MDC Q3: Earnings Rise as Revenue Falls

NEW YORK MDC Partners said that although revenue dropped 5.3 percent in the third quarter to $135 million, earnings increased 9.9 percent to $18 million.
 
The Toronto-based company said those numbers are preliminary and subject to the final closing of corporate books, and it offered no explanation for the results. MDC will issue a full earnings report on Oct. 29.
 
Organic revenue in the quarter dropped 4.4 percent and declined 7.9 percent in the first nine months of 2009. Revenue in that latter period decreased 9.9 percent to $396 million while earnings rose 5.9 percent to $46.5 million.
 
Margins in the third quarter improved to 14.8 percent compared to 12.3 percent in the year-earlier quarter.
 
In the quarter, MDC agencies lost significant business. In late July, Kirshenbaum Bond + Partners did not prevail as the incumbent creative lead on Wendy’s, an account that spent $275 million in 2008, per Nielsen. The following month Crispin Porter + Bogusky declined to participate in a review of its Volkswagen of America business, an account billing $220 million, according to Nielsen.
 
Nonetheless, MDC today reiterated its previously issued 2009 guidance of revenue in the range of $545-575 million and earnings of $63-65 million.
 
Separately, Standard & Poor’s Rating Services assigned MDC a BB- corporate rating and also rated a proposed offering of $200 million seven-year senior unsecured notes at that same level.
 
“Despite our expectation of continued economic pressure and organic revenue declines in the high-single-digit percentage range for the full year, we expect MDC to continue to generate healthy discretionary cash flow and preserve EBITDA margins through cost-cutting initiatives,” S&P credit analyst Michael Altberg said in a statement.

MDC said free cash flow increased to 14.1 percent in the third quarter to $13.8 million and the company reconfirmed that free cash flow in 2009 would be in the range of $37-39 million.