MDC Partners is finalizing plans for further streamlining at the holding company resulting in the formation of two "multi-agency networks" each of which will be led by a flagship agency at the firm. The development was confirmed by CEO Mark Penn during a call with analysts to discuss third quarter financial results on Monday.
The formation of the two new networks (further details are expected soon) follows the reorganization of the company's media operations in July that aligned flagship media agency Assembly with CRM and data specialist Gale.
The new networks are part of an ongoing transformation plan that MDC announced shortly after Penn came on board as CEO earlier this year, designed in part to foster much greater collaboration across operations at the holding company. Penn described the change in part as a shift from a "federation" culture to a "unified" culture.
The reorganization will reduce the number of reporting units at the holding company by nearly half, Penn told analysts.
MDC Partners reported a nearly 9% drop in revenue during the third quarter to $342 million and a 4.5% revenue decline to $1.03 billion for the first nine months of the year.
Organic revenue growth (which excludes currency and M&A impact) was down 7.5% in Q3 and 3.7% through the first nine months.
The company also downgraded its organic revenue outlook for the full year, now saying it will decline by 3% to 5%.
MDC Partners shares slid 12% in Tuesday morning trading on the news.
Commenting on the results, Penn said, “We are seeing the results of prudent financial management while we cycle through revenue softness in select areas of the portfolio and actively execute against our strategic plan.”
Penn added, “We’ve delivered year-to-date growth in adjusted EBITDA, up $6.5 million, and margin up 110 basis points. Net new business also remained strong this quarter at $30 million and we continued this momentum into the fourth quarter.”
Frank Lanuto, Chief Financial Officer, stated that “Execution of cost-savings initiatives and ongoing disciplined management of expenses helped to offset softer revenues during the period.”
Net New Business wins for the first nine months of the year totaled $56.4 million.
The company is also in the process of reducing real estate portfolio and co-locating agencies. In New York that process will be completed next year, resulting in annual savings of $10 million.
Penn said the company's goal is to achieve $100 million in free cash flow by the end of 2020.