | 20,218 | $ | 62,560 | $ | 41,849 |
Note: Actuals may not foot due to rounding.
Page 9
SCHEDULE 7
STAGWELL MARKETING GROUP LLC AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES
2020 | 2021 | YTD Q2 | YTD Q2 | |||||||||||||||||||||||||||||
Q2 | Q3 | Q4 | Full Year | Q1 | Q2 | 2020 | 2021 | |||||||||||||||||||||||||
Inorganic GAAP Revenue | ||||||||||||||||||||||||||||||||
GAAP Revenue | 162,330 | 228,097 | 313,062 | 888,032 | 181,242 | 209,560 | 346,873 | 390,802 | ||||||||||||||||||||||||
Organic revenue for the period | (140,923 | ) | (216,959 | ) | (299,785 | ) | (812,488 | ) | (171,435 | ) | (203,124 | ) | (295,745 | ) | (374,559 | ) | ||||||||||||||||
Foreign exchange impact | 188 | 760 | 478 | 579 | (147 | ) | 1,041 | (659 | ) | 894 | ||||||||||||||||||||||
Inorganic GAAP Revenue | 21,595 | 11,898 | 13,755 | 76,123 | 9,660 | 7,477 | 50,469 | 17,137 | ||||||||||||||||||||||||
Inorganic Net Revenue | ||||||||||||||||||||||||||||||||
GAAP Revenue | 162,330 | 228,097 | 313,062 | 888,032 | 181,242 | 209,560 | 346,873 | 390,802 | ||||||||||||||||||||||||
Third party direct costs | (31,971 | ) | (75,238 | ) | (113,882 | ) | (254,801 | ) | (23,168 | ) | (27,715 | ) | (65,681 | ) | (50,884 | ) | ||||||||||||||||
Net revenue | 130,359 | 152,859 | 199,180 | 633,231 | 158,074 | 181,845 | 281,192 | 339,918 | ||||||||||||||||||||||||
Organic revenue for the period | (112,795 | ) | (142,291 | ) | (186,473 | ) | (567,292 | ) | (148,588 | ) | (175,409 | ) | (238,528 | ) | (321,963 | ) | ||||||||||||||||
Foreign exchange impact | 188 | 760 | 478 | 579 | (147 | ) | 1,041 | (659 | ) | 894 | ||||||||||||||||||||||
Inorganic Net Revenue | 17,752 | 11,328 | 13,185 | 66,518 | 9,338 | 7,477 | 42,005 | 17,061 |
Note: Actuals may not foot due to rounding.
Page 10
Exhibit 99.4
1 SECOND QUARTER 2021 EARNINGS CONFERENCE CALL AUGUST 4, 2021
FORWARD LOOKING INFORMATION & OTHER INFORMATION 2 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 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 “Transactions”) or the occurrence of difficulties in connection with the Transactions ; • adverse tax consequences in connection with the 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 attributes may result in increased tax costs ; • the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions ; • the impact of uncertainty associated with the Transactions on the Company’s businesses ; • direct or indirect costs associated with the Transactions, which could be greater than expected ; • risks associated with severe effects of international, national and regional economic conditions ; • the risk of parties challenging the Transactions or the impact of the Transactions on the Company’s debt arrangements ; • the Company’s ability to attract new clients and retain existing clients ;
FORWARD LOOKING INFORMATION & OTHER INFORMATION 3 • 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 out lined in more detail in the Company’s 2020 Form 10 - K, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2021 and accessible on the SEC’s website at www .sec.gov., under the caption “Risk Factors,” and in the Company’s other SEC filings.
