"We are continuing the trend toward stabilizing adjusted EBITDA in 2019," said
The trend in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved sequentially in the second quarter of 2019. Adjusted EBITDA excluding the impact of real estate gains and equity distributions was down 3.2% for the quarter compared to the second quarter of 2018. This reflects the third consecutive quarter of improvement: from a decline of 8.2% in the fourth quarter of 2018 and a decline of 5.7% in the first quarter of 2019 when compared to previous periods.
Evidence of the company's continued digital transformation is reflected in its growth in the number of digital subscribers and engagement with its digital products. Digital-only subscriptions grew 51.6% from the second quarter of 2018 to nearly 185,500 subscribers. When coupled with the company's combination print/digital subscriptions, where customers have activated their digital products, total paid digital customer relationships were approximately 483,600 at the end of the second quarter of 2019, up 24.4% from 388,600 a year earlier.
Forman added: "We continue to be strategic and resolved in taking costs out of the business while making key investments to boost revenue generation. During the quarter we invested in our digital advertising team, adding new leaders to our functional organizational structure with a dedicated focus on our customers to drive digital revenue and create new efficiencies. While periods of reorganization and change can be temporarily disruptive, we believe the new structure, powered by a highly-motivated and focused sales team, will drive greater digital advertising revenues in the future.
"We are excited by the improvements we are seeing in our business and we remain firm in our commitment to independent local journalism in the public interest. In this regard we had a very strong quarter capped by international recognition of the
Second Quarter Results
Total revenues in the second quarter of 2019 were
In the second quarter of 2019 total digital advertising revenues were
Audience revenues were
Digital audience revenues were up 8.1% for the second quarter of 2019 compared to the same period last year. The company reported total digital subscribers, defined as digital-only subscribers and digital subscriptions activated by combined print/digital customers, of 483,600, up 24.4% compared to the second quarter of 2018. Digital-only audience revenues associated with digital-only subscriptions were up 57.6% and the number of digital-only subscribers ended the quarter at 185,500, representing an increase of 51.6% from the second quarter of 2018. Digital-only subscriptions have grown for thirteen consecutive quarters.
Average monthly total unique visitors to the company's online products were 51.1 million in the second quarter of 2019.
Results in the second quarter of 2019 included the following items:
- Loss on extinguishment of debt related to bond redemptions;
- Severance charges; and
- Costs related to re-organizing operations and other miscellaneous costs.
Adjusted net loss, which excludes the items above, was
Operating expenses were down 14.6%, while adjusted operating expenses were down 15.3%. Excluding the impact of real estate gains offsetting expenses in the second quarter of 2019, operating expenses were down 13.5% and adjusted operating expenses were down 14.0%.
Adjusted EBITDA was
Other Second Quarter Business and Recent Highlights
Real Estate Transaction:
As announced on
Debt and Liquidity:
On
As of the end of the second quarter, the company had
Pension Matters:
As previously disclosed, the Company submitted an application for a waiver of the minimum required contributions to its defined benefit pension plan with the
There can be no assurance that the
The Company expects to make a required pension contribution under ERISA of approximately
Journalism Highlights:
In
In the first quarter,
First Six Months Results of 2019
Total revenues for the first six months of 2019 were
Advertising revenues were
Audience revenues were
Results for the first six months of 2019 included the following items:
- Non-cash charge to the company's tax provision;
- Non-cash incremental pension costs related to the voluntary early retirement incentive program;
- Severance charges;
- Loss on extinguishment of debt related to bond redemptions;
- Costs related to re-organizing operations;
- Non-cash impairment charge on real estate held for sale; and
- Accelerated depreciation and other miscellaneous costs.
The company reported a net loss for the first half of 2019 of
Operating expenses were down 10.8%, while adjusted operating expenses were down 11.7% in the first half of 2019 compared to the same period last year.
Adjusted EBITDA was
Outlook
In the full-year of 2019, digital subscriptions are expected to continue to grow and largely offset continuing declines in print circulation, resulting in low single-digit total audience revenue declines for the full-year 2019.
Management expects digital-only advertising to improve in the second half of the year and total digital and digital-only advertising revenues to surpass newspaper print advertising for the full-year 2019 as print advertising becomes a smaller percent of total revenues. While product offerings and collaboration efforts in digital advertising have steadily grown, management will continue to adjust news and advertising content, paywall strategies and the mix of advertising and audience revenue initiatives as
Management plans to be steadfast in reducing operating expenses in the second half of 2019 to align expense and revenue performance, while making additional investments in our news and sales organization.
