Not done quite yet, Martha Stewart Living Omnimedia reports Q2 earnings
The company’s deal with Sequential Brands Group is due to close later in the year, and its magazines are now the responsibility of Meredith
The Q2 earnings for what is left of Martha Stewart Living Omnimedia were reported today, with the company reporting an operating loss of $2.4 million.
The company has been sold to Sequential Brands Group, but that deal won’t be closed until later this year, meaning that the company had to still report earnings.
Of interest to publishers has always been the magazine side of things, but MSLO closed a deal with Meredith Corporation to take over Martha Stewart Living and Weddings magazines, and so there is not much revenue to report in this statement. Interestingly, the group still reported a loss, which one would think would be impossible after doing the deal, but it may be that there were continued expenses to be reported.
Here is the earnings statement:
NEW YORK, NY – August 5, 2015 — Martha Stewart Living Omnimedia, Inc. today announced its financial results for the second quarter ended June 30, 2015.
Sequential Brands Group Transaction Update
On June 22, 2015, MSLO announced that it had signed a definitive agreement with Sequential Brands Group, Inc. (Nasdaq: SQBG) pursuant to which Sequential will acquire 100% of the Company’s outstanding shares for aggregate consideration valued at $6.15 per share, payable 50% in stock and 50% in cash. At 11:59 p.m. on July 22, 2015, the 30-day “go-shop” period pursuant to the terms of the merger agreement expired. None of the parties contacted by MSLO during the “go-shop” period notified MSLO by the deadline that they would be interested in pursuing an alternative transaction under the merger agreement. On July 29, a registration statement on Form S-4 was filed related to the acquisition, which includes a proxy statement for the MSLO stockholder meeting. More details on how to access the statement is included below. The parties to the merger agreement currently expect the transaction to close in the last quarter of 2015 following the satisfaction of customary closing conditions, including the adoption of the merger agreement by MSLO’s stockholders.
Second Quarter 2015 Summary
“Second quarter results were consistent with our previously announced expectations as we continue to realize cost savings from our partnership with Meredith Corporation,” said CEO Dan Dienst. “While we are pleased by exceeding our ‘cost avoidance’ projections, we eagerly await our partner Meredith Corporation’s sales progress as we move into late 2015 and into 2016. We are excited about our pending merger agreement with Sequential Brands Group, which best positions MSLO for long-term success by allowing the Company’s design and creative resources to tap into Sequential’s commercial expertise to grow and expand the Martha Stewart brand, both domestically and abroad.”
Revenues totaled $18.2 million in the second quarter of 2015, compared to $37.6 million in the second quarter of 2014. The anticipated decline was primarily due to our agreement with Meredith Corporation under which we now only receive a share of digital revenues (and with Meredith, as publisher, responsible for all sales, printing, distribution and hosting costs) as well as lower Merchandising revenues.
Total operating loss for the second quarter of 2015 was $(2.4) million, compared to total operating income of $2.2 million in the prior-year period. Included in second quarter 2015 results was $2.1 million in Corporate expenses related to legal and financial advisory fees associated with our proposed merger transaction with Sequential and a non-recurring charge of $0.7 million related to the buyout of a legacy Publishing segment contract. Excluding these two non-recurring charges, consolidated operating income for the second quarter 2015 would have been approximately $0.3 million.
Excluding these two non-recurring charges mentioned above, basic and diluted net income per share was breakeven for the second quarter of 2015 compared to net income per share of $0.03 in the second quarter of 2014. Including the two non-recurring items, basic and diluted net loss per share was $(0.05) for the second quarter of 2015.
Revenues in the second quarter of 2015 were $6.1 million, compared to $22.2 million in the prior year’s second quarter reflecting our agreement with Meredith Corporation which resulted in MSLO’s elimination of advertising and circulation revenue from Martha Stewart Living and a digital advertising revenue share arrangement.
Operating loss was $(1.6) million for the second quarter of 2015, compared to $(1.8) million in the prior year’s second quarter as a result of the cost reductions from our partnership with Meredith. The second quarter of 2015 also includes a $0.7 million non-recurring charge as mentioned above.
Revenues were $12.0 million for the second quarter of 2015 compared to $14.7 million in the prior year’s second quarter due to the expiration of certain partnerships such as Avery (which has been replaced with a direct partnership with Staples – scheduled to hit shelves in early 2016) as well as lower sales at The Home Depot. The decline in revenue was partially offset by increased revenue from our partnership with PetSmart.
Operating income was $8.7 million for the second quarter of 2015 as compared to $11.0 million in the second quarter of 2014.
Revenue in the second quarter of 2015 was $0.1 million, compared to $0.7 million in the second quarter of 2014. The prior year’s second quarter included revenue from Season 3 of Martha Bakes.
Operating loss was $(0.1) million for both the second quarter of 2015 and 2014.
Corporate expenses were $(9.4) million in the second quarter of 2015 compared to $(6.9) million in the prior year’s quarter. Included in this year’s second quarter were $2.1 million in fees associated with our proposed merger transaction with Sequential, $0.3 million of facility costs previously allocated to Publishing, and increased legal fees.