MDC Companions Is Newest Holding Firm to Submit Q3 Natural Income Drop
MDC Partners, which owns agencies including 72andSunny and Doner, saw its organic revenue drop 16.4% in the third quarter of this year. According to the company, organic revenue declined primarily due to reduced spending by clients in response to Covid-19.
Revenue fell to $283.4 million, down from $342.9 million during the same period last year.
All of advertising’s major holding companies posted organic revenue declines for the third quarter as they continue to grapple with the business impact of Covid-19, although MDC Partners’ is steeper than some of its competitors. Omnicom’s organic revenue fell 11.7%, IPG’s dipped 3.7% and WPP, which also reported its quarterly earnings today, experienced a 7.6% drop.
In the second quarter of this year, MDC Partners experienced a 26% drop in organic revenue. On the company’s quarterly earnings call today, chairman and CEO Mark Penn said its revenue “rebounded nicely off of the second-quarter lows,” increasing 9% on a sequential basis.
“Looking more closely at our revenue trends in Q3, the overwhelming reason for the slowdown is paused or delayed revenue from a few specific Covid-impacted sectors,” Penn said. “Nearly half the revenue decline is driven by a slowdown in both our experiential business and the transportation and travel sectors. Another third of decline is from reduced spend within the technology sector, as those companies slowed down new product launches.”
He said pitch activity “resumed in earnest” during the third quarter and listed a number of new business wins. According to Penn, MDC Partners has won Lucky Charms, Sony Vision & Sound, Diageo’s Singleton brand, Albertsons, Meals on Wheels and Constellation Brands. He did not share which brands the company will be working on within the Constellation Brands portfolio.
Additionally, Penn said MDC Partners has expanded relationships with clients including Target and Samsung. Penn added that net new business, a figure that estimates annualized revenue from wins and losses incurred during the quarter, was $31.9 million.
“Even as we battle the pandemic, the business is not standing still,” Penn said.
Since joining MDC Partners last year, Penn has implemented a turnaround plan that involves cost-cutting measures and bundling various agencies together into networks to foster collaboration. During the earnings call, he said the holding company recently completed the first phase of its real estate “transformation,” which involves moving many of its New York-based agencies into One World Trade Center.
Penn said the holding company’s corporate team is already operating out of One World Trade Center and that 13 other agencies will be based there by the end of this year. It’s unclear if employees are physically working out of the offices, however, considering many people have been working from home because of the pandemic. Penn has previously said that the move to One World Trade Center will save the company $10 million-$12 million per year.
The Stagwell Group, a private equity founded by Penn that invested $100 million into MDC Partners last year, recently proposed a merger between the two entities.