4 SECOND QUARTER 2021 FINANCIAL RESULTS
SECOND QUARTER & SIX MONTHS ENDED JUNE 30, 2021 FINANCIAL HIGHLIGHTS 5 GAAP Revenue ▪ Q2 2021 GAAP revenue of $209.6 million reported quarter on quarter growth of $47.2 million, or 29.1%, compared to Q2 2020 of $162.3 million ▪ Q2 2021 GAAP revenue reported sequential growth of $28.3 million, or 15.6%, compared to Q1 2021 of $181.2 million ▪ Six Months 2021 reported GAAP Revenue of $ 390.8 million reported period on period growth of $ 43.9 million, or 12.7%, compared to Q2 2020 of $346.9 million Net Revenue (1) ▪ Q2 2021 Net revenue of $181.8 million reported quarter on quarter growth of $51.5 million, or 39.5%, compared to Q2 2020 of $130.4 million ▪ Q2 2021 Net revenue reported sequential growth of $23.8 million, or 15.0%, compared to Q1 2021 of $158.1 million ▪ Six Months 2021 reported Net Revenue of $ 339.9 million reported period on period growth of $ 58.7 million, or 20.9%, compared to Q2 2020 of $281.2 million Adjusted EBITDA (2) ▪ Q2 2021 Adjusted EBITDA of $38.7 million reported quarter on quarter growth of $18.5 million, or 91.5%, compared to Q2 2020 of $20.2 million ▪ Q2 2021 Adjusted EBITDA reported sequential growth of $14.9 million, or 62.4%, compared to Q1 2021 of $23.8 million ▪ Six Months 2021 reported Adjusted EBITDA of $ 62.6 million reported period on period growth of $ 20.7 million, or 49.5%, compared to Q2 2020 of $41.8 million Note: See appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 21 (2) – Refer to non - GAAP reconciliation of Adjusted EBITDA on slide 19, 21 and 21
SECOND QUARTER 2021 REVENUE HIGHLIGHTS 6 Components of GAAP Revenue Q2 2021 GAAP revenue growth was $47.2 million, or 29.1%, and consisted of the following: ▪ Organic revenue growth of $38.7 million, or 23.8% ▪ Inorganic revenue contributed $ 7.5 million ▪ Foreign exchange effects on revenue was $1.0 million Components of Net Revenue (1) Q2 2021 Net revenue growth was $51.5 million, or 39.5%, and consisted of the following: ▪ Organic net revenue growth of $43.0 million, or 33.0% ▪ Inorganic net revenue contributed $7.5 million ▪ Foreign exchange effects on net revenue was $1.0 million Note : See appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 21
SIX MONTHS 2021 REVENUE HIGHLIGHTS 7 Components of GAAP Revenue Six Months 2021 GAAP revenue growth was $43.9 million, or 12.7%, and consisted of the following: ▪ Organic revenue growth of $25.9 million, or 7.5% ▪ Inorganic revenue contributed $1 7.1 million ▪ Foreign exchange effects on revenue was $0.9 million Components of Net Revenue (1) Six Months 2021 Net revenue growth was $58.7 million, or 20.9%, and consisted of the following : ▪ Organic net revenue growth of $40.8 million, or 14.5% ▪ Inorganic net revenue contributed $17.1 million ▪ Foreign exchange effects on net revenue was $0.9 million Note : See appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 18
8 SUMMARY OF OPERATING PERFORMANCE COMPARATIVE: 2021 - Q2 VS 2020 - Q2 & SIX MONTHS 2021 VS SIX MONTHS 2020 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 21 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2021 2020 % Change 2021 2020 % Change Net Revenue $ 181,845 $ 130,356 39.5% $ 339,918 $ 281,192 20.9% Third - party direct costs 27,715 31,974 - 13.3% 50,884 65,681 - 22.5% Revenue $ 209,560 $ 162,330 29.1% $ 390,802 $ 346,873 12.7% Operating expenses: Cost of services sold 122,074 103,296 18.2% 234,073 224,054 4.5% Office and general expenses 52,674 41,243 27.7% 104,952 84,515 24.2% Depreciation and amortization 10,381 