Fast growing New Media Investment Group reports Q2 earnings reflecting recent acquisitions
If, like me, you are a publisher or former publisher, and one of those that actually likes looking at P&L and earnings statements, then you’re going to love to look over the statements from New Media Investment Group in the coming years. The company, formerly known as GateHouse Media, is pursuing a roll-up strategy, recently acquiring the Columbus Dispatch.
Today’s earnings for Q2 show the company, not surprisingly, being able to report strong revenue growth. Net income is also up. But a look at the assets show less cash on hand and increasing liabilities. The company also said that, like other newspaper companies, revenue at its properties is falling, though it claimed that at those it has owned longer those declines are somewhat less.
It all makes for interesting reading, in my opinion.
Like Gannett, New Media just announced a cash dividend for shareholders. The idea is to make the shareholders happy so they don’t dump the stock. The stock has been on a roller coaster this year, going from $14.23 a year ago to $25.43 in March, but back down to $16.41 before the earnings were announced. The stock is currently up modestly in morning trading today.
NEW YORK, NY – July 30, 2015 — New Media Investment Group Inc. today reported its financial results for the second quarter ended June 28, 2015.
- New Media declares a cash dividend of $0.33 per common share for the second quarter of 2015
- Total revenues of $299.5 million, an increase of 89.0% to prior year, and a decrease of 3.5% on a same store basis*
- Digital revenue of $27.0 million, an increase of 10.7% to prior year on a same store basis*
- Operating income of $19.5 million, an increase of 164.4% to prior year
- Net income of $11.2 million
- As Adjusted EBITDA of $42.4 million, an increase of 74.5% to prior year*
- Free cash flow of $33.2 million, or $0.74 per basic share, an increase of $0.09 per basic share to prior year*
- Liquidity, consisting of cash on the balance sheet and undrawn revolver, of $23.7 million
- Closed the acquisition of The Columbus Dispatch for $47.0 million, funded with a combination of cash on the balance sheet and an incremental $25.0 million on the Company’s existing term loan
- Entered into a promotional venture with Direct Eats, an online specialty food marketplace; New Media will provide advertising across all of its local markets in exchange for a 12.5% equity stake in Direct Eats
“I’m very pleased to announce another strong quarter for New Media supported by our robust financial results, successful execution of our acquisition strategy, and strong cash flow generation,” said Michael E. Reed, New Media President and Chief Executive Officer. “During the second quarter, the Company generated total revenues of $299.5 million, As Adjusted EBITDA of $42.4 million, and free cash flow of $33.2 million, an increase of 89.0%, 74.5%, and 69.4% vs. the prior year, respectively. On a same store basis, total revenues decreased 3.5% vs. prior year driven primarily by pressure on our Local Print Advertising and Preprints categories.
“For the last twelve months, excluding tuck-in acquisitions, total revenues for the Company decreased 4.1%; however, revenue we have owned for over one year performed much better, decreasing 3.2%, highlighting the improvement we believe is due to the Company having time to execute on its operational strategy. We are very proud that most of the publications we have owned for more than one year have better revenue trends than the papers we recently acquired, and better trends than the industry at large. Further, we expect our revenue trends to improve, gradually reaching flat within the next two years. In the meantime, we believe we can shield our cash flows from topline declines through measured expense reductions at our acquired properties, and remain confident in our ability to continue to grow free cash flow and our dividend.
“Near-term, in order to maintain flat same store revenue trends, we believe New Media needs to complete approximately $20 to $40 million of tuck-in acquisitions per year, funded with organically generated cash. This assumes a 3% to 5% decline in same store revenues, in line with the revenue declines we have seen over the past 12 months. We believe this level of acquisitions is highly achievable given the Company’s strong free cash flow generation and proven track record of successfully identifying and acquiring local media assets. While accretive acquisitions are driving the Company’s growth near-term, we believe New Media’s maturing digital initiatives will lead to long-term organic growth.
“In addition to our strong Q2 financial results, New Media also closed the acquisition of The Columbus Dispatch for $47.0 million. The family-owned daily newspaper, first published in 1871, is the longstanding, flagship daily newspaper serving the Columbus, Ohio area. Since inception, New Media has announced $585.8 million of acquisitions at an average 4.1x LTM As Adjusted EBITDA. After factoring in estimated net synergies for the deals we have completed, the multiple reduces further and we will generate levered yields of over 40% for the Company.
“Our strategy and commitment to create value for shareholders has been consistent since becoming a public company in early 2014. We intend to generate substantial value for shareholders by completing accretive acquisitions, investing in print and digital initiatives to drive long-term organic growth, and returning a significant portion of our stable cash flows to shareholders in the form of a dividend. As New Media has grown through acquisitions, we have raised our dividend twice, or 22%, since the prior year, highlighting our commitment to return a significant portion of our stable free cash flow to investors. Looking ahead, we continue to believe our position as a leading source of local news in the markets we serve, and our strategic investments, will continue to generate substantial value for our shareholders.”
Second Quarter 2015 Financial Results
New Media recorded total revenues of $299.5 million for the quarter, an increase of 89.0% when compared to the prior year, and a decrease of 3.5% on a same store basis. Excluding the benefit from tuck-in acquisitions, total revenues decreased 5.3% and total revenues owned for more than one year decreased 3.9% to prior year.
Total Print Advertising decreased 7.1% on a same store basis driven by Preprints and Local Display which decreased 11.2% and 7.9%, respectively. Preprints fell under pressure in the second quarter driven by several major retailers decreasing their volume, and multiple retail store closures in our markets. Classified Print revenue decreased 2.0% on a same store basis; however, obituaries revenue, a subcategory of Classified Print, continues to be a strong category.
New Media’s Digital revenue of $27.0 million contributed positively to the Company’s strong revenue performance increasing 10.7% on a same store basis. Propel, our digital marketing services business, increased 75.8% to the prior year on a same store basis.
Circulation, our largest individual revenue category at nearly one-third of total revenues, continues to be a stable category with revenue increasing 0.4% on a same store basis. Finally, Commercial Print and Other revenue decreased 6.9% to the prior year on a same store basis, with nearly half of the decline driven by recent acquisitions shifting from external print relationships to internal, as they are now part of New Media.
Total expenses decreased 2.9% to the prior year, on a same store basis, totaling $257.1 million, after adjusting for non-recurring and non-cash items. Excluding the additional expense from tuck-in acquisitions, on a same store basis, total expenses decreased 5.5% to prior year, totaling $250.1 million. Organizational efficiency continues to be a central strategic priority, and as the Company continues to grow through acquisitions, we believe we will continue to be able to leverage our scale to increase our buying power.
As Adjusted EBITDA of $42.4 million increased $18.1 million, or 74.5%, over the prior year. Free cash flow of $33.2 million increased 69.4% over the prior year to $0.74 per basic share.
Second Quarter 2015 Dividend
New Media’s Board of Directors declared a second quarter 2015 cash dividend of $0.33 per share of common stock. The dividend is payable on August 20, 2015 to shareholders of record as of the close of business on August 12, 2015.
The declaration and payment of any dividends are at the sole discretion of the Board of Directors, which may decide to change the Company’s dividend policy at any time.