Tribune Publishing reports a loss of $3.4M in Q3 earnings report, but points to digital growth
Publisher will move from a premium content strategy for digital subs to a metered paywall web approach; company expresses interest in acquiring The Orange County Register
What promises to be an interesting investor conference call will be held later this morning following the earnings announcement by Tribune Publishing. This will be the first time analysts will be able to ask CEO Jack Griffin about the melodrama at the Los Angeles Times, as well as the company’s plans concerning the Orange County Register.
Tribune was able to report that ad revenue was up slightly in its third quarter, but that was the result of the acquisition of The San Diego Union-Tribune. Minus that paper’s contribution, revenue fell 9.6 percent. Circulation revenue was up 11.6 percent, though it was flat when the U-T is taken out.
In the investor conference call, Denise Warren, President of Digital, said the company plans in 2016 to move from a premium digital subscription strategy to a metered paywall strategy. The company will also be selling print/digital bundles.
Net income came in at a loss of $3.374 million for the quarter, and for the full year net income is a profit of $2.5 million, versus $26.8 million during the same nine months of 2014.
The reported loss, however, does not include the possibly payout that might following an employment verdict that occurred Wednesday when a Superior Court jury awarded former sports columnist T.J. Simers $7.1 million. Simers had complained that he was forced him out after he collapsed in March 2013 while covering the Dodgers and Angels spring training for the Los Angeles Times. Tribune Publishing plans to appeal the judgement.
Between the last earnings statement and today a lot has happened. Austin Beutner, who had been running the California News Group as publisher of both the Los Angeles Times and the recently acquired San Diego Union-Tribune, was pushed out. The company said performance was disappointing under his management, a charge that Beutner did not appreciate and refuted. There was obviously more going on there, with many believing that Beutner was either positioning himself to take over the newspapers in an acquisitions move, or was using his position for political purposes. No matter, he is gone, at least for now.
Then just in the past few days, the owner of The Orange County Register, Freedom Communications, filed for Chapter 11 bankruptcy protection. What will happen now is an auction for both that paper and the Riverside Press-Enterprise – and Tribune Publishing looks to be interested. According to The Wall Street Journal, Tribune offered to loan the paper’s owner $3 million in exchange for a right to bid on the properties.
The roll-up strategy certainly makes sense, the question is if investors will be willing to be patient enough to see it through.
Tribune Publishing also announced yesterday that the company will be bring on board Alex Rotonen as Vice President of Investor Relations. Rotonen comes to Tribune from Alpha Natural Resources where he held the same position. Alpha Natural Resources is a coal company that filed for Chapter 11 bankruptcy protection this summer and recently disclosed that it had made $18,600 in payments to a prominent global warning skeptic, the WSJ reported.
“Tribune Publishing is a collection of market-leading brands and unique digital properties with deep local reach and national scale,” said Rotonen in Tribune’s hiring announcement. “I am thrilled to be a part of this team and am eager to tell the digital transformation story and showcase the significant value of the Company and its media assets.”
Here is Tribune Publishing’s Q3 earnings announcement (this post will be updated if any news comes from the conference call):
CHICAGO, Ill. – November 5, 2015 — Tribune Publishing Company:
2015 Third Quarter Summary:
Q3 Preliminary GAAP Measures
- Total Revenues of $404 million, up slightly from the prior-year quarter
- Advertising Revenues of $220 million, down slightly from the prior-year quarter and down 9.6%, excluding advertising revenues from the acquisition of The San Diego Union-Tribune
- Direct Mail, Digital Marketing Services and Content Syndication were $33 million, up 5.4% from prior-year quarter
- Including restructuring, acquisition and remediation costs, Net Loss was $3 million or Diluted Loss per Share of $0.13
- Preliminary Net Loss and Diluted Loss per Share do not include an estimated $5 million or $0.20, respectively, after-tax charge related to an adverse jury verdict in a pre-spin employment litigation matter that was announced on the evening of Nov. 4th
Q3 Non-GAAP Measures
- Adjusted Net Income of $3 million and Adjusted Diluted Earnings per Share of $0.12, excluding restructuring, acquisition and remediation costs
- Pro Forma Adjusted EBITDA of $28 million, up $2 million from the prior-year quarter, reflecting accretive acquisitions and significant progress on in-year expense reductions
Q3 Total Digital Revenues of $52 million, up 6.6% from the prior-year quarter (adjusted for prior-year impact of modified affiliate agreements); Over the twelve months ended September 27, 2015, Total Digital Revenues have grown to over $200 million and 12% of Total Revenues
- Q3 Total Digital subscribers grew to 715,000, up 19% from prior-year quarter, up 6% from Q2 2015
- Q3 Digital-only subscribers were 81,000, up 37% from prior-year quarter, up 15% from Q2 2015
On adjusted basis, the Company eliminated $24 million of Q3 cash expenses versus the comparable prior-year quarter and over $70 million year-to-date through Q3
Generated $22 million of Operating Cash Flow in Q3
- Q3 Capital Expenditures of $8 million
Company reaffirms full year 2015 Financial Guidance:
- Total Revenues of $1.645 billion to $1.675 billion
- Adjusted EBITDA of $145 million to $160 million
Tribune Publishing Company today reported preliminary financial results for its third quarter ended September 27, 2015. Preliminary Net Loss and Diluted Loss per Share do not include an estimated $5 million or $0.20, respectively, after-tax charge related to an adverse jury verdict that was announced on the evening of November 4th in an employment litigation matter that originated pre-spin. The Company expects to record the reserve in its third quarter financial statements included in its Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or before November 11, 2015. Management uses non-GAAP measures to enhance comparability of operating results.
