Hello and welcome to the MDC Partners' First Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Chesler, Vice President of Investor Relations and Finance. Please go ahead, sir.

Thank you and good afternoon, everyone. I'd like to thank you all for joining us today to discuss MDC Partners' financial performance for the first quarter of 2017. Joining me from MDC are Chairman and CEO, Scott Kauffman, and CFO, David Doft. Before we begin our prepared remarks, I'd like to remind you all that the following discussion contains forward-looking statement and non-GAAP financial data. As we all know, forward-looking statements about the Company are subject to uncertainties referenced in the cautionary statement included in our earnings release and slide presentation and are further detailed in the Company's Form 10-K and subsequent SEC filings. For your reference, we've posted an investor presentation to our website. We also refer you to this afternoon's press release and slide presentation for definitions, explanations, and reconciliations of non-GAAP financial data. And now to start the call, I'd like to turn it over to our Chairman and CEO, Scott Kauffman.

Thank you, Matt, and good afternoon, everyone. I'm pleased to report that MDC Partners is off to a solid start in 2017 positioning us well to achieve our full-year financial guidance. Our Company is significantly stronger compared to this time a year-ago. We have an improved balance sheet, a strong new business pipeline, our cost structure that corresponds to our growth profile, and solid revenue and earnings momentum. Here are some of the highlights from the quarter. Revenue increased 11.6% to $345 million. Total organic revenue growth accelerated to 5.6% as we are now ramping new business one in recent periods. And we saw a strong performance in the U.S. with domestic organic growth accelerating to 8.9%. Adjusted EBITDA increased 9% to $36 million, with margins of 10.4% typical for our first quarter. Strength was broad-based. Our world-class portfolio of highly creative firms is gaining market share from the larger holding companies. Our media led offerings are seeing a result of their focus on data and analytics, creativity and transparency. Our emerging firms are gaining traction, scaling and fast growth discipline such as technology and data science. We secured healthy $26 million of net new business in the quarter. Highlights we can mention publicly include eBay, Diet Coke, Fair and MillerCoors experiential, all in all a very good start to the year. And as we look ahead we're well positioned to continue to gain share in our space at a time of significant disruption across the marketing and communications industry. Our competitive advantage lies in going to market with a collection of best-in-class agencies distinguished by brilliant creativity and a track record of delivering transformational results for some of the world's most iconic brands. Firms that are media agnostic with digital and technology at their core. Firms that are nimble…

Thank you, Scott and good afternoon. As Scott indicated, our first quarter results underscored the renewed strength of our business. This is clear in the recovery of topline momentum that we are seeing in healthy net new business trends. It is seen in the recovery of profits were both topline growth and the benefits of our recent cost initiatives will translate to meaningful margin expansion as we move through the year. Given the shape of last year's performance, comparisons get incrementally easier over the remaining three quarters of 2017. Our strength is also evident in our improved credit profile from smoother working capital trends consistent with what we have indicated on prior calls. Accordingly, we are reaffirming our guidance for 2017. We continue to expect better revenue growth compared to 2016 as our business momentum recovers. Specifically, we are targeting approximately 4% organic revenue growth based on contribution from a solid core of existing clients and as the tailwind from net new business strengthens. We are also targeting an improvement in adjusted EBITDA margins of approximately 100 basis points on a full-year basis. Remember, we have one more quarter before we cycle the acquisition of F&B, so 2Q should have similar benefits to the first quarter. We currently estimate that the impact of foreign exchange assuming currency rates remain the same will be negative 50 basis points for the full-year. With that, I'd like to add some additional detail about our revenue growth. Overall organic revenue growth was 5.6% with variation by geography. The U.S. where we derived 80% of our revenue accelerated organically to plus 8.9%. There was broad strength across the Company in particular in client sectors including communications, food and beverage, and automotive and then primary disciplines including media, integrated advertising, technology and data science, as well…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from James Dix with Wedbush Securities.

Good afternoon, guys. I just got two questions for me. First, how are your expected reductions in your costs base tracking for the year and what did you see in the first quarter? And are there any swings that you would call out that might lead to some variances there? And then secondly, when you look across your top agencies, I don't know your top half a dozen however you choose to define that. How do the biggest wins and losses that they've had over the past year or so compared to the overall revenue and how is that been trending? I know you could have breakdown is to your biggest clients and how biggest share of revenue they make? So I'm just trying to get a little bit of sense is to the volatility that you see in the results with some your key agencies just because they are pitching maybe to some extent above their weight in terms of going after big global accounts even though they're not large agencies? Thanks.

Sure. Thank you, James. So the cost reductions are tracking as we expected. As we indicated on the last call, they're fully implemented in 2016 to benefit this year. I think that's important to keep in mind though that that's a point in time and then our business goes on and there are areas of the business that are growing and adding people and investing in new initiatives and there are companies that are similarly keeping their cost tight because they're coming off with tough year and had adjustments last year. And so overall, it's playing out as we would have hoped. Now the first quarter, it is the smallest quarter of the year on a seasonal basis, so you tend not to see the full impact of these things because the full revenue run rate isn't fully there until you get to 2Q just by the nature of the seasonality of our business. And so we would expect that more of the margin expansion will become apparent as we move into 2Q and beyond. In terms of the win and loss activity, the pipeline has been fairly consistent, I think in terms of the broad range of large and small opportunities and similarly on the loss side it's the same. Obviously, last year we were impacted by one fairly large loss, which has been I think discussed extensively at this point in terms of Samsung and that had an impact. But outside of that, we haven't seen any real change in the kind of tone or trend in terms of size of wins and losses. We continue to see our agencies compete for some of the largest opportunities on the creative side. We increasingly see our agencies compete for larger opportunities on media buying led type opportunities and we surly see - continue to step up across our other businesses in their ability to lease getting the pitches and compete for a larger piece of the business, whether it's PR or experiential or what not. So those trends are consistent and thankfully consistent in the right direction.