Management is completing the consolidation and restructuring of the advertising division which created some disruption to advertising sales in the second quarter of 2019. The second half of 2019 should bring focus back to the advertising division, as well as continued cost savings that are expected to be in the high single digit millions of dollars for full year 2019.
Proceeds from asset sales and free cash flow are expected to be used to reduce debt and debt service costs throughout 2019.
The company's consolidated statistical reports, which summarize actual revenue performance for the second quarter and six months ended are attached.
Non-GAAP Operating Performance Measures
In addition to the results reported in accordance with accounting principles generally accepted in
- make more meaningful period-to-period comparisons of the company's ongoing operating results. Management believes variances in the excluded line items are not reflective of the underlying business operations of the company or trends in the company's markets or industry;
- better identify trends in the company's underlying business;
- better understand how management plans and measures the company's underlying business;
- more easily compare operating results to those of our peers;
- more directly compare the company's operating results against investor and analyst financial models; and
- better understand the performance measures used in the company's indenture, term loan agreement, and ABL credit agreement.
These non-GAAP operating performance measures should not be considered a substitute or an alternative to these computations calculated in accordance with and required by GAAP. Also,
Conference Call Information
At
About
Additional Information
Statements in this press release regarding future financial and operating results, including our strategies for success and their effects, our real estate monetization efforts and the repurchase of outstanding notes, revenues, and management's efforts with respect to cost reduction efforts and efficiencies, cash expenses, revenues, adjusted EBITDA, debt levels, interest costs and creation of shareholder and investor value as well as future opportunities for the company and any other statements about management's future expectations, beliefs, goals, investments, plans or prospects constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: McClatchy may not generate cash from operations, or otherwise, necessary to reduce debt; we may not be successful in reducing debt whether through open market repurchase programs or other negotiated transactions; we may not be successful in obtaining waiver(s) for minimum pension plan contributions from the
THE MCCLATCHY COMPANY |
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(Unaudited; In thousands, except per share amounts) |
|||||||
Quarter Ended |
Six Months Ended |
||||||
June 30, |
July 1, |
June 30, |
July 1, |
||||
2019 |
2018 |
2019 |
2018 |
||||
REVENUES - NET: |
|||||||
Advertising |
$ 85,455 |
$ 106,953 |
$ 170,650 |
$ 206,840 |
|||
Audience |
80,292 |
84,825 |
163,404 |
171,103 |
|||
Other |
12,915 |
12,570 |
24,932 |
25,263 |
|||
178,662 |
204,348 |
358,986 |
403,206 |
||||
OPERATING EXPENSES: |
|||||||
Compensation |
61,456 |
77,937 |
130,891 |
157,149 |
|||
Newsprint, supplements and printing expenses |
11,229 |
13,761 |
22,925 |
27,420 |
|||
Depreciation and amortization |
17,411 |
19,222 |
34,929 |
38,455 |
|||
Other operating expenses |
83,087 |
91,817 |
171,291 |
181,466 |
|||
Other asset write-downs |
- |
- |
739 |
59 |
|||
173,183 |
202,737 |
360,775 |
404,549 |
||||
OPERATING INCOME (LOSS) |
5,479 |
1,611 |
(1,789) |
(1,343) |