“Our Company demonstrated solid progress against our strategic plan this quarter,” said Tribune Publishing CEO Jack Griffin. “Pro Forma Adjusted EBITDA increased by $2 million; our digital revenues increased 7 percent year-over-year; we continued to make significant progress re-shaping the Company’s cost structure, realizing more than $70 million of expense savings year-to-date on an adjusted basis; and year-over-year acquired properties generated $40 million of incremental revenue and $10 million of incremental Adjusted EBITDA. We are confident about the path we are on to create shareholder value as we build upon our foundation of premium journalism, strong brands and an excellent team.”
2015 THIRD QUARTER RESULTS
Total Revenues in the third quarter of 2015 were $404.3 million compared to $404.1 million in the third quarter of 2014. Advertising revenues were $220 million in the third quarter of 2015, down 0.5% from the prior-year quarter. Third quarter advertising revenues, excluding advertising revenues from The San Diego Union-Tribune, declined 9.6%. Circulation revenues of $120 million were up 11.6% in the quarter compared to the prior-year and increased 0.7% from last year excluding revenues from The San Diego Union-Tribune. Third quarter 2015 Commercial Print and Delivery revenues of $31 million declined from $44 million in the prior-year quarter due to changes in contracts, primarily in Chicago and Los Angeles. All other revenues, including Direct Mail, Digital Marketing Services and Content Syndication, were $33 million, an increase of 5.4%, compared to the third quarter of 2014. Revenues from acquired properties in the third quarter of 2015 totaled $49 million. Acquired properties consist of all of the properties acquired in 2014 and 2015.
Total Operating Expenses, including depreciation and amortization, for the third quarter of 2015 were $403 million compared to $400 million in the third quarter of 2014. Total operating expenses, adjusted to isolate in-year reductions in cash operating expenses as calculated below, resulted in $23.9 million of adjusted cash operating expense savings in the third quarter of 2015 compared to 2014 and over $70 million of savings year-to-date through the third quarter of 2015. A component of the adjusted cash operating expense savings is adjusted cash compensation, as calculated below. Of the $23.9 million of adjusted cash operating expense savings in the third quarter, $15.8 million represented adjusted cash compensation savings in 2015 versus 2014.
ncome from operations for the third quarter of 2015 was $2 million compared to $5 million in the prior-year quarter primarily due to revenue and expense variances, as described above.
Income from operations, excluding the increase in depreciation and amortization expenses exceeded the prior-year period by $1 million. Depreciation and amortization expenses increased by $4 million related to the spin-off transaction.
Interest expense, net for the third quarter of 2015 was $7 million compared to $4 million in the prior-year quarter, due to $70 million of debt incurred in the second quarter of 2015 in connection with the San Diego acquisition and because the post-spin interest expense in the prior year represented a partial quarter.
Net loss for the third quarter of 2015 was $3 million compared to $0.2 million in the third quarter of 2014 due to the variances described above.
On the evening of November 4, 2015, the Company received an adverse jury verdict in a pre-spin employment litigation matter. Although not probable or estimable before this jury verdict was announced, the Company, in accordance with GAAP, expects to record an after-tax charge estimated at $5 million in its financial statements that will be included in its Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission for the quarter ended September 27, 2015. Given the timing of this verdict, the preliminary financial results included herein do not reflect this GAAP charge. The after-tax effect of this reserve is estimated at $5 million or $0.20 per share for both the third quarter of 2015 and the year-to-date period ended September 27, 2015.
Net Cash Provided by Operating Activities for the third quarter of 2015 was $22 million. Capital Expenditures for the third quarter were $8 million.
Pro Forma Adjusted EBITDA for the third quarter of 2015 was $28 million, up $2 million from the third quarter of 2014. Cash outlays for restructuring, acquisition and remediation costs for the third quarter totaled $11 million.
Adjusted Net Income and Adjusted Diluted EPS for the third quarter of 2015 were $3 million and $0.12 per share, respectively.