MDC discloses SEC probe as Q1 marketing unit revenue rises

CEO Miles Nadal has agreed to return $8.6 million to MDC following an SEC probe into his expenses.

MDC Partners chairman and CEO Miles Nadal
MDC Partners chairman and CEO Miles Nadal

NEW YORK: MDC Partners’ Strategic Marketing Services unit, which contains its PR agencies, reported revenue of $240.4 million in the first quarter of 2015, representing 8.7% organic growth over the same period last year.

The holding company owns majority stakes in Hunter Public Relations, HL Group, Allison+Partners, Kwittken, and Sloane & Company, among others.

MDC reported overall organic revenue growth of 7.4% to $302.2 million in Q1. Its net loss in the first quarter was $32.1 million, compared to a loss of $8.8 million in Q1 2014. The holding company’s net new business wins for the period clocked in at $27.9 million.

The company also said that CEO Miles Nadal has agreed to return $8.6 million to MDC following an investigation by the Securities and Exchange Commission into his travel, medical, and other expenses. The SEC issued a subpoena last October seeking information on Nadal’s expenses between 2009 and 2014.

MDC's share price fell by about 33% following the company's disclosure about the SEC probe.

The food and beverage sector made up 17% of MDC’s revenue in Q1, followed by retail at 15%, and consumer products and technology both at 11%. Healthcare, which accounted for 10% of revenue, is among the fastest growing industries for clients at MDC, according to a company statement.

Revenue from MDC’s top 10 clients dropped to 24.3% in Q1 from 25% in the same period the prior year. The company attributes the slight dip to ongoing business diversification.

Nadal recently told PRWeek that the company’s PR revenue grew nearly 20% organically in 2014, outdoing the Strategic Marketing Services unit’s growth of 12.2%.

"What matters to us is return on invested capital, which is about 40%," he said at the time. "Over the last [few] years, our share price appreciated more than any firm in our industry. A shareholder who invested in 1987 would have made 20 times their money, including dividend reinvestment."

Representatives from MDC were not immediately available for comment.

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