Image source: MDC Partners.
What happened
Shares of MDC Partners (MDCA +0.00%) were getting slammed today after the marketing firm badly missed estimates, suspended its quarterly dividend, and cut its full-year guidance. As of 12:14 p.m. EDT, the stock was down 60.7%.
So what
MDC said revenue grew 6.3% to $349.3 million with organic revenue, a measure that strips out the effect of currency and acquisitions. Analysts had expected revenue of $354.3 million. On the bottom line, the company reported a loss of $33.5 million, though that includes a $29.6 million goodwill impairment charge. On a per-share basis, it reported a loss of $0.64 per share, though it would have been about a $0.08-per-share loss, adjusting for the goodwill impairment. Still, that was well below the analyst mark of $0.22 a share.
The company also suspended its dividend so it could allocate resources to accelerated deleveraging and strategic growth initiatives.
The poor results seemed to call into question MDC Partners' ability to remain a viable entity as current liabilities are now more than 1.5 times current assets, and its operating cash flow was minus $58 million through the first nine months of the year. Without positive cash flow or an emergency loan, it may be unable to pay its debts as most of its assets are in goodwill.
Now what
The company hired LionTree Advisors to help it evaluate its financial and capital structure strategy, which could portend the upcoming sale of some agencies.
Management also cut the company's guidance for the year, calling for revenue of $1.365 billion-$1.375 billion, a 2.9%-3.7% increase over a year ago but down from a previous range of $1.39 billion-$1.42 billion. It also lowered its adjusted EBITDA forecast from $205 million-$215 million to $170 million-$180 million, representing a decrease between minus 14% and minus 9% from a year ago.
MDC is no stranger to tumult as its CEO was ousted last year following a Securities and Exchange Commission investigation into its accounting practices, and it was the target of short-seller Gotham City Research earlier this year. Though management claims 2017 will be a better year, at this point, the company has a long way to go before it can restore faith in investors.