10,108 2.7% 21,331 19,864 7.4% Total operating expenses 185,129 154,647 19.7% 360,356 328,433 9.7% Operating income 24,431 7,683 218.0% 30,446 18,440 65.1% Other expenses, net: Interest expense, net (1,935) (1,976) (3,286) (2,887) Other expense, net (486) (691) 122 2,336 Income before taxes and equity in earnings (losses) of unconsolidated affiliates 22,010 5,016 27,282 17,889 Provision for income taxes (3,348) (134) (4,021) (593) Income before equity in earnings (losses) of unconsolidated affiliates 18,662 4,882 23,261 17,296 Equity in earnings (losses) of unconsolidated affiliates (3) (37) 1 42 Net income 18,659 4,845 23,262 17,338 Less : Net income attributable to noncontrolling interests 1,470 1,671 2,623 2,809 Less: Net (loss) income attributable to redeemable noncontrolling interests (156) (1,097) (1,071) (1,789) Net income attributable to Member $ 17,345 $ 4,271 $ 21,710 $ 16,318
GAAP REVENUE & NET REVENUE SUMMARY 9 PRIVILEGED & CONFIDENTIAL | DRAFT (in thousands) Quarter on Quarter Change (2 nd Quarter) GAAP REVENUE Revenue % Change JUNE 30, 2020 162,330 Organic Revenue 38,712 23.8% Inorganic Revenue (1) 7,477 4.6% Foreign exchange effects 1,041 0.6% Total Change 47,228 29.1% JUNE 30, 2021 209,560 Quarter on Quarter Change (2 nd Quarter) NET REVENUE (1) Revenue % Change JUNE 30, 2020 130,356 Organic Revenue 43,010 33.0% Inorganic Revenue (1) 7,437 5.7% Foreign exchange effects 1,041 0.8% Total Change 51,488 39.5% JUNE 30, 2021 181,845 Six Months Change Revenue % Change 346,873 25,899 7.5% 17,136 4.9% 894 0.3% 43,929 12.7% 390,802 Six Months Change Revenue % Change 281,192 40,771 14.5% 17,061 6.1% 894 0.3% 58,726 20.9% 339,918 Note: S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Inorganic Revenue and Net Revenue on slide 28
GAAP REVENUE & NET REVENUE ADJUSTED BASIS 10 PRIVILEGED & CONFIDENTIAL | DRAFT Note: S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Adjusted Results on slide 23 and 24 (in thousands) Quarter on Quarter Change Year to Date (2 nd Quarter) (2 nd Quarter) GAAP REVENUE Revenue % Change Revenue % Change June 30, 2020 $ 148,959 $ 321,325 Organic Revenue 65,454 43.9% 76,994 24.0% Inorganic Revenue (1) 7,477 5.0% 17,136 5.3% Foreign exchange effects 1,041 0.7% 894 0.3% Total Change 73,971 49.7% 95,024 29.6% June 30, 2021 $ 222,931 $ 416,350 Quarter on Quarter Change Year to Date (2 nd Quarter) (2 nd Quarter) NET REVENUE (1) Revenue % Change Revenue % Change June 30, 2020 $ 125,511 $ 266,799 Organic Revenue 52,701 42.0% 69,558 26.1% Inorganic Revenue (1) 7,437 5.9% 17,061 6.4% Foreign exchange effects 1,041 0.8% 894 0.3% Total Change 61,179 48.7% 87,513 32.8% June 30, 2021 $ 186,690 $ 354,311 REVENUE ADJUSTED FOR POLITICAL SEASONALITY
GAAP REVENUE QUARTERLY 11 PRIVILEGED & CONFIDENTIAL | DRAFT 2020 2021 % Change Q221 vs Q220 YTD June (in thousands, except percentages) Q2 Q3 Q4 Q1 Q2 2020 2021 % change GAAP Revenue: Digital - Marketing $ 50,998 $ 54,227 $ 61,318 $ 66,631 $ 76,324 49.7% $101,546 $142,955 40.8% Digital - Content 23,651 28,895 31,905 28,015 33,278 40.7% 64,352 61,293 - 4.8% Research - Technology 11,907 13,311 13,959 15,339 21,933 84.2% 28,217 37,272 32.1% Research - Corporate 12,847 11,553 17,348 16,575 17,770 38.3% 25,161 34,345 36.5% Communications, Public Affairs and Advocacy 52,423 107,465 173,192 43,300 48,580 - 7.3% 104,662 91,880 - 12.2% All Other 10,504 12,646 15,341 11,382 11,676 11.2% 22,934 23,058 0.5% Total $ 162,331 $ 228,097 $ 313,062 $ 181,242 $ 209,560 29.1% $346,872 $390,803 12.7%
