Earnings: Gannett reports falling revenue due to print; New Media acquires two new properties
Gannett is still looking to entice tronc into a deal for at least the Los Angeles Times, while New Media continues to acquire print properties, and rack up new liabilities
This morning brings a couple of earnings releases from two major newspaper companies that are looking to make acquisitions: Gannett and New Media Investment Group. A number of media observers have a lot on the line when it comes to Gannett, forecasting a deal with tronc (the company formerly known, in its sane days, as Tribune Publishing) to be announced at… any… moment. Only to have to say, well, not yet.
Both Gannett and New Media may be growing their portfolios, but both are finding it hard to report very good news, this despite having added new properties.
Here they are the reports, starting with Gannett:
The publisher of USA Today this year acquired Journal Media Group so it shouldn’t come as a major surprise that the company was able to report an increase in revenue – they did, $772.3 million compared to $701.2 million in the prior year third quarter, or a 10.1 percent increase.
But same-store revenue fell 8.6 percent, and the company reported a net loss for the third quarter was $24.2 million, thanks in part to $31.6 million in “after-tax restructuring, acquisition costs, severance and other related items.”
“We have made solid progress integrating our recent acquisitions, which we expect will be strong contributors to our performance as we drive toward a digital future. While we saw signs of improvement late in the third quarter, we were disappointed with our performance, and as we expected, it was our most challenging period in 2016. We have implemented initiatives that will result in $10 million of additional cost savings in the fourth quarter to align our cost structure with the current industry environment,” said Robert J. Dickey, president and CEO of Gannett. “We are taking these actions to ensure we can remain nimble in the face of ongoing industry challenges while we continue our digital transformation.”
Digital ad revenue grew 6.2 percent, and even pulling Journal Media Group out, digital was up a solid 4.4 percent.
“To combat the continuing challenges in print advertising trends, the company is implementing cost saving initiatives, which include reductions throughout our operations as well as in corporate support and related functions,” said John Zidich, president of Domestic Publishing. “We expect to recognize approximately $6 million of payroll related savings and $4 million of non-payroll savings in the fourth quarter of 2016. On an annual basis, we expect the payroll related savings to total $30 million and impact approximately 2% of our workforce.”
Gannett already said that it would implement a staff reduction of around 2 percent of positions, across their properties. Should Gannett manage to scoop up the tronc newspapers, or just enter into a joint ownership agreement for the Los Angeles Times, as the rumor has it, one can expect the staff of the acquired paper to the fearful for their jobs.
What is the future of Gannett? Good question. They really want to expand, hoping that national breadth will lead to better digital and national print ad revenue. That’s the plan, anyways.
New Media Investment Group Inc.:
New Media’s Q3 saw the company report lower revenue, due to lower advertising – this despite it continuing to pick up new properties.
In fact, it announced this morning that it had acquired the Columbia Daily Tribune (Columbia, Missouri), as well as the Rochester Business Journal.
“I’m very pleased to announce that our solid third quarter results represent the fifth consecutive quarter of improving same store revenue trends, increasing sequentially by nearly 200 basis points since last quarter,” said Michael E. Reed, New Media President and Chief Executive Officer.
OK, great. But the company also reported that print ad revenue decreased 8.0 percent – due, it said, “continued pressure across Preprints, Classified Print, and Local Print Advertising which decreased 10.0%, 9.2%, and 4.6%, respectively.”
New Media, too, is looking to make acquisitions.
“We are very optimistic about the year ahead with regard to our deal pipeline and our organic growth initiatives. New Media’s business strategy remains intact and we are well positioned to continue to execute on our strategy of acquiring great local media assets at attractive valuations, investing in new revenue initiatives that we believe will lead to organic growth, and paying a substantial portion of our cash flow to shareholders in the form of a regular dividend.”
For those who can read a P&L, however, warnings flags should be waving. The company’s cash position is now one-third what it was a year ago, and liabilities have grown to $567 million.
What is the future of New Media? More acquisitions, followed by another trip to bankruptcy court would be my guess, but I’m sure the company would dispute that. We’ll see.