MDC Partners CEO Miles Nadal says earnings are “well ahead” of initial expectations, and that the marketing communications company is on track to establish record highs for both revenue and adjusted earnings in 2014.
Revenue for the three months ended June 30 increased 10.5% over the corresponding year-earlier period, to US$317.7 million, with organic growth increasing 7%. Adjusted earnings before interest and taxes increased 9.5% to $48.8 million.
Year-to-date revenue was $610.3 million, a 10.3% increase from the six months ended June 30, 2013, while adjusted EBITDA increased 13% to $85.3 million.
Speaking during a conference call to discuss second-quarter results Thursday, Nadal said the outlook for MDC, whose agency brands include CP+B, KBS+ and Anomaly, remains positive.
“I believe we are better positioned than ever to continue to grow our business, gain material share of wallet and market from our existing and potential clients, and drive superior shareholder value… over the short, medium and long-term,” he told analysts and investors.
MDC added a record-high $54 million in net new business during the quarter, and Nadal said the new business pipeline is “extremely full and increasing,” as its agencies continue to scale their capabilities. Nadal told analysts there is an estimated $200 million in new business available to MDC in the second half of the year.
New business wins during the quarter included Doner’s recapture of the security giant ADT after just eight months at Havas agency Arnold, Colle+McVoy’s win of Bellisio Foods, Anomaly Amsterdam’s win of the Carerra eyewear business, and KBS+’s win of the global BMW 7 Series. Nadal said the latter is particularly noteworthy because it further thrusts the agency onto the global stage.
Nadal said MDC has also been a “very large beneficiary” of the failed Publicis/Omnicom merger, picking up talent at an “accelerated rate” from the two organizations, as well as several pieces of new business.
The companies’ pre-occupation with the failed merger also left the field open for M&A opportunities. “The field of opportunity is pretty clear, without much competition,” he said.
Nadal said MDC remains focused on its strategic growth plan, which calls for enhancing the competitive positioning of its core agency brands while investing in new growth areas such as media and international expansion.
Media in particular remains a “significant” area of focus for the company. During the second quarter, MDC combined RJ Palmer and TargetCast – the two media agencies it acquired in 2012 – into a new unit called Assembly, which Nadal said offers a “more progressive” offering. “This is opening more doors and leading to more pitches and more wins,” he said.
MDC’s international revenues increased 30% during the quarter, with Nadal singling out CP+B Brazil (the network’s sixth global office, which opened in February) for performing “exceptionally well.” In addition to the KBS+ win of the global BMW business, Nadal also pointed to the opening of two new French offices by its global PR agency, Allison+Partners, as an example of its growing international footprint.
The company continues to aggressively seek out new acquisition targets, with Nadal telling investors that the company is looking at a better M&A pipeline than has existed in the past five years. The company suggested that it could potentially close on one or more acquisition targets in the coming weeks and months, with guidance suggesting a possible 3% increase in revenue.
The company recently closed on a partnership with The House Worldwide (founded by former Publicis Worldwide COO Richard Pinder) that Nadal said will “significantly augment” its global capabilities, particularly in the United Kingdom.
The House Worldwide was MDC’s third acquisition of the year following the February purchase of a majority interest in Toronto-based proxy solicitation and communications firm Kingsdale Shareholder Services (which works to help companies or major investors persuade shareholders to accept or reject a deal), and the January purchase of communications company Luntz Global, which Nadal referred to as one of the company’s “great success stories.
“These firms have superior economics to anything we have done in the last period of time, and are enhancing both our strategic advantage as well as the financial characteristics of our firm,” said Nadal.
Continued diversification has also made MDC less vulnerable to abrupt shifts in its business. The company’s top 10 clients now comprise less than a quarter of all revenues, with the largest client accounting for less than 4%.