ADJUSTED EBITDA QUARTERLY 12 PRIVILEGED & CONFIDENTIAL | DRAFT Note: S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 21 (2) – Refer to non - GAAP reconciliation of Adjusted EBITDA on slide 18, 19 and 20 (in thousands, except percentages) 2020 2021 % Change Q221 vs. Q220 Q2 Q3 Q4 Q1 Q2 Digital - Marketing $ 8,540 $ 14,596 $ 15,759 $ 11,384 $ 16,663 95.1% Digital - Content (2,237) (792) 1,995 (1,797) 1,337 n/a Research – Technology 2,342 2,681 2,985 3,673 6,010 156.6% Research - Corporate 1,883 849 2,741 2,589 3,372 79.1% Communications, Public Affairs and Advocacy 9,023 20,256 39,539 8,009 10,047 11.3% All Other 1,420 1,848 1,482 576 1,668 17.5% Corporate (753) (2,316) (304) (592) (379) n/a Total $ 20,218 $ 37,122 $ 64,197 $ 23,842 $ 38,718 91.5% GAAP Revenue $ 162,331 $ 228,097 $ 313,062 $ 181,242 $ 209,560 Adjusted EBITDA margin (GAAP Revenue) 12.5% 16.3% 20.5% 13.2% 18.5% Net Revenue $ 130,359 $ 152,859 $ 199,179 $ 158,075 $ 181,844 Adjusted EBITDA margin (Net Revenue) 15.5% 24.3% 32.2% 15.1% 21.3%
ADJUSTED EBITDA SIX MONTHS ENDED 13 Note: S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) – Refer to non - GAAP reconciliation of Net Revenue on slide 21 (2) – Refer to non - GAAP reconciliation of Adjusted EBITDA on slide 18, 19 and 20 (in thousands, except percentages) Six Months Ended June 30 % Change Q221 vs. Q220 2020 2021 Digital - Marketing $ 14,511 $ 28,047 93.3% Digital - Content (1,249) (460) - 63.2% Research - Technology 6,130 9,683 58.0% Research - Corporate 3,063 5,961 94.6% Communications, Public Affairs and Advocacy 19,118 18,056 - 5.6% All Other 1,236 2,244 81.6% Corporate (960) (971) 1.1% Total $ 41,849 $ 62,560 49.5% GAAP Revenue $ 346,873 $390,802 Adjusted EBITDA margin (GAAP Revenue) 12.1% 16.0% Net Revenue $ 281,192 $339,918 Adjusted EBITDA margin (Net Revenue) 14.9% 18.4%
SUMMARY OF CASH FLOW COMPARATIVE: SIX MONTHS 2021 vs SIX MONTHS 2020 Operating Cash as a % of Adjusted EBITDA: Six Months 2021: 62.7% Six Months 2020: 111.7% Net cash used in investing activities included capital expenditures: Six Months 2021: $7,288 Six Months 2020: $5,317 14 Six Months Ended June 30 (in thousands, except percentages) 2021 – Q2 2020 – Q2 Net cash provided by operating activities $39,218 $ 46,813 Net cash used in investing activities (7,288) (7,908) Net cash (used in) provided by financing activities (52,710) (23,653) Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,773 380 Net (decrease) increase in cash, cash equivalents and restricted cash (19,007) 15,632 Cash , cash equivalents and restricted cash at the beginning of the period 92,457 63,860 Cash , cash equivalents and restricted cash at the end of the period $73,450 79,492 Supplemental cash flow information: Cash interest paid (4,649) (4,490) Income taxes paid (3,047) (1,310) Non - cash investing and financing activities: Acquisitions of business - (23,720) Unrealized loss on investments - (4,999) Contributions by Stagwell Media LP 12,122 83,242 Distributions to Stagwell Media LP (13,000) - Payment of deferred acquisition consideration (7,080) (64,322)
AVAILABLE LIQUIDITY (1) 15 PRIVILEGED & CONFIDENTIAL | DRAFT June 30, December 31, (in thousands) 2021 2020 Commitment Under JPM Credit Facility $ 325,000 $ 325,000 Drawn 187,698 201,636 Undrawn Letters of Credit 7,111 5,482 Undrawn Commitments Under JPM Credit Facility (1) 130,192 117,882 Total Cash, Cash Equivalents and Restricted Cash 73,450 92,457 Liquidity $ 203,642 $ 210,339 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) Subject to available borrowings under the JPM Credit Facility.
