MDC Partners Inc. (NASDAQ:MDCA) Q2 2020 Earnings Conference Call - Final Transcript
Aug 06, 2020 • 08:30 am ET
Ladies and gentlemen, good day, and thank you all for joining this MDC Partners Second Quarter 2020 Results Conference Call. [Operator Instructions] But after today's prepared remarks, instructions on how to share a question will be given to our questions.
To get us started with opening remarks and introductions, I'm pleased to turn the floor to Mr. David Kirby. Welcome, David.
Thank you, operator and good morning, everyone. Welcome to the MDC Partners conference call for the second quarter of 2020. Joining me today are Mark Penn, Chairman and Chief Executive Officer; and Frank Lanuto, Chief Financial Officer.
Before we begin our prepared remarks, I'd like to remind you that the following discussion contains forward-looking statements and non-GAAP financial data. Forward-looking statements about the company, including those relating to earnings guidance, are subject to uncertainties referenced in the cautionary statements included in our earnings release and slide presentation and are further detailed in the company's Form 10-K and subsequent SEC filings.
For your reference, we've posted an investor presentation to our website. Please also -- we also refer you this morning -- to this morning's press release and slide presentation for definitions, explanations and reconciliations of non-GAAP financial data.
And now to start the call, I'd like to turn it over to our Chief Executive Officer, Mark Penn.
Thank you and good morning. The second quarter brought the full economic, social, and political force of COVID-19 upon our clients, the economy, and the marketing service industry. The results affirmed the basic strength and resilience of MDC Partners in the face of a more than 30% contraction in GDP. While we had to take significant cost reduction measures, we continue to implement the key elements of the New World marketing plan that I announced a year ago to position us for a strong rebound as the economy recovers and to continue to operate in a positive net cash position, even as the virus extends economic shutdown. The underlying economics of the business have been preserved and extended, adjusted EBITDA margins have expanded and we have ample liquidity.
As we anticipated, revenue declined 15% in the first-six months of the year. Organic revenue was down 12.9%, fueled by a strong first quarter, which was followed by a softer Q2 performance as organic revenue declined 26%. Excluding direct pass-through costs our net revenue was down 10% in the first half and down 22% in the second quarter, significantly stronger than the recent GDP decline of 32%. After three months of clients paring budgets, delaying projects and extending contracts, as expected, we are seeing clients again look to restore funding and new pitches are restarting. Our client relations remain strong, as the revenue loss was driven heavily by client postponements, not client losses.
In anticipation of the softer top line, we were extremely diligent in protecting the bottom line through our cost management efforts. In the first-six months, we reduced costs by 16%, or $82 million, as compared to the prior year. 75% of those