Stagwell Inc. · NASDAQ:STGW
Stagwell — MDC Partners — Merger or Acquisition (May 2021)
48 slides from Stagwell's merger presentation, May 17, 2021
Slide 1: Transforming Marketing
TRANSFORMING MARKETING
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward - Looking Statements This communication may contain certain forward - looking statements (collectively, “forward - looking statements”) within the meanin g of Section 27A of the U.S. Securities Act of 1933, as amended and Section 21E of the U.S. Exchange Act an
Slide 3: Additional Information and Where to Find It
Additional Information and Where to Find It In connection with the Proposed Transaction, MDC and New MDC filed with the SEC the Proxy Statement/Prospectus. This commun ica tion is not a substitute for the Proxy Statement/Prospectus or any other document MDC may file with the SEC in connection with t
Slide 4: Pro Forma Financial Information
Pro Forma Financial Information The unaudited summary pro forma financial information contained in this presentation has been prepared for illustrative purpo ses only and is not necessarily indicative of the operating results or financial position that would have been achieved if the Proposed Transa
Slide 5: Non-GAAP Financial Measures
Non - GAAP Financial Measures The presentation includes certain financial measures that the SEC defines as “non - GAAP financial measures.” MDC’s and Stagwell’s respective managements believe that such non - GAAP financial measures, when read in conjunction with the results reported in accordance wi
Slide 6: Better Together
BETTER TOGETHER “The combination unites the award - winning talent of MDC with the advanced technology platform of Stagwell. Together, we become the transformative company that modern marketers need.” MARK PENN Chairman & CEO 6
Slide 7: Digital Media Is Disrupting Marketing
DIGITAL MEDIA IS DISRUPTING MARKETING 8% 5% 31% 6% 1% 7% 44% 33% 15% 35% 9% 6% 2% GLOBAL AD SPENDING 2000 (Total $329B) GLOBAL AD SPENDING 2019 (Total $639B) Newspapers Magazines Television Radio Cinema Outdoor Internet BY 2025 NEARLY 68% OF US AD SPEND IS EXPECTED TO BE ONLINE CREATING NEW ADDRESSA
Slide 8: Aging Holding Companies Control Half the Marketplace
$21B $15B $12B $10B $120B SPENT ON ADVERTISING & MARKETING SERVICES IN 2018 AGING HOLDING COMPANIES CONTROL HALF THE MARKETPLACE DESPITE OUTDATED MODELS AS CLIENTS LACK AT - SCALE ALTERNATIVES Source: Morgan Stanley research Dentsu Accenture Interactive PwC Di gital Deloitte Digital IBM iX OTHERS $
Slide 9: The Marketplace
9 THE MARKETPLACE The combination brings together the right mix of talent + technology Consulting firms lack essential creative talent JUST RIGHT FOR THE TIMES Legacy holding companies grew too big 9
Slide 10: Better Together: Harmony
BETTER TOGETHER: HARMONY A MODERN MARKETING PLATFORM UNITING CREATIVE TALENT & TECHNOLOGY A LONG HISTORY OF AWARD - WINNING CREATIVITY PERFORMANCE BORN OF THE NEW DIGITAL ECONOMY
Slide 11: Better Together Today: One Company
11 Combined company with targets of 5%+ annual organic growth , driven by 10 - 15% digital marketing growth and complementary capabilities, and 9%+ total annual revenue growth including new products and acquisitions Integrated services driving $30M in cost synergies , with ~90% achieved in the first
Slide 12: Better Together: MDC and Stagwell 2020 Actuals and 2021 Projections