- - - 187,698 - - - 130,192 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 2021 2022 2023 2024 Borrowing Structure as of June 30, 2021 Standby Letters of Credit Maturity date of Revolver draws Available facility on Revolver DEBT PROFILE AS OF JUNE 30, 2021 BORROWING MATURITY SCHEDULE, COVENANT AND RATIOS Note: See appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) The leverage ratio is not based on generally accepted accounting principles and are not presented as alternatives measures of o perating performance or liquidity. The ratio includes, among other things, pro forma adjustments for acquisitions, one - time char ges, and other items, as defined in the JPM Credit Facility Agreement. They are presented here to demonstrate compliance with the cov enants in the JPM Credit Facility Agreement, as non - compliance with such covenants could have a material adverse effect on the C ompany. (2) Based on borrowings excludes Deferred Acquisition Consideration, which totaled $[X] as of June 30, 2021. (3) On November 13, 2020, the Company entered into a term loan agreement that provided the Company with a Delayed Draw Term Loan A in an aggregate principal amount of $90.0 million (“DD Term Loan A”). The DD Term Loan A will mature on November 13, 2023, provided that if the MDC Proposed Transaction is not consummated within thi rty days of the draw of the DD Term Loan A, the maturity date will be thirty - one days after the draw. Proceeds of the borrowing under the DD Term Loan A will be used to partially fund a distribution by the Company prior to the clo sing of the Proposed MDC Transaction. Borrowing reported on the maturity schedule do not include the unfunded DD Term Loan A. Covenant June 30, 2021 Total Leverage Ratio (1) 1.09 Maximum per covenant 4.25 Minimum per covenant 1.00 16 Adjusted EBITDA Ratios LTM June 30, (in thousands, except ratios) 2021 2020 Adjusted EBITDA $ 163,879 $ 99,071 Total Debt / Adjusted EBITDA 1.2 2.30 Net Debt / Adjusted EBITDA 0.7 1.50 Debt Term debt $ 497 $ 1,491 Borrowings under Revolver 187,698 229,266 Total Debt 188,195 230,757 Cash , cash equivalents and restricted cash 73,450 79,492 Net Indebtedness $ 114,745 $ 151,265 $325M
PRIVILEGED & CONFIDENTIAL | DRAFT (in thousands) June 30, 2021 Net Indebtedness (1) 114,745 Deferred Acquisition Consideration 16,283 Redeemable Non - Controlling Interest 2,626 Non - Redeemable Non - Controlling Interest 30,947 Investments (1,865) Total Other Obligations 47,991 Total Net Obligations 162,736 TOTAL NET OBLIGATIONS 17 Note : See appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” (1) Refer to non - GAAP reconciliation of Net Indebtedness on slide 12
APPENDIX 18
ADJUSTED EBITDA QUARTERLY RECONCILIATION BY SEGMENT 19 Note: S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” For the six months ending June 30, 2020 2021 (in thousands) Q1 Q2 Q3 Q4 Full Year Q1 Q2 2020 2021 Digital – Marketing Operating income 2,413 5,027 10,429 9,939 27,810 3,740 10,715 7,440 14,455 Depreciation and amortization 3,228 3,283 3,096 3,815 13,422 3,728 3,710 6,511 7,438 Deferred acquisition consideration adjustments - - 761 1,239 2,000 3,650 1,956 - 5,606 Other items, net 330 230 308 767 1,634 266 283 560 549 Adjusted EBITDA 5,971 8,540 14,594 15,760 44,866 11,384 16,663 14,511 28,047 Digital - Content Operating income (2,852) (5,738) (4,093) (1,307) (13,990) (5,181) (2,082) (8,590) (7,263) Depreciation and amortization 3,053 2,953 3,030 3,050 12,086 3,148 3,190 6,006 6,338 Deferred acquisition consideration adjustments - - - - - - - - - Other items, net 787 548 271 252 1,858 236 230 1,335 