Journal Media reports ad revenue decline of 8% in Q1 2015 earnings report
First earnings report since the merging of newspaper properties of Journal Communications and E.W. Sxripps shows the print side has a tough road ahead
The media assets swap between E.W. Scrips and Journal Communications sent broadcast properties to Scripps, and print properties to Journal Media, the new name of the newspaper company established following the swap.
That a company would intentionally trade their broadcast properties for print makes no sense at all until you realize that the deal solved a debt issue for the new newspaper company. But now, going forward, things may get ugly.
Journal Media today announced Q1 earnings for their new newspaper company, and reported that ad revenue fell 8 percent, subscription revenues fell 3.2 percent. Overall, the company reported an operating loss of $3.7 million. (The company only reported GAAP financials for the Scripps portion of the new company.)
The comapny also said it “anticipates incurring approximately $9 million to $11 million, net, in transition and integration-related expenses related to the transition service agreements with Scripps, costs of information technology implementations, recruitment and relocation costs and future synergies.”
What’s next? Well, more cost cutting, one assumes. Can this company make it? Good question (glad I asked).
Here is the Q1 earnings announcement:
MILWAUKEE, Wisc. – May 15, 2015 — Journal Media Group, Inc. today announced results for its first quarter ended March 31, 2015 and the declaration of a cash dividend of $0.04 per share, payable on June 5, 2015, to shareholders of record as of the close of business on May 26, 2015.
“Eight months from the day we announced the proposed transaction between The E.W. Scripps Company and Journal Communications to spin off and merge their respective newspaper publishing operations, we commenced publishing our daily newspapers in 14 markets under the Journal Media Group umbrella,” said Tim Stautberg, president and CEO of Journal Media Group. “This is an exciting time for our company as we shift our focus from planning for the integration of these two newspaper groups to the execution of our plans and the reimagining of the relationship our local brands have with readers and advertisers in the communities we serve.”
Since the transactions between The E.W. Scripps Company (“Scripps”) and Journal Communications, Inc. (“Journal Communications”) did not close until April 1, reported GAAP financials in the attached tables and in the 10-Q which will be filed later today have been prepared on a “carve-out” basis derived from the financial statements of Scripps. As a result, the combined financial statements exclude any cost savings or synergies expected to result from the transactions. In order to enhance investors’ understanding of the expected financial performance of the company’s business as a stand-alone entity, adjusted to give effect to the merger of the Scripps newspaper business with the Journal Communications newspaper business (the “newspaper mergers”), non-GAAP information has been provided in this release. Please note that the Merged Company results may not be indicative of results that may occur in the future. Any discussions of Merged Company results can be referenced in Table 2 through Table 4 below.
See “Use of Non-GAAP Financial Measures” below and the reconciliations of these non-GAAP measures to the most comparable GAAP measures in the attached schedules
First Quarter GAAP Reported Results
Note that unless otherwise indicated, all comparisons are to the first quarter ended March 31, 2014.
In the first quarter, revenue of $91.5 million decreased 7.1 percent driven chiefly by advertising revenue declines. Expenses were down 6.7 percent driven primarily by lower employee costs from actions taken at the end of 2014 and lower newsprint consumption. Net loss attributable to Parent was $3.5 million, down 10.1 percent.
First Quarter Non-GAAP Merged Company Results
All discussions of Merged Company Revenue, Merged Company EBITDA and Adjusted Merged Company EBITDA can be referenced to Tables 2 through Table 4. These Merged Company numbers are intended to enhance investors’ understanding of the historic financial performance of the company’s business as a stand-alone company, adjusted to give effect to the newspaper mergers. Please note that the Merged Company results may not be indicative of results that may occur in the future. Note that unless otherwise indicated, all comparisons are to the Merged Company quarterly information ended March 31, 2014.
Non-GAAP Merged Company Revenue, found on table 2, would have been $124.2 million in the first quarter, down 7.4 percent led by a 9.3 percent decline in advertising. Coming off of a soft holiday period, advertisers have been slower to spend, which contributed to a decline of 9.4 percent in retail advertising. Advertiser challenges, particularly amongst larger national clients, combined with lower circulation volumes, put pressure on pre-prints leading to a decline of 13 percent in the category. Classified, down 6.9 percent, maintained its downward trend and continues to become a smaller component of revenue.
Digital advertising and marketing services were down 5.3 percent as an increasing amount of sales through third party programmatic put pressure on rates.
In the second half of 2014, subscription revenue growth moderated as the price increases in the Scripps papers cycled against volume declines. This trend continued in the first quarter of 2015 with subscription revenue down 3.4 percent.
The loss of several commercial printing and distribution customers led to a decline of 9.4 percent in other revenue.
Adjusted Merged Company EBITDA, as defined in table 3, would have been approximately $13.7 million, up 5.7 percent versus the prior year.
Merged Company Outlook
The company expects second quarter total revenue to be down in the high-single-digits when compared to the quarterly Merged Company Revenue in the prior year period set forth in Table 2.
The company anticipates second quarter operating expenses, excluding transition and integration-related costs, to decline at a high-single-digit rate compared to the Merged Company Expenses in the prior year period.
For the final three quarters of 2015, the company expects:
- Capital expenditures to be between $4 million and $6 million
- Depreciation and amortization to be approximately $17 million, subject to finalizing the purchase price allocation for the Journal Communications newspaper business
Finally, the company anticipates incurring approximately $9 million to $11 million, net, in transition and integration-related expenses related to the transition service agreements with Scripps, costs of information technology implementations, recruitment and relocation costs and future synergies.