BETTER TOGETHER ($ M ) 12 MDC 2020 Actual Stagwe ll 2020 Actual REVENUE: $888 NET REV: $633 ADJ. EBITDA: $143 COUNTRIES: 20 EMPLOYEES: 3,865 GAAP REV: $1,199 NET REV: $1,023 ADJ. EBITDA: $177 COUNTRIES: 14 EMPLOYEES: 4,900 2021 PF Projections MDC 2021 Est. GAAP REVENUE: $1,285 - 1,305 ADJ. EBITDA: $
Slide 13: Equation for Success
13 Equation for Success ($M) 2025 Combined Organic Revenue Growth $2,600 + New Digital Revenue Streams $75 + M&A Growth $325 = TARGET GOAL $3,000 $3 BILLION+ AND BEYOND OF GAAP REVENUE IN 2025 THROUGH COMBINATION OF ORGANIC, NEW REVENUE STREAMS & ACQUISITIONS OPPORTUNITY TO GROW TO BETTER TOGETHER T
Slide 14: Growth Driver 1: Digital Transformation Engine
GROWTH DRIVER 1: DIGITAL TRANSFORMATION ENGINE 14 10% - 15% ANNUAL GROWTH DRIVEN BY E - COMMERCE, ONLINE ADVOCACY, & DIGITAL MARKETING SERVICES Political & advocacy consulting, digital strategy, & online fundraising Designing, creating, implementing and managing consumer e - commerce platforms Servi
Slide 15: Business Mix: Deepened Expertise in Digital Services
(% 2019 Revenue) Advertising 59% HIGH GROWTH DIGITAL SERVICES 9% Media 7% Other 9% Advertising 31 % Marketing Comm. / PR 17% HIGH GROWTH DIGITAL SERVICES 38% Media 4 % Other 5 % Research 5 % Marketing Comm. / PR 16% BUSINESS MIX DEEPENED EXPERTISE IN DIGITAL SERVICES 15 (% 2020 Revenue) Note: Does n
Slide 16: Growth Driver 2: Pioneering Scaled Creative Performance
16 PRECISION MEDIA & DATA CAPABILITIES GROWTH DRIVER 2: PIONEERING SCALED CREATIVE PEFORMANCE THE COMBINATION CREATES SOMETHING NEW IN THE MARKETPLACE: A FORMIDABLE CONTENDER PURPOSE - BUILT TO SCALE CREATIVE PERFORMANCE Our data - fueled media and content practice will invest to lead the industry i
Slide 17: Growth Driver 3: New SaaS Products
GROWTH DRIVER 3: NEW SaaS PRODUCTS Audience identification and activation I nfluencer management platform AI for public relations pros Mobile device usage and behavior Modern brand management Online reputation management Transformational media execution Traveler targeting across channels Content rev
Slide 18: Growth Driver 4: Accessing Global Contracts
18 Growth Driver 4: ACCESSING GLOBAL CONTRACTS THE INTEGRATED SOLUTIONS NEEDED TO UNLOCK $90 - $150M IN NEW BUSINESS A YEAR LEADERSHIP THAT BRINGS IT ALL TOGETHER INTO ONE SYNERGISTIC OFFERING Second - to - None Creativity & Communications Blue Chip Customer Base Precision Media & Data Capabilities
Slide 19: Second-to-None Creativity & Communications
19 SECOND - TO - NONE CREATIVITY & COMMUNICATIONS IMPACTFUL WORK SHAPING CULTURE & CONVERSATION 19 EMMY AWARDS 333 396 129
Slide 20: High Growth Areas of Issue Communications
20 SECOND - TO - NONE CREATIVITY & COMMUNICATIONS HIGH GROWTH AREAS OF ISSUE COMMUNICATIONS, DIGITAL FUNDRAISING & CRISIS MANAGEMENT 162 candidates represented across parties $222M in placed media over $720M raised across 17.5M transactions in 2020 alone
Slide 21: Blue Chip Customer Base
SECOND - TO - NONE CREATIVITY & COMMUNICATIONS BLUE CHIP CUSTOMER BASE Communications / Media Retail Food & Beverage Consumer Products Technology Automotive Financial Services Healthcare 21
Slide 22: A $4.4 Billion Integrated Media & Data Powerhouse
22 PRECISION MEDIA & DATA CAPABILITIES A $4.4 BILLION INTEGRATED MEDIA & DATA POWERHOUSE FOR THE POST - COOKIE WORLD 2,000+ media experts across 40+ global offices Note: Represents media billings under management.
