MDC chief: 'Our results are unacceptable and we know that'

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'We need to do better,' MDC Partners chairman and CEO Scott Kauffman said Wednesday.
'We need to do better,' MDC Partners chairman and CEO Scott Kauffman said Wednesday. Credit: MDC Partners

MDC Partners chairman and CEO Scott Kauffman said the advertising holding company's first-quarter results were "unacceptable"—citing some client cutbacks and slower conversion in its new-business pipeline as it reduced its 2018 financial targets.

"The start of 2018 has been challenging," Kauffman said on an earnings call Wednesday to discuss results with analysts. "While the prospects for the business this year were strong coming into the year, our performance in March and April has been disappointing."

"We share your frustration with our financial results," Kauffman said. "We need to do better."

MDC Partners' portfolio includes agencies such as 72andSunny, Anomaly, Assembly, Colle McVoy, Doner, KBS and The Media Kitchen.

Although adoption of a new accounting measure added "noise" to the company's results, making them not directly comparable with last year, MDC said, a slowdown in the pitch process and smaller-than-expected client budgets adversely affected results.

MDC reported revenue of $327 million, down from $344.7 million a year ago, according to MDC, which said the accounting change was a primary reason for the 6.2 percent decline in revenue.

The company lowered its expected organic revenue growth this year from 4 percent to a range of 1 percent to 3 percent.

One analyst asked why MDC's results were different than larger holding companies whose first-quarter results were more promising. MDC said it has often not been consistent with overall industry trends in good times or bad.

Kauffman said the company sees opportunities in areas including healthcare (MDC hired a managing partner for healthcare from Publicis Groupe earlier this month), expansion outside North America and centralizing functions or consolidating or divesting agences where it makes strategic or financial sense.

He said in the past two years, "We've consolidated the number of separate P-and-L's reporting up to us from 36 to 27 as of this quarter, either through mergers or divestitures."

MDC sold one growing and profitable firm last year "for good value" as well as two smaller ones, Kauffman said. Similar "rebalancing" initiatives will continue going forward, he added.

Another analyst asked MDC's thoughts about acquisitions given rumors that WPP will sell off some units after the recent exit of CEO Martin Sorrell. Executives said MDC is revisiting the M&A markets, but independently of what WPP is doing.

Lee Cooperman, chairman and CEO of Omega Advisors, asked near the end of the earnings call about the company's strategy.

"You've been more of a buyer than a seller," he said. "I mean, you've not been the best custodian of the shareholders' money. This call is so different, Scott, than what you talked about on the last call. People wonder kind of what you're up to."

Kauffman answered: "Look, as the chairman I can assure you it's the board's responsibility to consider any and all options to maximize shareholder value, that's a fiduciary duty that we take very seriously, and as I said, we're committed to it."

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