MDC Partners continued to weather some tough conditions in its latest financial report, however recent strategic changes have made it hopeful for the year ahead.
Organic revenue growth was down by 1.5% year-over-year at MDC during Q4, although that is lower than the declines posted in its previous two quarters, leading to an overall decline of 3.1% for the full year.
Organic growth was up by 2.6% among MDC’s global integrated agencies, the segment responsible for most of the company’s revenue, bringing it up to only a 0.4% decline for the full year. Business was also good among MDC’s specialist communications agencies, with 15.4% organic revenue growth in Q4 and and 9% growth for the full year. Those positive signs, though, were not enough to offset declines in other segments. The biggest decline was in MDC’s media agencies, where organic growth dropped by 28.8% in Q4 and 19.7% for the full year, although that segment is one of the smallest at the holding company. Domestic creative agencies had an organic revenue decline of 14.5% in Q4, down by 6.1% for the year.
Looking just within MDC’s Canadian operations, organic revenue growth was 12.9% year-over-year in Q4. While that wasn’t enough to completely offset declines in each of the previous three quarters, it did help the region inch closer to the black, ending at a 0.9% revenue decline for the full year.
MDC’s Canadian operations accounted for 7.4% of its total revenue in 2019, down slightly from 8.4% in 2018 and 8.1% in 2017. The U.S. accounted for 78.8% of its 2019 revenue, with 12.8% coming from the rest of the world.
Despite the negative revenue growth, CEO Mark Penn said MDC is “beginning to see the benefits of the strategic plan” it began to implement in 2019, pointing to cost-cutting efforts resulting in improved operating income and EBITDA (up 3.1% and 14.9%, respectively), as well as new client wins. According to an investor presentation, MDC had business growth in Q4 from clients in the financial, retail, consumer goods, automotive, technology and healthcare sectors. However, it saw a decline in business from clients in communications, transportation and travel, as well as in food and beverage, though it remains the largest part of its client mix.
Penn also pointed to more recent organizational changes he expects will help “enhance collaboration across disciplines, benefiting [its] clients and agencies alike.” Over the last several months, MDC has created new networks by grouping its agencies together into networks meant to foster collaboration, which Penn described in an investor call as helping it be an “alternative to the holding companies.”
In December, Union, KWT and Veritas became part of a network led by U.S. creative agency Doner. Last month, Anomaly was put at the centre of a network that also includes digital innovation agency Y Media Labs, PR firm Hunter and experiential agency Relevent. Earlier in February, it announced the creation of Constellation, a collective led by U.S. agencies 72andSunny and Crispin Porter Bogusky.