|||
NON-OPERATING (EXPENSES) INCOME: |
|||||||
Interest expense |
(19,920) |
(17,939) |
(39,964) |
(36,835) |
|||
Equity income (loss) in unconsolidated companies, net |
(900) |
2,314 |
(1,529) |
1,046 |
|||
Loss on extinguishment of debt, net |
(1,986) |
(19) |
(1,986) |
(5,368) |
|||
Retirement benefit expense |
(4,329) |
(2,779) |
(15,056) |
(5,557) |
|||
Other - net |
218 |
65 |
368 |
241 |
|||
(26,917) |
(18,358) |
(58,167) |
(46,473) |
||||
Loss before income taxes |
(21,438) |
(16,747) |
(59,956) |
(47,816) |
|||
Income tax (benefit) provision |
(3,907) |
3,618 |
(469) |
11,490 |
|||
NET LOSS |
$ (17,531) |
$ (20,365) |
$ (59,487) |
$ (59,306) |
|||
Net loss per common share: |
|||||||
Basic |
$ (2.21) |
$ (2.62) |
$ (7.54) |
$ (7.66) |
|||
Diluted |
$ (2.21) |
$ (2.62) |
$ (7.54) |
$ (7.66) |
|||
Weighted average number of common shares used |
|||||||
to calculate basic and diluted earnings per share: |
|||||||
Basic |
7,925 |
7,761 |
7,892 |
7,741 |
|||
Diluted |
7,925 |
7,761 |
7,892 |
7,741 |
THE McCLATCHY COMPANY |
||||||||
Reconciliation of GAAP Measures to Non-GAAP Amounts |
||||||||
(In thousands) |
||||||||
Reconciliation of Net Loss to Adjusted EBITDA |
||||||||
Quarters Ended |
Six Months Ended |
|||||||
June 30, |
July 1, |
June 30, |
July 1, |
|||||
2019 |
2018 |
2019 |
2018 |
|||||
NET LOSS |
$ (17,531) |
$ (20,365) |
$ (59,487) |
$ (59,306) |
||||
Income tax provision (benefit) |
(3,907) |
3,618 |
(469) |
11,490 |
||||
Interest expense |
19,920 |
17,939 |
39,964 |
36,835 |
||||
Depreciation and amortization |
17,411 |
19,222 |
34,929 |
38,455 |
||||
EBITDA |
15,893 |
20,414 |
14,937 |
27,474 |
||||
Severance charges |
1,566 |
4,903 |
3,488 |
7,596 |
||||
Non-cash stock compensation |
302 |
319 |
965 |
1,059 |
||||
Non-cash and non-operating retirement benefit expense |
4,329 |
2,779 |
15,056 |
5,557 |
||||
Equity (income) loss in unconsolidated companies, net |
569 |
506 |
1,198 |
1,774 |
||||
Loss related to sale of equity investment |
331 |
- |
331 |
- |
||||
Other asset impairment charges |
- |
- |
739 |
59 |
||||
Other operating costs, net (1) |
3,794 |
1,154 |
6,645 |
1,897 |
||||
Other non-operating, net |
1,768 |
(46) |
1,633 |
5,127 |
||||
Adjusted EBITDA |
$ 28,552 |
$ 30,029 |
$ 44,992 |
$ 50,543 |
||||
Adjusted EBITDA Margin |
16.0% |
14.7% |
12.5% |
12.5% |
||||
EBITDA ADJUSTED FOR REAL ESTATE / MINORITY DISTRIBUTION ACTIVITY |
$ 26,289 |
$ 27,170 |
$ 42,729 |
$ 44,609 |
||||
(1) Other operating costs, net, includes: Relocation charges; limited technology conversion costs; costs associated with reorganizing operations; trust related litigations, and operating costs associated with the voluntary early retirement program. |
||||||||
Reconciliation of Net Loss to Adjusted Net Loss |
||||||||
NET LOSS |
$ (17,531) |
$ (20,365) |
$ (59,487) |
$ (59,306) |
||||
Add back certain items: |
||||||||
Loss on extinguishment of debt, net |
1,986 |
19 |
1,986 |
5,368 |
||||
Other asset impairment charges |
- |
- |
739 |
59 |
||||
Loss related to sale of equity investment |
331 |
- |
331 |
- |
||||
Severance charges |
1,566 |
4,903 |
3,488 |
7,596 |
||||
Voluntary early retirement incentive program, pension costs |
- |
- |
6,850 |
- |
||||
Accelerated Depreciation |
- |
229 |
106 |
229 |
||||
Other operating costs, net |
3,794 |
1,154 |
6,645 |
1,897 |
||||
Certain discrete tax items |
33 |
10,101 |
9,214 |
24,352 |
||||
Less: Tax effect of adjustments |
(1,569) |
(1,627) |
(2,770) |
(3,765) |
||||
Adjusted net loss (2) |
$ (11,390) |
$ (5,586) |
$ (32,898) |
$ (23,570) |
||||
