MKTG Services Inc. continues to employ cost cutting measures and efficiencies as it winds down the completion of the integration of acquisitions to bring the firm in line with a troubled economy.
Last Thursday, about 35 employees, or 10% of the staff, were let go across all areas of the New York office where the firm is headquartered.
Over the last year the firm made another 65 staff cuts as it eliminated redundancies between six businesses operating in four New York offices. The offices have been consolidated into one facility at 333 7th Ave. "We moved from the mentality of a holding company to an operating company to maximize the profits of the company," CEO Jeremy Barbera said.
The company's revenue began to decline in June 2001, dropping for three consecutive quarters before rebounding slightly in the third quarter to $8.7 million from $8.2 million in the prior quarter. The company had projected revenue of $8 to $9 million and expects the improvements to continue into the fourth quarter.
"What we believe we saw in February was the bottoming out," spokesperson David Sasso said. "We saw this quarter-over-quarter improvement and we expect sequential improvement in June."
While the firm's direct marketing business had been particularity hard hit by the slumping economy and the effects of Sept. 11, the company has expanded its initiatives in online community marketing and media and entertainment, Sasso continued.
"Our core business has seen some decline in revenue as all core direct marketing businesses have in the last two years," Barbera said. "We've made adjustments to compensate for that, but they are anticipated adjustments based on revenue levels that we are expecting to be at."
For the third quarter ended March 31 MKTG Services reported revenue of $8.7 million compared to $45.8 million the year prior. The $45.8 million represents gross billings, which had been reported as revenue at that time. Actual revenues were $31.1 million. A change in Securities and Exchange Commission (SEC)rules now requires MKTG Services, and other firms, to report actual net revenue as opposed to gross billings as revenue. MKTG Services put the change into effect during the fourth quarter ended June 30, 2001.
Of the year-over-year third quarter revenue decrease, approximately $19.4 million was attributable to the sale of Grizzard Advertising Inc. in July 2001 to Omnicom Group Inc. About $3 million, or 10% of the loss, was caused by a decrease in list services and database marketing billing and the move of its telemarketing call center.
That decrease in billings was a direct result of the weakened economy causing unexpected client cancellations, postponed fundraising campaigns and lost clients, according to a report the company filed with the SEC.
The firm's third quarter net loss grew to $39.4 million from $12.9 million one year ago. Excluding a one-time non-cash Goodwill charge of $35.9 million taken on acquisitions over the last seven years, the loss narrowed 73% year-over-year.
The firm's stock closed yesterday at 75 cents yesterday. Barbera owns 10% of the company's outstanding shares.
Barbera said reaction from Wall Street is related to uncertainty over when a group of preferred shareholders will be replaced with another class of preferred shareholders, Barbera said. He said the exiting group of shareholders "came in at a peak of irrational exuberance at the end of the 90s" in a financial play.
The company also has offices in Boston, Philadelphia, Atlanta, Houston, Los Angeles and the San Francisco areas.