Great, thanks very much.

Thank you. And the next question comes from Tom Eagan with Telsey Advisory Group.

I want to follow-up your comments on the tone or whatever you're hearing from your clients about ad spending. There is a lot of concern in the street about I guess the willingness to spend from a lot of companies here in the U.S. So I guess what you're hearing about again the appetite to spend and secondarily in terms of overall marketing spend, I'm wondering whether you're seeing any interest in their spending less on say market research like less for example to IRI and Nielsen and more on the actual advertising campaigns. And then lastly, how many of your clients are in the CPG or SMCG categories? Thanks.

Hey, Tom, this is Scott. So on client spending, we read the same things you read, we hear what you hear. But what we're saying something differently and I think that's reflected in the results from the quarter. As we said in the prepared remarks clients are still spending behind their brands. Is the mix shifting a little I wouldn't say from traditional research into other areas. But I would talk a lot about the increased focus on data and insights that come from data and not just at the media level, but also in the way that data insights inform strategy and the creative process. And so in our go-to-market offerings, we make sure that we meet all of the expanding needs of the CMO and that includes you can call it research, in traditional forms it was third-party market research increasingly it's first party client data and additional forms of insights that come from all kinds of transactions and activity on the social group.

In terms of our exposure of our client base, in the investor presentation on our website, we disclose the pie chart of exposure by category in the quarter 18% of our revenue came from food and beverage and 11% came from the rest of the broader consumer products category. Now that obviously includes whole range of things, but it gives you a sense of the exposure there.

Great, thank guys.

Thank you. [Operator Instructions] And the next question comes from us Steven Cahall of Royal Bank of Canada.

Yes, thank you very much. Good quarter. A couple for me maybe first just on your new business, you had a couple of good quarters both this one and the fourth quarter. I think you're still tracking a little bit below the 2012 to 2014 run rate for new business. But can you just talked about with a bigger revenue base and more agencies how you see the new business pipeline possibly picking up the wealth of those historical levels? And then maybe just on the DAC as well as working capital. Can you give us an update of where the DAC sits today? And then you talked about smoothing the working capital or what you could done on that side in order to make that a little less volatile than it's been in the past? Thanks very much.

Hi. Steven on the net new business front it's lumpy quarter-to-quarter and obviously it's the net number, so it's the aggregate new wins minus client losses, and it ebbs and it flows, it's been consistently up for us. And I look at it from the standpoint of the pipeline for new business opportunities those searches that are underway right now and the extent to which our agencies are participating in those searches both on the creative side and on the media side. And on both fronts, I mean historically we've always done very well on the creative front, but increasingly with the morphing of our media business from series of point solutions to more of a platform play and some iconic wins coming out of last year. We're participating in larger media searches as well. So we've talked a lot about the pipeline. Historically, we told you on the last call that it was robust. You saw the numbers from this quarter and that pipeline continues to be robust.

And I would add just one thing, if you recall, we've commented in the past that our level of growth wins has been as high as ever over the last several quarters. And last year was the story of a large loss as well as some delays in some of the new business actually ramping up which impacted us, but the larger loss surely has an impact on the net number. This quarter I think was a solid quarter. It was 29% increase in net new business wins over the first quarter of last year and so we think a good start overall and hopefully our pipeline continues to come through and we'll be able to continue to deliver our solid numbers as we move through the second quarter and beyond. Can you clarify, again I'm sorry your second question?

Yes. It was kind of two questions. Just if you could give us an update on what deferred acquisition expenses currently look at for the year or on a total balance sheet commitment. And then also just maybe give a little more detail on what you've actively done on the working capital side because you talked about the smoothing of working capital, so I'm just curious how you've been able to manage the business in order to make that a little less volatile?

Sure. The deferred acquisition consideration right now sums to about $235 million for that sits on the balance sheet. As we've talked about extensively that's presented as fair value and so with the discounted number the discounting amount is about $28 million, so you can add that to get the gross amount over time and that amount is continued to come down over the last several quarters and has a very significant quarter in the second quarter as I said in my prepared remarks where we anticipate paying down about $90 million. And so as presented on the balance sheet, we will continue to come down substantially in 2017 barring other activities. And so that's how that's trending if that's what you're asking about on that front. From a working capital standpoint, we've focused on managing the ins and outs of our cash for many years and a lot of it blocking and tackling around making sure we're getting our bills out on time and that our clients are paying on time and that we're also managing the other side as well, but ultimately given the dynamic last year, which had the change in the client mix at our media business that led to a fairly large outflow of working capital. We had indicated that that we expected that to be one time in nature, the magnitude of that and that that we would be back to kind of normal course and that's exactly what you're seeing now is that that business is healthy, the client base is growing and the seasonality has reverted back to what we had seen in prior is actually a little less so even than in prior years based on kind of a different level and mix of billings coming through the media business in particular. And so overall I'd say we've continue to get more sophisticated on tracking and managing the blocking and tackling as we have for many years and then benefit from that that change in mix in our media business that has lower volatility quarter-to-quarter in terms of the media billings.

Thank you.

Thank you. And as there are no more questions, I would like to return the call to Chairman and CEO, Scott Kauffman for any closing remarks.

Thank you, operator. So in closing, we're pleased with where we sit after the first quarter and for the remainder of the year, we're highly focused on delivering our numbers and positioning the Company for continued success in the quarters and the years to come. Good afternoon from New York City. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.