New Media acquires The Fayetteville Observer, ends 93 years of local ownership
The newspaper company, which also operates as GateHouse Media, reported higher total revenue due to its acquisitions, but lower same-store revenue due to falling print advertising
NEW YORK, N.Y – July 28, 2016 – New Media Investment Group Inc., one of the largest publishers of locally based print and online media in the United States as measured by number of publications, today reported its financial results for the second quarter ended June 26, 2016.
Second Quarter 2016 Financial Summary
- New Media declares a cash dividend of $0.33 per common share
- Total revenues of $314.8 million, an increase of 5.1% to prior year, and a decrease of 3.2% on a same store basis, the fourth consecutive quarter of improving same store revenue trends
- Digital revenue of $31.2 million, an increase of 6.7% to prior year on a same store basis
- Operating income of $16.7 million
- Net income of $9.4 million
- As Adjusted EBITDA of $40.1 million
- Free cash flow of $29.1 million
- Liquidity, consisting of cash on the balance sheet and undrawn revolver, of $100.7 million
Second Quarter 2016 & Subsequent Business Highlights
- Acquired substantially all of the assets of Journal Multimedia, a multi-title publishing, events, media, and research company for $18.0 million in cash in Q2
- Reached an agreement to acquire substantially all of the assets of the family-owned Fayetteville Publishing Company for $18.0 million in cash, which is expected to close in Q3
- The Columbus Dispatch was named the Best Daily Newspaper in Ohio’s Best Journalism contest
Michael E. Reed, New Media President and Chief Executive Officer, commented, “I’m excited to announce that our second quarter results mark the fourth consecutive quarter of improving same store revenue trends, increasing nearly 200 basis points sequentially. Over the last several quarters, New Media has been committed to investing in both print and digital initiatives to drive its topline, and the improvement in our Q2 revenue trend indicates that we are building momentum towards achieving organic revenue growth by year-end 2017.
“I’m also pleased to announce that subsequent to the quarter, New Media reached an agreement to acquire substantially all of the assets of the family-owned Fayetteville Publishing Company for $18.0 million in cash and importantly, this acquisition met all of our stated operational and financial criteria. The Fayetteville Observer (“the Observer”), is the flagship newspaper of the Fayetteville Publishing Company, and has a long history as the dominant source of local news and information in Cumberland County, NC. First established in 1816, the Observer is the oldest newspaper still being published in North Carolina, and today has a daily and Sunday circulation of approximately 36,000 and 45,000, respectively.
“Over the years, the Fayetteville Publishing Company has been able to grow its array of products and services while continuing to maintain its community roots and produce award-winning journalism. We are honored the extended Lilly family entrusted New Media to carry on its tradition of providing quality news coverage and editorial content, and we are excited to welcome the Observer’s employees and community into our growing company.
“Given the out of favor and fragmented nature of the local media market, we believe there continues to be a compelling opportunity for New Media to acquire great assets at attractive valuations within this sector. With our print and digital initiatives contributing to our improving revenue trend, identified expense savings to be realized over the second half of the year, a strong and growing pipeline of potential acquisitions, and significant recurring cash flow from our core newspaper business, New Media remains well positioned to create substantial value for our shareholders.”
New Media anticipates the acquisition of the Fayetteville Publishing Company will close in the third quarter of 2016 subject to customary closing conditions; however, there can be no assurance as to the timing or the occurrence of the closing.
Second Quarter 2016 Financial Results
New Media recorded total revenues of $314.8 million for the quarter, an increase of 5.1% when compared to the prior year, and a decrease of 3.2% on a same store basis. Q2 represents the fourth consecutive quarter of improving same store revenue trends, or a near 200 basis point trend improvement vs. last quarter. Total Print Advertising revenue decreased 10.2% on a same store basis primarily driven by anticipated softness in Preprints, Local Print Advertising, and Classified Print which decreased 11.2%, 10.8%, and 7.8% respectively.
Digital, our consistently growing revenue category, increased 6.7% on a same store basis to $31.2 million for the quarter. The primary driver of our strong revenue performance was our digital marketing services platform, Propel Marketing, which generated $12.0 million this quarter, an increase of 53.0% to prior year on a same store basis.
Circulation, our largest individual revenue category, performed strongly and increased 2.0%, on a same store basis, driven by promotions and redesigns to our newspapers and websites that have improved the consumer and advertiser experience. Lastly, Commercial Print and Other revenue increased 11.2% to prior year, on a same store basis, driven by strong commercial print and distribution performance, as well as the benefit from new business initiatives, such as events revenue.
Operating income of $16.7 million decreased $2.8 million to prior year, and net income of $9.4 million decreased $1.8 million to prior year.
As Adjusted EBITDA of $40.1 million was negatively impacted by $2.0 million of larger than expected healthcare claims in the second quarter that we do not believe to be recurring, and $1.2 million of new expenses tied to revenue growth initiatives that we believe will benefit future quarters. To compensate for these, the Company has identified and implemented incremental expense savings to be realized over the second half of the year.
Similar to As Adjusted EBITDA, free cash flow of $29.1 million was negatively impacted by the same expenses in the second quarter. We do not expect this additional $3.2 million in expenses to be present in the second half of the year.
Second Quarter 2016 Dividend
New Media’s Board of Directors declared a second quarter 2016 cash dividend of $0.33 per share of common stock. The dividend is payable on August 18, 2016 to shareholders of record as of the close of business on August 10, 2016.
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.
For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of New Media’s website, www.newmediainv.com and the Company’s Quarterly Report on Form 10-Q, which will be available on the Company’s website. Nothing on our website is included or incorporated by reference herein.isitions”) were funded from the Company’s available cash and not considered material.