466 Adjusted EBITDA 988 (2,237) (792) 1,995 (46) (1,797) 1,337 (1,249) (460) Research - Technology Operating income 3,301 1,840 2,113 2,113 9,367 3,041 5,380 5,141 8,421 Depreciation and amortization 487 502 568 872 2,429 632 640 989 1,272 Deferred acquisition consideration adjustments - - - - - - - - - Other items, net - - - - - - (10) - - Adjusted EBITDA 3,788 2,342 2,681 2,985 11,796 3,673 6,010 6,130 9,693 Research – Corporate Operating income 609 774 286 2,157 3,827 2,048 2,721 1,383 4,769 Depreciation and amortization 571 559 562 582 2,274 541 651 1,130 1,192 Deferred acquisition consideration adjustments - - - - - - - - - Other items, net - 550 - 2 552 - 0 550 - Adjusted EBITDA 1,180 1,883 848 2,741 6,653 2,589 3,372 3,063 5,961
20 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” For the six months ending June 30, 2020 2021 (in thousands) Q1 Q2 Q3 Q4 Full Year Q1 Q2 2020 2021 Communications, Public Affairs and Advocacy Operating income 8,911 6,314 19,437 35,742 70,404 6,426 8,450 15,225 14,876 Depreciation and amortization 1,183 1,573 1,455 1,696 5,907 1,583 1,395 2,756 2,978 Deferred acquisition consideration adjustments - 1,121 (638) 1,774 2,257 - - 1,121 - Other items, net 1 15 2 327 345 - 202 16 202 Adjusted EBITDA 10,095 9,023 20,256 39,539 78,913 8,009 10,047 19,118 18,056 All Other Operating income (941) 660 1,094 568 1,381 (545) 1,216 (281) 671 Depreciation and amortization 756 760 754 672 2,942 833 310 1,516 1,143 Deferred acquisition consideration adjustments - - - 242 242 288 142 - 430 Other items, net 1 - - - 1 - 0 1 - Adjusted EBITDA (184) 1,420 1,848 1,482 4,566 576 1,668 1,236 2,244 Corporate Operating income (685) (1,231) (2,825) (10,320) (15,061) (3,516) (1,968) (1,916) (5,484) Depreciation and amortization 478 478 509 500 1,965 485 485 956 970 Deferred acquisition consideration adjustments - - - - - - - - - Other items, net - - - 9,516 9,516 2,439 1,103 - 3,542 Adjusted EBITDA (207) (753) (2,316) (304) (3,580) (592) (379) (960) (971) ADJUSTED EBITDA QUARTERLY RECONCILIATION BY SEGMENT
ADJUSTED EBITDA CONSOLIDATED RECONCILIATION 21 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” For the six months ending June 30, 2020 2021 (in thousands, except percentages) Q1 Q2 Q3 Q4 Full Year Q1 Q2 2020 2021 Net income 12,493 4,845 21,422 32,701 71,461 4,603 18,659 17,338 23,262 Equity in (losses) earnings of unconsolidated affiliates (79) 37 35 (51) (58) (4) 3 (42) (1) Provision for income taxes 459 134 2,618 2,726 5,937 673 3,348 593 4,021 Other (income) expense, net (3,027) 691 594 1,919 177 (608) 486 (2,336) (122) Interest expense, net 911 1,976 1,778 1,558 6,223 1,351 1,935 2,887 3,286 Depreciation and amortization 9,756 10,108 9,974 11,187 41,025 10,950 10,381 19,864 21,331 Deferred acquisition consideration adjustments - 1,121 149 3,227 4,497 3,936 2,098 1,121 6,034 Other items, net 1,118 1,306 552 10,931 13,906 2,941 1,808 2,424 4,749 Adjusted EBITDA 21,631 20,218 37,122 64,198 143,168 23,842 38,718 41,849 62,560
RECONCILIATIONS INORGANIC GAAP REVENUE AND INORGANIC NET REVENUE 2020 2021 (in thousands) Q1 Q2 Q3 Q4 FY Q1 Q2 YTD INORGANIC GAAP REVENUE GAAP revenue $ 184,543 $ 162,330 $ 228,097 $ 313,062 $ 888,032 $ 181,242 $ 209,560 $ 390,802 Organic revenue for the period (154,822) (140,923) (216,959) (299,785) (812,488) (171,435) (203,124) (374,559) Foreign exchange effects (847) 188 760 478 579 (147) 1,041 894 Inorganic GAAP Revenue $ 28,874 $ 21,595 $ 11,898 $ 13,755 $ 76,123 $ 9,660 $ 7,477 $ 17,137 INORGANIC NET REVENUE GAAP revenue $ 184,543 $ 162,330 $ 228,097 $ 313,062 $ 888,032 $ 181,242 $ 209,560 390,802 Third party direct costs (33,710) (31,971) (75,238) (113,882) (254,801) (23,168) (27,715) (50,884) Net revenue 150,833 130,359 152,859 199,180 633,231 158,074 181,845 339,918 Organic revenue for the period (125,733) (112,795) (142,291) (186,473) (567,292) (148,588) (175,409) (321,963) Foreign exchange effects (847) 188 760 478 579 (147) 1,041 894 Inorganic Net Revenue $ 24,253 $ 17,752 $ 11,328 $ 13,185 $ 66,518 $ 9,338 $ 7,477 $ 17,061 22 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES”
