Stagwell Inc. · NASDAQ:STGW
Stagwell — MDC Partners — Merger or Acquisition (December 2020)
44 slides from Stagwell's merger presentation, Dec 22, 2020
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 Transactions, MDC and New MDC will file with the SEC a registration statement on Form S - 4 (the “ Form S - 4”) that will include a proxy statement of MDC (the “Proxy Statement” and, together with the Form S - 4, the “Proxy
Slide 4: Pro Forma Financial Information
Pro Forma Financial Information The unaudited pro forma financial information contained in this presentation has been prepared for illustrative purposes only an d is not necessarily indicative of the operating results or financial position that would have been achieved if the Proposed Transactions o
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: Better Together Today: One Company That Together Offers
7 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 $30M in cost synergies , with ~90% achieved in the first
Slide 8: Better Together: MDC and Stagwell Financial Snapshot
BETTER TOGETHER ($ M ) 8 MDC 2020 Est. Stagwe ll 2020 PF Est. REVENUE: $890 ADJ. EBITDA: $138 COUNTRIES: 20 EMPLOYEES: 3,775 REVENUE: $1,180 ADJ. EBITDA: $180 COUNTRIES: 14 EMPLOYEES: 4,900 2021 PF Projections 2020 PF Est. REVENUE: $2,065 – 2,075 ADJ. EBITDA 1 : $345 – 350 REVENUE: $2,095 – 2,135 AD
Slide 9: Equation for Success
9 Equation for Success ($M) 2025 Combined Organic Revenue Growth $2,600 + New Digital Revenue Streams $75 + M&A Growth $325 = TARGET GOAL $3,000 $3 BILLION+ OF REVENUE IN 2025 THROUGH COMBINATION OF ORGANIC, NEW REVENUE STREAMS & ACQUISITIONS OPPORTUNITY TO GROW TO BETTER TOGETHER TOMORROW See slide
Slide 10: Combined Presence Spans 23 Countries and 67 Cities
10 STAGWELL MDC BOTH AS OF 6.30.20 Cities 42 49 67 Countries 14 20 23 Employees 4,900 3,775 8,675 BETTER TOGETHER: MDC & STAGWELL’S COMBINED PRESENCE SPANS 23 COUNTRIES AND 67 CITIES
Slide 11: The Marketplace
11 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
Slide 12: Integrated Solutions Needed to Transform Marketing
12 COMBINATION OFFERS THE INTEGRATED SOLUTIONS NEEDED TO TRANSFORM MARKETING LEADERSHIP THAT BRINGS IT ALL TOGETHER INTO ONE SYNERGISTIC OFFERING Second - to - None Creativity & Communications Blue Chip Customer Base Precision Media & Data Capabilities Addressable on a Global Scale Rigorous Consumer
Slide 13: Second-to-None Creativity & Communications
13 SECOND - TO - NONE CREATIVITY & COMMUNICATIONS IMPACTFUL WORK SHAPING CULTURE & CONVERSATION 19 EMMY AWARDS 129 333 396
Slide 14: High Growth Areas of Issue Communications and Digital Fundraising
14 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 15: 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 15
Slide 16: Precision Media & Data Capabilities
16 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
Slide 17: Scaled Creative Performance
17 PRECISION MEDIA & DATA CAPABILITIES 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 in addressable media. By scal
Slide 18: Rigorous Consumer Insights & Strategy
18 Polling in 12 countries each week 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 Short - Form Premium Video Co
Slide 19: Unique & Accurate Data
19 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 20: Results-Driven Technology & Digital Transformation
20 RESULTS - DRIVEN TECHNOLOGY & DIGITAL TRANSFORMATION GLOBALLY SCALED DESIGN, DEVELOPMENT & IMPLEMENTATION ACROSS PLATFORMS 24/7 scaled global engineering teams with over 600 engineers
Slide 21: Greater Contribution from High Growth Digital Services
RESULTS - DRIVEN TECHNOLOGY & DIGITAL TRANSFORMATION GREATER CONTRIBUTION FROM HIGH GROWTH DIGITAL SERVICES REVENUE (% 2019 Revenue) Advertising 59% DIGITAL SERVICES 9% Media 7% Other 9% Advertising 37 % Marketing Comm. / PR 16% DIGITAL SERVICES 32% Media 4 % Other 6% Research 6 % Marketing Comm. /
Slide 22: New Products & Revenue Streams
RESULTS - DRIVEN TECHNOLOGY & DIGITAL TRANSFORMATION NEW PRODUCTS & REVENUE STREAMS 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 executi
Slide 23: 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 23 Founder & Pollster Founded Penn and Schoen in 1975 with his Harvard roommate Doug Schoen Grower Under Penn’s leadership, firm expanded to
Slide 24: Financial Detail
FINANCIAL DETAIL 24
Slide 25: Stagwell: A Proven Platform for Growth & Acquisitions
25 STAGWELL: A PROVEN PLATFORM FOR GROWTH & ACQUISITIONS $294 $426 $629 2017A 2018A 2019A 2020 PF Est. $ in millions GAAP REVENUE 2015 & 2016 $890 25 Note: Stagwell financials are pro forma for certain in - period acquisitions and other adjustments based on reports from MDC third party accounting ad
Slide 26: Stagwell: Suite of Digital-First Marketing Solutions
26 STAGWELL: A COMPREHENSIVE SUITE OF DIGITAL - FIRST MARKETING SOLUTIONS RESEARCH & INSIGHTS CONTENT & MEDIA MARKETING COMMUNICATIONS DIGITAL TRANSFORMATION & MARKETING 42% of 2020 PF Est. Revenue 40% of 2020 PF Est. Revenue 13% of 2020 PF Est. Revenue 5% of 2020 PF Est. Revenue $890M 2020 PF Est.
