MDC’s Mark Penn: “CMOs are in ‘get back to business’ mode”

The holding company reported a roughly 14% organic revenue drop in 2020, but says things are turning a corner from the worst of the pandemic.

MDC Partners CEO Mark Penn
MDC Partners CEO Mark Penn

MDC Partners believes the worst of the pandemic is behind it.

The holding company posted a 13.7% drop in Q4 organic revenue to $328.2 million; and organic revenue declined 13.9% in 2020 to $1.2 billion. Net loss was $243.2 million in 2020, versus $17.6 million in the prior year.

“Just as MDC Partners achieved renewed, industry pace-setting growth in 2020, the pandemic hit and changed everything,” chief executive Mark Penn said on an earnings call Tuesday morning.

Organic revenue for MDC’s “all other” business segment, which includes Allison+Partners, Bruce Mau, Forsman & Bodenfors, Hello, Team and Vitro, dropped 27.3% organically to $60.8 million in Q4, and 20.9% to $244.8 million in 2020. 

Group B, which contains the Constellation group (72andSunny, CPB, Instrument and Redscout) and Doner Partner Network (6degrees, Doner, KWT, Union, Veritas and Yamamoto), saw a Q4 organic revenue drop of 17.7% to $112.3 million, and full year organic revenue drop 17.7% to $435.6 million.

In Group A, comprised of the Anomaly Alliance (Anomaly, Concentric Partners, Hunter, Mono, Y Media Labs) and Colle McVoy operating segments, Q4 organic revenue rose 2.3% to $119.2 million, and dropped 3.2% to $379.6 million in 2020.

In the U.S., Q4 organic dropped 12.1% to $256.5 million, and in Canada by 18.4% to $26.8 million. In North America, Q4 organic revenue fell by 12.7% to $283.2 million. In all other locations, revenue dropped organically by 19.8% to $44.9 million. 

Silver linings

Despite the steep declines, there are signs of improvement. MDC Partners’ Q4 organic revenue increased 15.8% over Q3, and the firm is net new business positive for the year, with $90 million in revenue from new accounts including Netflix, Jimmy John’s, and hotels.com.

“Business is being rebuilt quarter by quarter as the pandemic begins to recede and marketers get back to business,” Penn said.

By category, business from CPG brands and tech brands grew 45% and 35% respectively in Q4. Revenues from healthcare, food and beverage, financial and automotive clients were also up double digits, while travel, tourism and experiential are still suffering.

MDC also saw some upside from its digital and tech offerings, which grew 50% organically in the quarter. MDC’s PR agencies grew in the quarter “as companies pivoted to new messages,” Penn said. 

“CMOs who see recovery coming are trying to understand their company's position in that recovery,” Penn said. “They're looking at when they can move back product launches they had delayed; they’re  reviewing media to see if they had the right performance orientation.” 

Stagwell merger and global growth

In December, MDC Partners and Stagwell Group reached an agreement to combine to take on the “bloated and outdated” holding companies as a top 10 marketing services company.

The combined company, which has 8,600 employees in 23 countries, plans to invest in global services and digital marketing products. The combination will help MDC Partners, which “is most famous for creative and cultural understanding,” offer more “performance-driven creative” that clients demand, Penn said.

 The combined company will sell digital products, such as PRophet, an AI platform for PR professionals, to clients and non-clients alike. The companies are already pitching together on joint accounts, including J&J’s U.S. consumer health business, which the group recently won from WPP.

“Creative is more vulnerable to switching if it's not paired up with a combination of data, media and research services that is ultimately stickier,” Penn said. 

To support its global ambitions, MDC launched an affiliate program of agencies in fast-growing markets. The group plans to have 50 global affiliates by the end of the year, which will serve as a funnel for potential acquisitions.  

“Often I see us winning on creative and application of technology, but not having global enough wings,” Penn told Campaign US in a post-earnings interview. “This is a low-cost way to extend these wings on a very effective basis.”

Penn became MDC's CEO in 2019 after Stagwell, where he is managing partner, invested $100 million in the company.

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