RECONCILIATIONS SECOND QUARTER - ADJUSTED GAAP REVENUE AND ADJUSTED NET REVENUE 23 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” Communications, Public Affairs and Advocacy ("CPAA") Normalization Adjustment GAAP Revenue As Reported plus the difference between current period reported and Average of CPAA Periods Reported As Reported Reporting Periods Calculations GAAP REVENUE For the three months ending June 30, Average of CPAA Periods Reported Difference between current period reported and Average As Reported 2019 2020 % Change i ii iii iv = (ii + iii) / 2 v = ii - iv vi = v + i June 30, 2020 $ 162,330 $ 25,681 $ 52,423 $ 39,052 $ (13,371) $ 148,959 Organic Revenue 38,712 26,742 (3,843) 65,453 43.9% Inorganic Revenue(1) 7,477 - - 7,477 5.0% Foreign exchange effects 1,041 - - 1,041 0.7% Total Change 47,230 26,742 (3,843) 73,971 49.7% June 30, 2021 $ 209,560 $ 52,423 $ 48,580 $ 50,501 $ 13,371 $ 222,930 As Reported Reporting Periods Calculations Net Revenue As Reported plus the difference between current period reported and Average of CPAA Periods Reported Net Revenue For the three months ending June 30, Average of CPAA Periods Reported Difference between current period reported and Average As Reported 2019 2020 % Change i ii iii iv = (ii + iii) / 2 v = ii - iv vi = v + i June 30, 2020 $ 130,356 $ 16,354 $ 26,045 $ 21,200 $ (4,845) $ 125,511 Organic Revenue 43,011 9,691 4,964 52,701 42.0% Inorganic Revenue(1) 7,437 - - 7,437 5.9% Foreign exchange effects 1,041 - - 1,041 0.8% Total Change 51,489 9,691 4,964 61,179 48.7% June 30, 2021 $ 181,845 $ 26,045 $ 31,009 $ 28,527 $ 4,845 $ 186,690
RECONCILIATIONS SIX MONTHS ENDED - ADJUSTED GAAP REVENUE AND ADJUSTED NET REVENUE 24 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES” Communications, Public Affairs and Advocacy ("CPAA") Normalization Adjustment GAAP Revenue As Reported plus the difference between current period reported and Average of CPAA Periods Reported As Reported Reporting Periods Calculations GAAP REVENUE For the six months ending June 30, Average of CPAA Periods Reported Difference between current period reported and Average As Reported 2019 2020 % Change i ii iii iv = (ii + iii) / 2 v = ii - iv vi = v + i June 30, 2020 $ 346,873 $ 53,567 $ 104,662 $ 79,115 $ (25,548) $ 321,325 Organic Revenue 25,899 51,095 (14,966) 76,994 24.0% Inorganic Revenue(1) 17,136 - 2,183 17,136 5.3% Foreign exchange effects 894 - - 894 0.3% Total Change 43,929 51,095 (12,783) 95,024 29.6% June 30, 2021 $ 390,802 $ 104,662 $ 91,879 $ 98,270 $ 25,548 $ 416,349 As Reported Reporting Periods Calculations Net Revenue As Reported plus the difference between current period reported and Average of CPAA Periods Reported Net Revenue For the six months ending June 30, Average of CPAA Periods Reported Difference between current period reported and Average As Reported 2019 2020 % Change i ii iii iv = (ii + iii) / 2 v = ii - iv vi = v + i June 30, 2020 $ 281,192 $ 31,302 $ 60,088 $ 45,695 $ (14,393) $ 266,799 Organic Revenue 40,771 28,786 (9,463) 69,558 26.1% Inorganic Revenue(1) 17,061 - 2,127 17,061 6.4% Foreign exchange effects 894 - - 894 0.3% Total Change 58,726 28,786 (7,337) 87,513 32.8% June 30, 2021 $ 339,918 $ 60,088 $ 52,751 $ 56,420 $ 14,393 $ 354,312
