MDC Partners Sees Boost From Varick Trading Desk, Plans Modest Digital M&A

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mdc-nadalData-driven buying methods have boosted media margins at MDC Partners, although programmatic is still small as a percentage of the whole business. On the holding company's earnings call yesterday, CEO Miles Nadal said digital media stands out in its portfolio of marketing services firms with margins surpassing 20%.

"Strategically, our media investments especially digital media have been extraordinary," he told investors. "The returns have been beyond expectations and north of 25%. Margins are well north of 20%."

Varick Media Management, MDC's trading desk unit, can take some credit. Chief Financial Officer David Doft said VMM is doing "exceedingly well."

But Nadal said while growth at Varick is reassuring, it's a relatively tiny slice of the pie.

"We continue to scale that business, but you've got to keep in mind [Varick] is about 2% of our revenue," he said. "As wonderful as it is, it's maybe got an extra .1 or .2 % appreciation on our margin. As it scales it hopefully will have a greater impact. We're thrilled with the business both strategically and financially."

This is the second earnings call this week where programmatic media has been damned with faint praise, so to speak -- or at least put in its place as a fast-growing but still diminutive portion of digital ad sales. On Facebook's Tuesday call, COO Sheryl Sandberg said, "FBX is actually a very small part of our business." (More on that.)

MDC's management also gave some indication that new acquisitions are likely in the coming 18 months, after an M&A dry spell of about that length. However the scope of those purchases will be limited.

"We are looking at areas of analytics, media, experiential, as well as consumer insight and multicultural – but they will be modest," said Nadal. "We are for the most part focused on organic growth and expansion of our business by hiring talent and adding existing infrastructure."

MDC's Q2 results beat the street, with a 5.3% revenue lift from $273.5 million to $288.1 million. Total new Business wins surpassed $20 million. (Read the earnings release)

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