Slide 23: Rigorous Consumer Insights & Strategy
23 Polling in 12 countries each week with The Harris Poll & NRG 5 million surveys a year across all consumer touchpoints RIGOROUS CONSUMER INSIGHTS & STRATEGY CONNECTING DATA ACROSS POLLING, BEHAVIOR, RETAIL, WEB & MEDIA TO UNDERSTAND CONSUMERS Snap, NRG Study: Gen Z, Millennials Gravitate Toward Sh
Slide 24: Unique & Accurate Data
24 RIGOROUS CONSUMER INSIGHTS & STRATEGY UNIQUE & ACCURATE DATA HARRIS POLL PRODUCED THE SINGLE LARGEST TRACKER OF COVID CONSUMER SENTIMENT Source: https://americanresearchgroup.com/ratings/2020/USPres.html & THE MOST ACCURATE PRESIDENTIAL POLL
Slide 25: Results-Driven Technology & Digital Transformation
25 RESULTS - DRIVEN TECHNOLOGY & DIGITAL TRANSFORMATION GLOBALLY SCALED DESIGN, DEVELOPMENT & IMPLEMENTATION ACROSS PLATFORMS 24/7 scaled global engineering teams with over 600 engineers
Slide 26: Combined Presence Spans 23 Countries and 67 Cities
26 STAGWELL MDC BOTH AS OF 12.31.20 With Affiliates Cities 42 49 67 80 Countries 14 20 23 31 Employees 4,900 3,865 8,765 ~10,765 BETTER TOGETHER: MDC & STAGWELL’S COMBINED PRESENCE SPANS 23 COUNTRIES AND 67 CITIES AFFILIATES IN 28 CITIES, 23 COUNTRIES WITH ~2,000 EMPLOYEES AFFILIATE Note: Affiliates
Slide 27: Leadership Team with Experience in Value Creation
LEADERSHIP TEAM WITH EXPERIENCE IN VALUE CREATION AND MARKETING SERVICES MARK PENN HAS OVER 45 YEARS OF SUCCESSFUL OPERATING EXPERIENCE AND INDUSTRY EXPERTISE 27 Founder & Pollster Founded Penn and Schoen in 1975 with his Harvard roommate Doug Schoen Grower Under Penn’s leadership, firm expanded to
Slide 28: Financial Detail
FINANCIAL DETAIL 28
Slide 29: Stagwell: A Proven Platform for Growth & Acquisitions
29 STAGWELL: A PROVEN PLATFORM FOR GROWTH & ACQUISITIONS $294 $426 $629 2017A 2018A 2019A 2020A $ in millions GAAP REVENUE 2015 & 2016 $888 29 Source: Stagwell Management and Stagwell audited financial statements.
Slide 30: MDC: Growing Profitability & Declining Leverage Ratio
EXPANDING COVENANT EBITDA (LTM) MDC: GROWING PROFITABILITY & DECLINING LEVERAGE RATIO 1 Indicates fair value of M&A obligations in accordance with GAAP. 2 Represents aggregate of contingent payments and fixed payments balances. 3 Total Leverage Ratio, as defined under the credit agreement, includes
Slide 31: Pro Forma Financials
Pro Forma ($M) 2020 2021 E Revenue 2,087 2,110 – 2,150 Adjusted EBITDA 1 333 325 – 340 Plus: Run Rate Synergies 2 30 30 Adjusted EBITDA with Run Rate Synergies 363 355 – 370 % Margin 17% 17% Pro Forma Cash Generation 3 200 – 220 % Conversion (mid - point) 58% Stagwell 2020 financial information pres
Slide 32: An Enhanced Credit Profile
WHAT WE CAN BUILD TOGETHER: AN ENHANCED CREDIT PROFILE TRANSACTION REDUCES LEVERAGE BY ~1X $ in millions, (unaudited) LTM as of: 12/31/20 12/31/20 Pro Forma at Closing Revenue $1,199 $888 $2,087 Adj. EBITDA (Incl. Synergies) $190 1 $143 $333 ($363) Net Debt $809 3 $110 4 $1,157 5 Note: Assumes ~$30
Slide 33: Pro Forma Capitalization
PRO FORMA CAPITALIZATION 33 Pro Forma Capitalization Diluted Shares Outstanding 26% 77 PF Stagwell Units 74% 216 Pro Forma Fully Diluted No. of Shares Outstanding 100% 293 Pro Forma Capitalization as of 12/31/20. Fully Diluted Number of Shares Outstanding includes RSUs and contingent future commi tm
Slide 34: Other Obligations
APPENDIX OTHER OBLIGATIONS 34 $Millions (unaudited) MDC 12/31/20 Stagwell 12/31/20 Pro Forma Net Debt $809 $110 $1,157 4 Deferred Acquisition Consideration 83 18 101 Redeemable NCI 27 1 28 Non - Redeemable NCI 41 40 81 Series 4 Preferred 1 129 – 99 Series 6 Preferred 58 – 58 Investments 2 – (14) (14
Slide 35: What We Can Build Together: Cost Synergies of $30 Million
Corporate 9% T&E 5% Shared Services 16% Media 32% Production 10% Research 12% Real Estate 9% Other 1 7% Annualized Cost Synergies ~55% Expected To Be Realized by Year 1 ~9 0 % Expected To Be Realized by Year 2 100% Expected To Be Realized by Year 3 $30 MILLION ~ WHAT WE CAN BUILD TOGETHER: COST SYNE
Slide 36: Improved Credit Outlook
IMPROVED CREDIT OUTLOOK “We believe [Stagwell’s] specialty in digital services and polling research will complement MDC’s portfolio of creative advertising agencies. Moreover, we expect the combined company will benefit from Stagwell’s history of positive revenue growth, good EBITDA margins and favo
Slide 37: Making Progress: Added Value to Debt and Equity
37 MAKING PROGRESS ADDED VALUE TO DEBT AND EQUITY MDC 2024 Senior Notes MDC Class A Shares Stagwell Investment In MDC Partners Stagwell Investment In MDC Partners Note: As of May 6, 2021.