(2) The tax impact of these non-GAAP adjustments for 2019 and 2018 are calculated using the federal statutory rate of 21% plus the net state rate for the jurisdictions in which the subsidiaries file tax returns and ranges from 2.1% to 10.0%. |
||||||||
Reconciliation of Operating Expenses to Adjusted Operating Expenses |
||||||||
OPERATING EXPENSES: |
$ 173,183 |
$ 202,737 |
$ 360,775 |
$ 404,549 |
||||
Add back: |
||||||||
Depreciation and amortization |
17,411 |
19,222 |
34,929 |
38,455 |
||||
Other asset impairment charges |
- |
- |
739 |
59 |
||||
Severance charges and non-cash stock compensation |
1,868 |
5,222 |
4,453 |
8,655 |
||||
Other operating costs, net |
3,794 |
1,154 |
6,645 |
1,897 |
||||
Adjusted operating expenses |
$ 150,110 |
$ 177,139 |
$ 314,009 |
$ 355,483 |
||||
OPEX ADJUSTED FOR REAL ESTATE ACTIVITY |
$ 175,446 |
$ 202,737 |
$ 363,038 |
$ 407,624 |
||||
ADJUSTED OPEX ADJUSTED FOR REAL ESTATE ACTIVITY |
$ 152,373 |
$ 177,139 |
$ 316,272 |
$ 358,558 |
The McClatchy Company |
|||||||||
Consolidated Statistical Report |
|||||||||
(In thousands) |
|||||||||
Quarters Ended |
Six Months Ended |
||||||||
June 30, |
July 01, |
June 30, |
July 01, |
||||||
Revenues - Net |
2019 |
2018 |
$ Change |
% Change |
2019 |
2018 |
$ Change |
% Change |
|
Advertising |
|||||||||
Digital-only |
$ 31,250 |
$ 39,362 |
$ (8,112) |
-20.6% |
$ 65,683 |
$ 75,667 |
$ (9,984) |
-13.2% |
|
Digital bundled with print |
6,506 |
7,054 |
(548) |
-7.8% |
12,620 |
13,775 |
(1,155) |
-8.4% |
|
Total Digital |
37,756 |
46,416 |
(8,660) |
-18.7% |
78,303 |
89,442 |
(11,139) |
-12.5% |
|
|
32,459 |
39,930 |
(7,471) |
-18.7% |
63,652 |
78,555 |
(14,903) |
-19.0% |
|
Direct marketing and other |
15,240 |
20,607 |
(5,367) |
-26.0% |
28,695 |
38,843 |
(10,148) |
-26.1% |
|
Total Advertising |
85,455 |
106,953 |
(21,498) |
-20.1% |
170,650 |
206,840 |
(36,190) |
-17.5% |
|
Audience |
|||||||||
Digital |
26,969 |
24,957 |
2,012 |
8.1% |
54,798 |
50,397 |
4,401 |
8.7% |
|
|
53,323 |
59,868 |
(6,545) |
-10.9% |
108,606 |
120,706 |
(12,100) |
-10.0% |
|
Total Audience |
80,292 |
84,825 |
(4,533) |
-5.3% |
163,404 |
171,103 |
(7,699) |
-4.5% |
|
Other revenue |
12,915 |
12,570 |
345 |
2.7% |
24,932 |
25,263 |
(331) |
-1.3% |
|
Total Revenues |
$ 178,662 |
$ 204,348 |
$ (25,686) |
-12.6% |
$ 358,986 |
$ 403,206 |
$ (44,220) |
-11.0% |
|
Statistics: |
|||||||||
Daily average total circulation* |
1,061.0 |
1,151.4 |
N/A |
-7.9% |
1,099.3 |
1,196.9 |
N/A |
-8.2% |
|
Sunday average total circulation* |
1,477.4 |
1,753.6 |
N/A |
-15.8% |
1,548.9 |
1,810.2 |
N/A |
-14.4% |
|
Average monthly unique visitors |
51,082.7 |
65,649.0 |
N/A |
-22.2% |
54,523.2 |
71,909.5 |
N/A |
-24.2% |
|
Digital-only subscriptions |
185.5 |
122.4 |
N/A |
51.6% |
185.5 |
122.4 |
N/A |
51.6% |
|
Paid digital customer relationships |
483.6 |
388.6 |
N/A |
24.4% |
483.6 |
388.6 |
N/A |
24.4% |
|
Supplemental Advertising Detail: |
|||||||||
Retail |
$ 39,238 |
$ 47,484 |
$ (8,246) |
-17.4% |
$ 79,493 |
$ 91,814 |
$ (12,321) |
-13.4% |
|
National |
7,688 |
11,697 |
(4,009) |
-34.3% |
15,846 |
21,454 |
(5,608) |
-26.1% |
|
Classified |
23,289 |
27,165 |
(3,876) |
-14.3% |
46,616 |
54,729 |
(8,113) |
-14.8% |
|
Direct marketing and other |
15,240 |
20,607 |
(5,367) |
-26.0% |
28,695 |
38,843 |
(10,148) |
-26.1% |
|
Total Advertising |
$ 85,455 |
$ 106,953 |
$ (21,498) |
-20.1% |
$ 170,650 |
$ 206,840 |
$ (36,190) |
-17.5% |
* Reflects total average circulation based upon number of days in the period. Does not reflect AAM reported figures. |
View original content to download multimedia:http://www.prnewswire.com/news-releases/mcclatchy-reports-second-quarter-2019-results-300898489.html
SOURCE
Elaine Lintecum, VP Finance and CFO, 916-321-1846, elintecum@mcclatchy.com