OTHER MISCELLANEOUS INFORMATION 2020 2021 (in thousands) Q1 Q2 Q3 Q4 FY Q1 Q2 YTD OTHER ITEMS, NET Acquisition - related expenses $ 657 $ 478 $ 461 $ 9,392 $ 10,988 $ 2,646 $ 1,297 $ 3,943 Other non - recurring items - - - - - 295 511 806 Other restructuring costs 470 865 94 1,490 2,919 - - - Total other items, net $ 1,127 $ 1,343 $ 555 $ 10,882 $ 13,907 $ 2,941 $ 1,808 $ 4,749 CASH INTEREST, NET & OTHER Cash interest paid $ 1,871 $ 2,619 $ 2,798 $ 1,999 $ 9,287 $ 2,361 $ 2,288 $ 4,649 Interest income 317 225 232 234 1,008 200 75 275 Total cash interest, net & other $ 2,188 $ 2,844 $ 3,030 $ 2,233 $ 10,295 $ 2,561 $ 2,363 $ 4,924 CAPITAL EXPENDITURES, NET Capital expenditures $ 2,663 $ 2,654 $ 3,660 $ 3,122 $ 12,099 $ 3,311 $ 3,977 $ 7,288 MISCELLANEOUS DISCLOSURES Net income attributable to noncontrolling interest $ 1,138 $ 1,671 $ 4,522 $ 10,900 $ 18,231 $ 1,153 $ 1,470 $ 2,623 Net loss attributable to redeemable noncontrolling interest (692) (1,097) (908) (429) (3,126) (915) (156) (1,071) Cash taxes 2,105 (795) 2,308 7,096 10,714 928 2,119 3,047 25 Note : S ee appendix – “DEFINITION OF NON - GAAP FINANCIAL MEASURES”
DEFINITION OF NON - GAAP FINANCIAL MEASURES 26 In addition to its reported results, Stagwell Marketing Group has included in this supplemental management presentation certa in 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 Comp any'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 foll owing: Net Revenue GAAP Revenue adjusted to exclude certain third - party direct costs when the Company acts as principal for the services rendered in the client arrangement. Inorganic Revenue “Inorganic Revenue” consists of ( i ) for acquisitions during the current year, the revenue effect from such acquisitions as if the acquisition had been owned du rin g 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 th at entire year (or same period as the current reportable period), taking into account their respective pre - acquisition revenues for the applicable periods. Organic Revenue Organic revenue is calculated by subtracting both the foreign exchange and acquisition (disposition) components from total re ven ue. ”Organic revenue growth” and “organic revenue decline” refers to the positive or negative changes in revenue that were not attributable to the effects of foreign exchange or acquired run rate re ven ue from acquisitions. The organic revenue growth (decline) component reflects the constant currency effects of (a) the change in revenue of the Company’s Brands that have been held throughout ea ch of the comparable periods presented, and (b) inorganic revenue. Adjusted EBITDA Adjusted EBITDA is a non - GAAP financial measure that represents Net income adjusted for (a) interest expense, (b) provision for income taxes, (c) depreciation and amortization expense, (d) other income (expenses), (e) equity in earnings (losses) of unconsolidated affiliates, (f) deferred acquisition consideration adjustments, an d (g) other items, net. Other items, net includes items such as acquisition - related expenses, other non - recurring items and other restructuring costs. Net Indebtedness Net Indebtedness is a non - GAAP financial measure that is defined as total debt less cash, cash equivalents and restricted cash. Included in the Company’s earnings release and supplemental management presentation are tables reconciling The Company’s repo rte d results to arrive at certain of these non - GAAP financial measures.