The trend in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the impact of real estate gains recorded in the first quarter of 2018, improved sequentially to down 5.7% from the down 8.2% rate in the fourth quarter of 2018 and was the company's best performance in this key metric in three years. Adjusted EBITDA was
"The first quarter adjusted EBITDA marks the second consecutive quarter of improving trends in operating results," said
The first quarter of
"Our focus on paid digital subscriber growth is a key performance measure in our continuing digital transformation and a contributor to improving our audience revenue trend this quarter," said Forman. "We have tightened our paywalls, improved our ability to convert viewers to paid subscribers and sharpened our targeting for our digital products. As a result, we achieved nearly 60% growth in digital-only subscriptions, reaching 179,100 at the end of the first quarter of 2019."
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 organization structure with a dedicated focus on our customers to drive digital revenue and create new efficiencies.
"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 award-winning reporting and commentary in our markets from
First Quarter Results
Total revenues in the first quarter of 2019 were
Total advertising revenues were
Total digital and digital-only advertising revenues surpassed print newspaper advertising revenues in the first quarter of 2019. Digital-only advertising revenues in the first quarter of 2019 were down 5.2% and total digital advertising revenues were down 5.8% over the same period in 2018. The decline in digital-only advertising reflected lower audience traffic compared to the first quarter of 2018, the result of a softer news cycle generating fewer page views compared to last year, a strategic tightening of website paywalls that accelerated paid digital subscriptions and, to a lesser extent, a change in algorithms by a large platform company in the last half of 2018 that impacted
Direct marketing advertising revenues declined 26.1% in the first quarter of 2019 compared to the first quarter of 2018.
Audience revenues were
Digital audience revenues were up 9.4% for the first quarter of 2019 compared to the same period last year. The company reported growth of 34%, to 474,400, of total digital subscribers, defined as digital-only subscribers and digital subscriptions activated by combined print/digital customers, compared to the first quarter of 2018. Digital-only audience revenues associated with digital-only subscriptions were up 50.4% and the number of digital-only subscribers ended the quarter at 179,100, representing an increase of 59.6% from the first quarter of 2018. Digital-only subscriptions have grown for twelve consecutive quarters, with growth of 15.2% in the first quarter 2019 compared to the fourth quarter of 2018.
Average monthly total unique visitors to the company's online products were 58.0 million in the first quarter of 2019.
Results in the first quarter 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;
- Costs related to re-organizing operations;
- Non-cash impairment charge on real estate held for sale; and
- Accelerated depreciation and other miscellaneous costs.
Adjusted net loss, which excludes the items above, was
Operating expenses were down 7.0%, while adjusted operating expenses were down 8.1%. Excluding the impact of real estate gains offsetting expenses in the first quarter of 2018, operating expenses were down 8.4% and adjusted operating expenses were down 9.7%.
Adjusted EBITDA was
Other First Quarter Business and Recent Highlights
Real Estate Activity:
On
Debt and Liquidity:
As of March 31, 2019, the company's principal debt outstanding was
As of the end of the first quarter the company had
As a result of the early retirement incentive program the company remeasured its pension plan assets and obligations as of
Journalism Highlights:
Outlook
In full-year 2019 management expects to see growth in total digital revenues, which include both advertising and audience digital revenues. Digital subscribers 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 in each quarter and 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 our advertising and audience revenue mix as we pursue the best experience for our digital customers.
Management plans to be persistent in reducing GAAP and adjusted operating expenses and will continue to monitor costs over the next three quarters to align expense and revenue performance, while making additional investments in our news and sales organization.
Management is restructuring and further consolidating functions within its advertising division and expects the changes to result in savings in the mid-to-high single digit millions of dollars in 2019. Management also expects its realignment to improve revenue generation. As previously reported, management completed a voluntary early retirement incentive program that was implemented in the first quarter and is expected to result in savings of approximately
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 first quarter, is 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; and
- more directly compare the company's operating results against investor and analyst financial models.
