MDC Partners’ stock price dropped after its early-morning earnings report on Thursday revealed the company’s finances have struggled during the COVID-19 pandemic.
The company’s revenue in Q2 was $259.7 million, down 28% from a year ago, while year-to-date revenue declined 15% to $587.4 million. Organic revenue declined 26.4% in Q2 and 12.9% in the first six months of 2020. New business wins totaled $20.5 million in 2Q, and $28.9 million in the six months of this year.
Leaders from the company expressed optimism about their ability to recover from the pandemic, thanks to their cost-reduction tactics. To that end, MDC Partners extended its credit facility and retired $87 million in obligations in Q2, including scheduled merger and acquisition obligations, as well as a partial bond repurchase, explains Frank Lanuto, Chief Financial Officer, MDC Partners. He also points out the company has maintained a positive net cash position of $23 million at the end of Q2 and reduced its leverage from 4.9x a year ago to stand at only 4.6x.
"Coming off of pace-setting growth in the first quarter, we weathered the current effects of COVID-19 on GDP, our clients and revenue with a diligent focus on cost reductions and restructuring actions that helped preserve the underlying economics of the business,” states Mark Penn, Chairman-CEO, MDC Partners. “This resulted in expanded margins and positions MDC to rebound even more strongly once we return to growth.”
There was no significant development regarding the proposed merger between Penn’s Stagwell Group and MDC Partners. The special committee is proceeding with its review, assisted by independent advisors Moelis & Company and DLA Piper. "We continue to act in the best interests of the company and our shareholders as we evaluate the previously announced transaction proposed by Stagwell as well as all alternatives available to the Company, stated Irwin Simon, lead independent director, special committee chairman.
Given the uncertainties in the global business environment arising from the COVID-19 pandemic, MDC is following other holding companies by not providing a 2020 outlook.