MDC Partners had a good start to the year with organic revenue increasing 2% in Q1 from the first quarter of 2019, its first improvement since 3Q 2018. Reported revenue was consistent year-over-year at $328 million and net new business wins stood at $8.4 million (in terms of revenue).
MDC Partners CEO/Chairman Mark Penn believes the company was “far enough in our turnaround plan” prior to the crisis to manage through the pandemic that has disrupted the economy and the world.
"We are operating on the basis of safety first and business second as we act to safeguard our people and advance our business in a radically new environment,” stated Penn. “Our agencies have adapted well to the new work-from-home policies and delivered significant new campaigns for clients as we help them navigate through these uncertain times with the best in cloud-based production tools and data-based creativity."
The network is projecting to save around $100 million in cost reductions over the remainder of the year. Our team is working “tirelessly” to adapt to what Penn calls the “greatest crisis in our lifetime.” Anomaly, 72andSunny and CPB are just a few of the company’s agency brands that have had to impose layoffs.
The company is also enacting hiring freezes, compensation cutbacks, and discretionary spending reductions. MDC is not applying for any governmental loans, though it will benefit from a $16 million COVID-19 employer payroll tax deferment.
Penn is optimistic about his company’s post-pandemic future after segmenting its client roster into three buckets. The first are those experiencing higher demand, like pizza, toilet paper, and OJ, while the second category has completely collapsed such as airlines and cruise ships. The majority of MDC’s roster falls into a third bucket whose businesses aren’t directly impacted by changing consumer behavior, but are experiencing economic slowdowns.
“We expect this third category to participate strongly in the recovery once it occurs,” predicts Penn. There will be a “much faster bounce back” because of the unique nature of this crisis. There is going to be a switch in psychology, he states. Clients are going to immediately seek strategies to match the larger funded companies that haven’t reduced marketing spend during the crisis.
Although MDC gave upbeat guidance for this year in February, targeting 2% to 4% organic revenue growth for full-year 2020, the firm, similar to the other ad-holding companies, will not provide a 2020 outlook at this time giving the uncertainties arising from the virus.