The company's new indenture, term loan agreement, and ABL credit agreement, include a similar definition of consolidated EBITDA and consolidated net income, which retains the impact of a gain or loss on an asset sale in the operating results of the company. The company had previously excluded all asset sale results from non-GAAP adjusted EBITDA and adjusted net income in its previously reported earnings releases. However, given that sales of real properties have become ongoing and recurring events, and to maintain consistency in the presentation of non-GAAP operating results, the company believes that reporting the company's Non-GAAP adjusted EBITDA in line with that reported to bondholders and creditors is a more accurate and consistent representation of non-GAAP results in any given quarter. Accordingly, operating and non-operating costs have been recast to conform to this presentation for prior periods included in our comparative schedules and references in this press release.
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; sales of real estate properties may not close as anticipated or result in cash distributions in the amount or timing anticipated;
THE MCCLATCHY COMPANY |
|||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||
(Unaudited; In thousands, except per share amounts) |
|||
Quarter Ended |
|||
March 31 |
April 1 |
||
2019 |
2018 |
||
REVENUES - NET: |
|||
Advertising |
$ 85,195 |
$ 99,887 |
|
Audience |
83,112 |
86,278 |
|
Other |
12,017 |
12,693 |
|
180,324 |
198,858 |
||
OPERATING EXPENSES: |
|||
Compensation |
69,435 |
79,212 |
|
Newsprint, supplements and printing expenses |
11,696 |
13,659 |
|
Depreciation and amortization |
17,518 |
19,233 |
|
Other operating expenses |
88,204 |
89,649 |
|
Other asset write-downs |
739 |
59 |
|
187,592 |
201,812 |
||
OPERATING LOSS |
(7,268) |
(2,954) |
|
NON-OPERATING (EXPENSES) INCOME: |
|||
Interest expense |
(20,044) |
(18,896) |
|
Equity loss in unconsolidated companies, net |
(629) |
(1,268) |
|
Loss on extinguishment of debt, net |
- |
(5,349) |
|
Retirement benefit expense |
(10,727) |
(2,778) |
|
Other - net |
150 |
176 |
|
(31,250) |
(28,115) |
||
Loss before income taxes |
(38,518) |
(31,069) |
|
Income tax provision |
3,438 |
7,872 |
|
NET LOSS |
$ (41,956) |
$ (38,941) |
|
Net loss per common share: |
|||
Basic |
$ (5.34) |
$ (5.04) |
|
Diluted |
$ (5.34) |
$ (5.04) |
|
Weighted average number of common shares used |
|||
to calculate basic and diluted earnings per share: |
|||
Basic |
7,858 |
7,721 |
|
Diluted |
7,858 |
7,721 |
|
THE McCLATCHY COMPANY |
|||||
Reconciliation of GAAP Measures to Non-GAAP Amounts |
|||||
(In thousands) |
|||||
Reconciliation of Net Loss to Adjusted EBITDA |
|||||
Quarters Ended |
|||||
March 31, |
April 1, |
||||
2019 |
2018 |
||||
NET LOSS |
$ (41,956) |
$ (38,941) |
|||
Income tax provision (benefit) |
3,438 |
7,872 |
|||
Interest expense |
20,044 |
18,896 |
|||
Depreciation and amortization |
17,518 |
19,233 |
|||
EBITDA |
(956) |
7,060 |
|||
Severance charges |
1,922 |
2,693 |
|||
Non-cash stock compensation |
663 |
740 |
|||
Non-cash and non-operating retirement benefit expense |
10,727 |
2,778 |
|||
Equity loss in unconsolidated companies, net |
629 |
1,268 |
|||
Other asset impairment charges |
739 |
59 |
|||
Other operating costs, net (1) |
2,851 |
743 |
|||
Other non-operating, net |
(135) |
5,173 |
|||
Adjusted EBITDA |
$ 16,440 |
$ 20,514 |
|||
Adjusted EBITDA Margin |
9.1% |
10.3% |
