tronc surprises with somewhat better income than expected
Revenue falls nearly 6 percent on a same property basis, but that is somewhat better than some other newspaper companies have reported, and lower costs led to a slightly better bottom line
The newspaper chain formerly known as Tribune Publishing, now called tronc, reported its Q2 earnings today, and while revenue fell, the report was not quite the disaster that some projected it might be.
Total revenue fell 1.8 percent, but taking out The San Diego Union-Tribune which the company acquired last year, revenue fell 5.9 percent. Still, this is better than some other newspaper chains were able to report.
Net income rose for the quarter, though the company remains in the red. But the company raised their revenue guidance a bit, something investors like to see.
Will investors buy it? and will this be enough to hold off Gannett, expected to make another bid for the newspaper chain?
Ken Doctor seems on board with the idea that another bid is forthcoming, but I am not so sure (though I’m not willing to put any money on my position). TPUB stock, make that tronc stock, has risen in anticipation of a bid, but a more bidder who shows some patience may get the better deal.
Few in the industry think CEO Michael Ferro has the secret sauce necessary to make this all work, but the company remains independent and few would have guessed that just a couple of months ago. Among the steps the company has taken so far is to make the paper’s editors also the paper’s publishers. This immediately lopped some costs off the bottom line, but it also put those with little revenue experience in charge of the individual titles.
As for the conference call, there really was no news to come out of it, simply a lot of new numbers as tronc has broken out into two segments, troncM which is the legacy print business, and troncX, which is the digital business. But so little is the interest in the newspaper business today that there was exactly one analyst question asked.
Here is the second quarter earnings statement from tronc:
CHICAGO, Ill. — August 3, 2016 — tronc, Inc. today reported financial results for its second quarter ended June 26, 2016, and raised full year 2016 guidance.
“We have a strategic plan in place to transform tronc by combining our platform of premium brands with proprietary technology to accelerate digital growth and create value for our shareholders,” said CEO Justin Dearborn. “Our overall strategy is providing results earlier than forecasted, which gives us the confidence to raise our revenue and Adjusted EBITDA guidance for the 2016 full year.”
“The second quarter was another strong performance in growing our bottom-line and expanding our margins,” said CFO Terry Jimenez. “We believe tronc’s balance sheet and overall business prospects are the strongest they have been since the Company went public in 2014 and we are focused on continually improving from here.”
2016 SECOND QUARTER RESULTS
Total Revenues in the second quarter of 2016 were $405 million, down 1.8% compared to $412 million in the second quarter of 2015 due to a decrease in advertising and other revenue partially offset by a full quarter of revenue from The San Diego Union-Tribune, acquired mid-second quarter of 2015. Total revenues, excluding revenues from The San Diego Union-Tribune, were $373.8 million, down 5.9% compared to second quarter of the prior year. Advertising revenue was down 4.4% from prior-year period and down 9.2%, excluding The San Diego Union-Tribune. This is an improvement over first quarter 2016 where advertising revenue, excluding The San Diego Union-Tribune was down 12.0%.
Total Operating Expenses, including depreciation and amortization, for the second quarter of 2016 were $390 million compared to $400 million in the second quarter of 2015. Second quarter total operating expenses for 2016 included $4 million related to the Employee Voluntary Separation Program (“EVSP”) along with $9 million in restructuring and transaction costs. Total operating expenses, adjusted to exclude expenses relating to The San Diego Union-Tribune and other restructuring and related costs, resulted in a decline of $26.5 million from the prior-year quarter (as set forth in the Non-GAAP reconciliations below). The majority of the reduction in Adjusted total operating expenses can be attributed to lower headcount along with a $6 million decline in newsprint and ink and $5 million of savings in other expenses and outside services.
Net income for the second quarter of 2016 was $4 million, which included an after-tax $2 million EVSP charge and $5 million of restructuring and transaction costs, and was $1 million higher than the second quarter of 2015. Excluding the impact of these charges, Adjusted net income increased to $12 million for the quarter.
Earnings per share for the 2016 second quarter, on a fully diluted basis, was $0.12, which included the previously mentioned EVSP charge and restructuring and transaction costs. Before the impact of these charges, Adjusted Diluted earnings per share (or EPS) increased to $0.35 for the quarter.
Adjusted EBITDA for the second quarter of 2016 was $43.5 million, or an increase of $5 million from the second quarter of 2015 primarily due to the cost reductions discussed above.
In the three months ended June 26, 2016, the Company realigned under its new management team into two distinct segments: troncM, which is comprised of the Company’s media groups excluding their digital revenues and related expenses, and troncX, which includes all the digital revenues and related expenses of the Company including Tribune Content Agency (“TCA”) and Forsalebyowner.com (“FSBO”).
Included in tables below is segment reporting for troncM and troncX for the three and six months ended June 26, 2016, and June 28, 2015. Corresponding information for earlier periods has been restated to reflect the change in reportable segments.
Total Revenues for troncM for the quarter were $344 million or a decrease of 2.9% compared to the second quarter of 2015. A 7.3% year-over-year decline in advertising revenues and a 6.4% decline in other revenues for troncM were partially offset by an increase in circulation revenue. Income from operations for troncM was $28 million or $8 million more than second quarter of 2015. Adjusted EBITDA for troncM for the second quarter of 2016 was $35 million or $3 million more than the second quarter of 2015.
Total Revenues for troncX for the second quarter of 2016 were $62 million or an increase of 4.0% from the prior-year quarter. Advertising revenues for troncX increased by 6.9% which was partially offset by a decline in content revenues. Income from operations for troncX was $6 million or a decline of $4 million from prior-year period while Adjusted EBITDA for the second quarter of 2016 remained relatively flat at $11 million compared to second quarter of 2015.
Total second quarter 2016 average monthly unique visitors were 60 million, up 34% from prior-year quarter and up 7% sequentially from first quarter of 2016. Digital only subscribers grew to 116,000, up 66% from prior year and up 15% sequentially.
Net Cash Provided by Operating Activities for the second quarter of 2016 was $16 million and capital expenditures for the second quarter were $5 million. Debt was reduced by $5 million during the second quarter of 2016 and pension /OPEB liabilities were reduced by $4 million. Cash balance as of June 26, 2016, totaled $170 million.
2016 Full Year Guidance for Total Revenues increased to a range of $1.610 to $1.630 billion and Adjusted EBITDA increased to a range of $170 to $175 million.