MDC Partners Reports Annual Revenue Dip Despite Best New Business Run in 4 Years

Net new business totaled $93.6 million last year

MDC Partners' organic revenue declined 3.1% in 2019.
MDC Partners

MDC Partners has reported less-than-stellar fourth-quarter earnings, capping off a tumultuous year for the holding company.

Organic revenue for the fourth quarter of 2019 decreased by 1.5%. For the full year, organic revenue was down 3.1%, in line with expectations of a 3-5% downturn. The company expects organic revenue to grow by 2-4% in 2020.

While overall organic revenue was down for the fourth quarter, the company said its “specialty communications segment,” which includes public relations firms KWT Global and Allison+Partners, experienced 15% organic growth.

The earnings come amid CEO and chairman Mark Penn’s turnaround strategy, which began last year after his private equity firm Stagwell Group invested $100 million into the struggling holding company.

Since taking the helm in March, he’s primarily focused on cost-cutting measures and forming networks that bring its various agencies together under one umbrella. For instance, last month, it unveiled Constellation, a creative collective comprised of 72andSunny, CPB, Hecho Studios, Redscout and Instrument.

The hope is that these networks, of which there are now six, will help MDC Partners better compete with its larger holding company rivals.

“2019 has been a year of transition and fast implementation of our new world plan,” Penn said on the company’s fourth-quarter earnings call. “We have accomplished a lot of change in a short period of time, but there’s also much more to do. Overall, I’m very pleased with what we’ve achieved to date, delivering significant progress against our plan and creating the energy, early wins and momentum we need to succeed.”

During the call, Penn hammered home the fact that net new business came in at $93.6 million last year, the highest it’s been since 2015. He highlighted a number of the company’s new business wins, including Audi’s selection of 72andSunny Amsterdam and Johnson & Johnson’s decision to send its U.S. consumer health business to Doner.

Penn also detailed how MDC Partners has “actively trimmed” its overall cost structure to “establish a nimbler, more competitive organization.” According to Penn, the holding company has done this by lowering the compensation-to-revenue ratio, reducing administrative support expenditures and reining in corporate costs.

Additionally, MDC Partners has signed a deal to move its corporate headquarters from what Penn described as its “expensive and swanky” office at 745 Fifth Avenue in New York to One World Trade Center. A total of 11 MDC Partners agencies throughout New York will also move to One World Trade Center.

“When complete later this year, centralization of our New York real estate portfolio will allow for significant cost savings of $10 to 12 million annually starting in 2021,” Penn said. “We will reduce costs while furthering the key goals of our transformation plan.”

Frank Lanuto, chief financial officer of MDC Partners, addressed coronavirus on the earnings call. Considering less than 2% of the company’s revenue comes from China and Japan, Lanuto said MDC Partners has not made any adjustments to its 2020 outlook.

“We have much less exposure to the region than some of our peers,” he said. “We will continue to monitor the situation closely.”

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