|||
EBITDA ADJUSTED FOR REAL ESTATE ACTIVITY |
$ 16,440 |
$ 17,439 |
|||
(1) Other operating costs, net, includes: Relocation charges; limited technology conversion costs; costs associated with |
|||||
Reconciliation of Net Loss to Adjusted Net Loss |
|||||
NET LOSS |
$ (41,956) |
$ (38,941) |
|||
Add back certain items: |
|||||
Loss on extinguishment of debt, net |
- |
5,349 |
|||
Other asset impairment charges |
739 |
59 |
|||
Severance charges |
1,922 |
2,693 |
|||
Voluntary early retirement plan |
6,850 |
- |
|||
Accelerated depreciation and other miscellaneous charges |
106 |
- |
|||
Other operating costs, net |
2,851 |
743 |
|||
Certain discrete tax items |
9,181 |
14,251 |
|||
Less: Tax effect of adjustments |
(1,201) |
(2,138) |
|||
Adjusted net loss (2) |
$ (21,508) |
$ (17,984) |
|||
(2) The tax impact of these non-GAAP adjustments for 2019 and 2018 are calculated using the federal statutory |
|||||
Reconciliation of Operating Expenses to Adjusted Operating Expenses |
|||||
OPERATING EXPENSES: |
$ 187,592 |
$ 201,812 |
|||
Add back: |
|||||
Depreciation and amortization |
17,518 |
19,233 |
|||
Other asset impairment charges |
739 |
59 |
|||
Severance charges and non-cash stock compensation |
2,585 |
3,433 |
|||
Other operating costs, net |
2,851 |
743 |
|||
Adjusted operating expenses |
$ 163,899 |
$ 178,344 |
|||
OPEX ADJUSTED FOR REAL ESTATE ACTIVITY |
$ 187,592 |
$ 204,887 |
|||
ADJUSTED OPEX ADJUSTED FOR REAL ESTATE ACTIVITY |
$ 163,899 |
$ 181,419 |
The McClatchy Company |
|||||||||||||||||
Consolidated Statistical Report |
|||||||||||||||||
(In thousands, except for preprints) |
|||||||||||||||||
Quarter 1 |
|||||||||||||||||
Combined |
|
Digital |
|||||||||||||||
Revenues - Net: |
2019 |
2018 |
% Change |
2019 |
2018 |
% Change |
2019 |
2018 |
% Change |
||||||||
Advertising |
|||||||||||||||||
Retail |
$40,255 |
$44,330 |
-9.2% |
$19,124 |
$23,973 |
-20.2% |
$21,131 |
$20,357 |
3.8% |
||||||||
National |
8,158 |
9,757 |
-16.4% |
2,538 |
2,589 |
-2.0% |
5,620 |
7,168 |
-21.6% |
||||||||
Classified |
23,327 |
27,564 |
-15.4% |
9,531 |
12,063 |
-21.0% |
13,796 |
15,501 |
-11.0% |
||||||||
Direct Marketing |
13,439 |
18,184 |
-26.1% |
13,439 |
18,184 |
-26.1% |
|||||||||||
Other Advertising |
16 |
52 |
-69.2% |
16 |
52 |
-69.2% |
|||||||||||
Total Advertising |
$85,195 |
$99,887 |
-14.7% |
$44,648 |
$56,861 |
-21.5% |
$40,547 |
$43,026 |
-5.8% |
||||||||
Memo: Digital-only Advertising |
$34,433 |
$36,305 |
-5.2% |
||||||||||||||
Audience |
83,112 |
86,278 |
-3.7% |
55,283 |
60,838 |
-9.1% |
27,829 |
25,440 |
9.4% |
||||||||
Other |
12,017 |
12,693 |
-5.3% |
||||||||||||||
Total Revenues |
$180,324 |
$198,858 |
-9.3% |
||||||||||||||
Advertising Statistics for Dailies: |
|||||||||||||||||
Full Run ROP Linage |
2,138.7 |
2,081.9 |
2.7% |
||||||||||||||
Millions of Preprints Distributed |
296.8 |
335.5 |
-11.5% |
||||||||||||||
Audience: |
|||||||||||||||||
Daily Average Total Circulation* |
1,137.7 |
1,242.5 |
-8.4% |
||||||||||||||
Sunday Average Total Circulation* |
1,620.4 |
1,866.8 |
-13.2% |
||||||||||||||
Average Monthly Unique Visitors |
57,963.8 |
78,170.1 |
-25.8% |
||||||||||||||
Digital Subscriptions |
179.1 |
112.2 |
59.6% |
||||||||||||||
Columns may not add due to rounding |
|||||||||||||||||
* 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-first-quarter-2019-results-300846894.html
SOURCE
Stephanie Zarate, Investor Relations Manager, 916-321-1931, szarate@mcclatchy.com