The Leap Group's net loss of $5.6 million in its most recent fiscal year has forced the slashing of its ad agency staff by 40 percent and the elimination of $1 million in executive salaries.
Even with the downsizing, Leap Group's troubles may not be over. According to the company's annual report, a mutual client of Leap's ethnic agencies (YAR Communications and Kang & Lee) plans "across-the-board reductions in its marketing programs" this year. The client generated 36.3 percent of Leap Group's total revenue. An agency representative declined to identify the client. AT&T is the only client listed in the report as being serviced by both shops.
Leap Group paid $23.4 million for YAR Communications in April and $1.4 million for Kang & Lee in November. Both are based in New York.
Leap Group revenues for the year ending Jan. 31 were $30.6 million; the company recorded a loss of 41 cents per share, according to the report.
The filing, submitted to the Securities and Exchange Commission, documents Leap Group's efforts to stanch the financial hemorrhaging that triggered the dive in its stock price. Under chief executive Fred Smith, the company cut staff at The Leap Partnership in Chicago by 40 percent in the latter part of the year, which saved $1.4 million. The agency now employs about 40 staffers in Chicago, with about 40 more in the holding company and Quantum Leap, its interactive arm. Executive pay was trimmed by a total of $1 million, as certain executives agreed to salaries of $52,000 for this year.
Leap said it expects to save $3.5 million through the restructuring of its Santa Monica, Calif., office, which reported an operating loss of $4.3 million for the year.