Slide 38: What We Can Build Together: Organic Growth Acceleration
MDC & Stagwell’s complementary capabilities have previously resulted in pitch invitations for $15+ million assignments; just a handful of potential collaborative wins could generate $90 - $150 million annual top - line benefit over time 38 Multi - year, multi - brand creative work serviced by joint
Slide 39: A Plan for $3 Billion in Annual Revenues
WHAT WE CAN BUILD TOGETHER: A PLAN FOR $3 BILLION IN ANNUAL REVENUES Equation For Success ($M ) 2025 Basis Combined Organic Revenue Growth $2,600 5%+ annual organic growth, driven by 10 - 15% digital marketing growth and complementary capabilities + New Digital Revenue Streams $75 Growth & developme
Slide 40: Appendix
APPENDIX 40
Slide 41: Current MDC Corporate Structure
APPENDIX CURRENT MDC CORPORATE STRUCTURE 41 $211.5M Credit Agreement $870M, 7.5% Senior Notes Series 4 & 6 Preferred Shares Public Operating CDN LPs Non - US Corporate Subsidiaries of MDC 3 MaxxCom Inc. (US) 2 MDC (CDN) 1 1 Issuer under MDC 7.50% Senior Notes Due 2024. 2 Borrower under MaxxCom Credi
Slide 42: Pro Forma Corporate Structure
APPENDIX PRO FORMA CORPORATE STRUCTURE 42 1 Comprises $325M Revolver ($218M drawn on a pro forma basis; incremental revolving commitments of $90M allowed under the cre dit agreement) and $90M TLA. 2 Holds operating entities of Stagwell Marketing Group. 3 Holding Company which contains US corporate s
Slide 43: Pro Forma Credit Profile
APPENDIX PRO FORMA CREDIT PROFILE LESS LEVERAGE, BROADER SCALE AND FINANCIAL FLEXIBILITY PRO FORMA CAPITAL STRUCTURE PRO FORMA MATURITY SCHEDULE 8 1 Adjustments based on Stagwell projected balance sheet as of closing . 2 Assumes ~$66M of fees & expenses paid in cash. 3 Stagwell net debt includes $21
Slide 44: Stagwell Senior Secured Credit Facility
APPENDIX STAGWELL SENIOR SECURED CREDIT FACILITY 44 1 Includes Pledge and Security Agreements; Mortgages (if any); Pledge Agreements from certain minority shareholders under the RC F; and other agreements, instruments and documents intended to create, perfect or evidence liens to secure the secured
Slide 45: Series Convertible Preference Shares (Goldman Sachs)
APPENDIX SERIES 4 CONVERTIBLE PREFERENCE SHARES (GOLDMAN SACHS) 45 Size ▪ Liquidation Preference of $129M as at December 31, 2020. ▪ Subject to completion of the Transaction, MDC will redeem $30M of the Series 4 preference shares in exchange for, at MDC”s op tio n, either (i) $25 million in cash or
Slide 46: MDC Non-GAAP Reconciliation
APPENDIX MDC NON - GAAP RECONCILIATION 46 1 Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one - time charges, permitted dispositions an d other adjustments, as defined in the Company’s Credit Agreement. Covenant EBITDA is calculated as the aggregate of operatin g
Slide 47: Stagwell Non-GAAP Reconciliation
APPENDIX STAGWELL NON - GAAP RECONCILIATION 47 Three Months Ended December 31 Full - Year Ended December 31 (in thousands) 2019 - Q4 2020 - Q4 2019 2020 Net income $ 3,415 $ 32,700 $ 20,730 $ 71,461 Income before equity in earnings (losses) of unconsolidated affiliates (32) (51) 158 (58) Provision f
Slide 48: Transforming Marketing
TRANSFORMING MARKETING 48