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MDC REPORTS EARNINGS LOSS FOR FIRST QUARTER

Revenue From Marketing Services Up 49%

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NEW YORK (Adage.com) -- After twice delaying year-end and fourth-quarter earnings, agency holding company MDC Partners is back on track after announcing its first-quarter results today.
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The Toronto- and New York-headquartered company twice missed Securities and Exchange Commission filing deadlines because it needed additional time to comply with regulatory filing requirements associated with changing its status from being a foreign stock issuer to a U.S. issuer.

Profits down, revenues up
MDC today reported a loss of $3.8 million, or 17 cents per share, for the first quarter ended March 31, compared to earnings of $8.5 million, or 41 cents per share, in the year-ago period. Revenue rose 35% to $92 million from $68 million for the same period last year.

Revenue from the company’s marketing services unit, which includes agencies such as Crispin Porter & Bogusky, Miami, and Kirshenbaum Bond & Partners, New York, rose 49% to $75.2 million, up from $50.3 million in the prior-year period. The quarter’s results do not include contributions from Zyman Group, an Atlanta-based marketing consultancy, which MDC acquired for $63.8 million in a deal that closed April 1.

Non-marketing operations
Revenues at the company’s Secure Products Group, which provides products like secure tickets and stamps, declined nearly 5% to $17.2 million, down from $18 million one year ago. MDC management attributed the decline to a shift in revenues at SPI from the first quarter into the second.

“Lots of the new business has not reflected itself in our numbers,” said MDC's chairman-CEO, Miles Nadal, who said the new-business expenses are higher than they have been in the recent past.

Overall, MDC's operating expenses rose in the quarter to $93.7 million from $72.7 million.

Minding the store
After a year of agency acquisitions, Mr. Nadal said the majority of management's attention will be on "minding the store," though he did not rule out further acquisitions.

One analyst expressed concern with the decline in margins at MDC’s marketing communications unit and earnings decline. “Revenue growth is great, but investors want to see the bottom line grow. It’s just not,” said Jeff Tkachuk, Nesbitt Burns Research.

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