Slide 27: MDC: Growing Profitability & Declining Leverage Ratio
EXPANDING COVENANT EBITDA (LTM) MDC: GROWING PROFITABILITY & DECLINING LEVERAGE RATIO 1 Indicates fair value of M&A obligations 2 Represents aggregate of contingent payments and fixed payments balances 3 Total leverage calculation, as defined under the credit agreement, includes issued but undrawn l
Slide 28: Pro Forma 2020E and 2021E
Pro Forma ($M) 2020 E 2021 E Revenue 2,065 – 2,075 2,095 – 2,135 Adjusted EBITDA 315 – 320 325 – 340 Plus: Run Rate Synergies 1 30 30 Adjusted EBITDA with Run Rate Synergies 345 – 350 355 – 370 % Margin 17% 17% Pro Forma Cash Generation 2 200 – 220 % Conversion (mid - point) 58% Note: Stagwell finan
Slide 29: An Enhanced Credit Profile
WHAT WE CAN BUILD TOGETHER: AN ENHANCED CREDIT PROFILE TRANSACTION REDUCES LEVERAGE BY ~1X SYNERGY IMPACT $ in millions, LTM as of 9/30/20 (unaudited) Revenue $1,253 1 $797 $2,050 Adj. EBITDA (Incl. Synergies) $199 2 $117 $316 ($346) Net Debt $833 4 $256 5 $1,181 6 Note: Assumes ~$30 million of cost
Slide 30: 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 31: 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 31 Multi - year, multi - brand creative work serviced by joint
Slide 32: 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 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 Note: Capitalization as of 12/11/2020. Fully Diluted Number of Shares O utstanding includes RSU’s, SARS, and contingent future c
Slide 34: Appendix
APPENDIX 34
Slide 35: Current MDC Corporate Structure
APPENDIX CURRENT MDC CORPORATE STRUCTURE 35 $211.5M Credit Agreement $870M, 6.5% Senior Notes Public Operating CDN LPs Non - US Corporate Subsidiaries of MDC 3 MaxxCom Inc. (US) 2 MDC (CDN) 1 1 Issuer under MDC 6.50% Senior Notes Due 2024 2 Borrower under MaxxCom Credit Agreement Dated May 3, 2016 3
Slide 36: Pro Forma Corporate Structure
APPENDIX PRO FORMA CORPORATE STRUCTURE 36 1 Comprises $325M Revolver ($218M drawn on a pro forma basis; incremental revolving commitments of $90M allowed under the cre dit agreement) and $90M TLA 2 Holds operating entities of Stagwell Marketing Group, 3Holding Company which contains US corporate sub
Slide 37: Pro Forma Credit Profile
MDC Standalone Pro Forma($ in millions) Q3 2020 Adj.¹ MDC + Stagwell Liquidity Cash $37 ($15) $22 Revolver Availability (MDC) 193 (193) - Revolver Availability (Stagwell) - 107 107 Total Liquidity $230 ($101) $129 MDC Revolving Credit Facility - - - Stagwell Revolving Credit Facility - 218 218 Stagw
Slide 38: Stagwell Senior Secured Credit Facility
APPENDIX STAGWELL SENIOR SECURED CREDIT FACILITY 38 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 39: Series Convertible Preference Shares (Goldman Sachs)
APPENDIX SERIES 4 CONVERTIBLE PREFERENCE SHARES (GOLDMAN SACHS) 39 Size ▪ Liquidation Preference of $126M as at September 30, 2020 ▪ In connection with the Transaction, Holder has right to redeem up to $30M of its preferred shares in exchange for a $25M subordinated note or loan with a 3 - year matu
Slide 40: Other Obligations
APPENDIX OTHER OBLIGATIONS 40 $M, LTM as of 9/30/20 (unaudited) MDC Stagwell Pro Forma Net Debt $833 $256 $1,181 Deferred Acquisition Consideration 46 13 59 Redeemable NCI 25 – 25 Non - Redeemable NCI 40 38 79 Series 4 Preferred 1 126 – 96 Series 6 Preferred 57 – 57 Investments 2 – (19) (19) Total O
Slide 41: MDC Non-GAAP Reconciliation
APPENDIX MDC NON - GAAP RECONCILIATION 41 $ in millions Q3 Q4 Q1 Q2 Q3 Q2-2020- LTM Q3-2020 - LTM Net income (loss) attributable to MDC Partners Inc. common shareholders (5.1)$ (10.5)$ (2.4)$ (4.1)$ 0.4$ (22.1)$ (16.7)$ Adjustments to reconcile to operating income: Accretion on and net income alloca
Slide 42: Stagwell Non-GAAP Reconciliation
APPENDIX STAGWELL NON - GAAP RECONCILIATION 42 Source: Stagwell's financials and gives effect to certain sell - side adjustments and other adjustments based on reports by MDC th ird party accounting advisors 1 PF Revenue and quarterly results include unaudited results, 2 Pre acquisition results incl
Slide 43: Stagwell Non-GAAP Reconciliation (Cont'd)
APPENDIX STAGWELL NON - GAAP RECONCILIATION (CONT’D) 43 Source: Based on Stagwell's financials and gives effect to other adjustments based on reports by MDC third party accounting a dvi sors 1 Net income, as shown by MDC third party accounting advisors, adjusted for PCAOB adjustments 2 Sell - side a
Slide 44: Transforming Marketing
TRANSFORMING MARKETING 44