MDC Partners saw organic revenue drop 26% in the second quarter of this year, which the holding company said occurred “primarily due to reduced spending by clients in connection with Covid-19.”
Revenue fell to $260 million in Q2, down from $362 million during the same period last year.
“The second quarter brought the full economic, social and political force of Covid-19 upon our clients, the economy and the marketing service industry,” Mark Penn, chairman and CEO of MDC Partners, said on the company’s quarterly earnings call. “Our client relations remain strong, and the revenue loss was driven heavily by client postponement, not client losses.”
Despite the rough quarter, Penn spent much of the call pointing out the company’s bright spots. He said “net new business”—a figure that estimates annualized revenue from new wins and losses—totaled $20.5 million during the second quarter.
According to Penn, there were a number of “notable wins” for the company this quarter, including Budweiser naming Allison + Partners its U.S. public relations agency and Anomaly winning Coca-Cola in North America.
Additionally, he said MDC Partners has expanded relationships with clients including Salesforce, Google, Diageo, Molson Coors and Nike.
On the call, Penn also said that pitches are picking back up after a lull, noting that the “last six weeks have brought a significant increase in pitch activity.” He said MDC Partners has seen a mix of resumed pitches that had been put on pause because of the virus, as well as new ones.
“After three months of clients paring budgets, delaying projects and extending contracts, as expected, we are seeing clients again look to restore funding and new pitches are restarting,” he said. “Though it’s still early days, one thing to note is that in many cases, we’re actually seeing shorter pitch times than usual.”
Internally, Penn said MDC Partners has been “extremely diligent in protecting the bottom line” through cost management efforts this year. He said the company reduced costs by 16%, or $82 million, during the first six months of 2020 compared to the year prior.
Since joining MDC Partners over a year ago, Penn has implemented a turnaround plan that largely involves cost-cutting measures and bundling various agencies together into networks. Penn is relocating a number of the company’s New York agencies to One World Trade Center to centralize its offices, a move he said will save MDC Partners $10 million to $12 million per year.
In June, MDC Partners hired Julia Hammond to serve as president of a new division that will service “larger integrated accounts across the entire firm.” At the time, Penn said the new unit, which is not yet named, will focus on bringing together “the best of MDC to compete for and win even larger integrated assignments.”
Stagwell Group, the private equity founded by Penn that invested $100 million into MDC Partners last year, recently proposed a merger between the two entities.
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