May 10, 2017 Last Updated 1:22 pm

Time Inc. confirms it plans to sell off some magazine titles; Chairman Joe Ripp to retire

Digital revenue grew a robust 31 percent, but because print revenue fell 21 percent, total revenue ending up falling 8 percent; meanwhile, losses grew as the company recorded a Q1 operating loss of $26 million

The publisher Time Inc. picked a good day to release its first quarter earnings statement, it is doubtful anyone has quite gotten over yesterday’s news regarding FBI director Comey’s firing, and getting people to pay attention to industry news is difficult at best.

What investors who were not paying attention missed was that Time Inc. said Q1 revenue fell 8 percent, and that the publisher had an operating loss of $26 million. Investors who were paying attention immediately drove down the stock nearly 15 percent to under $13 a share.

If you remember. Meredith was willing to offer around $18 a share just a couple of weeks ago.

The strategy going forward, Rich Battista said Wednesday on a conference call, will be to sell off smaller titles and “other non-core assets.” This was all too predictable, and probably is what Meredith would prefer anyways (rather than having to buy the weeklies, then find another buyer who would take them off their hands).

Things got a little testy on the conference call, something that his highly unusual. Bloomberg says that Leon Cooperman, of Omega Advisors Inc. wanted some numbers to go along with the comforting words about a new plan.

“You constantly refer to this strategic plan, but you provide no numbers for the shareholders to basically grasp what this company will look like in two or three years,” said Cooperman.

What it will look like is very different than what we’ve seen since the spin off from Time Warner. Joe Ripp, who had been CEO, then Chairman of the Board, will be retiring from the board, as will Director Sir Howard Stringer.

John Fahey, current Lead Independent Director, will now be Non-Executive Chairman come the June shareholder’s meeting. “On behalf of the Board, I’d like to thank Joe and Howard for their tireless work for Time Inc. I know that they share our confidence in Time Inc.’s strategic plan and tremendous potential. We wish them well in their future endeavors,” Fahey said in the statement.

To make matters worse, Time cut its dividend to 4 cents per share, from 19 cents the previous quarter.

Here is the earnings statement, but look for more news from Time later this year as the company completes deals for some of its titles.

NEW YORK, NY — May 10, 2017 — Time Inc. reported financial results for its first quarter ended March 31, 2017.

Time Inc. President and CEO Rich Battista said, “In the first quarter of 2017, we made important progress on our strategic plan despite continuing challenges with print advertising revenues. We are taking strategic actions and focusing on key initiatives to put the Company on the right course for the future. We are creating a more vibrant and valuable platform for our advertisers and consumers, further enhancing financial flexibility, aggressively reducing our cost base, rationalizing our portfolio and continuing to invest in transformational growth initiatives. Importantly, our Board of Directors’ April 28 announcement affirming our strategic plan has removed a major distraction for our people and advertisers. While we have a lot of work to do, Time Inc. is very well positioned to emerge as a winner in the rapidly changing consumer and media marketplace.”

The Company’s Adjusted OIBDA, Adjusted Net income (loss), Adjusted Diluted EPS and Free cash flow are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” below and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in Schedules I through IV attached hereto.

FIRST QUARTER RESULTS

Revenues decreased $54 million or 8% in the first quarter of 2017 from the year-earlier quarter to $636 million, primarily reflecting declines in Print and other advertising revenues and Circulation revenues, partially offset by growth in Digital advertising revenues, primarily driven by acquisitions. The stronger U.S. dollar relative to the British pound had a $10 million adverse impact on Revenues for the quarter ended March 31, 2017. Excluding the impact of U.S. dollar/British pound exchange rate changes, Revenues would have decreased 6%, including the benefit of acquisitions.

Advertising Revenues decreased $29 million or 8% in the first quarter of 2017 from the year-earlier quarter to $331 million reflecting a decrease in Print and other advertising revenues, primarily due to fewer advertising pages sold as a result of the continuing secular trend of advertisers shifting advertising spending from print to other media, lower average price per page of advertising sold and fewer issues served to customers, primarily due to a change in frequency. In addition, our print advertising revenues were negatively impacted by the public speculation about the ownership of the Company and the disruption from the reorganization of our advertising sales force. Although the secular print declines are expected to continue, there is encouraging sequential improvement in print advertising in June and in our early booking trends for the third quarter of 2017. Partially offsetting the decrease in our Print and other advertising revenues was a 32% increase in our Digital advertising revenues primarily resulting from the Viant acquisition and growth in Digital advertising revenues relating to programmatic sales, native and branded content advertising, and video. The stronger U.S. dollar relative to the British pound had a $3 million adverse impact on Advertising revenues for the quarter ended March 31, 2017. Excluding the impact of U.S. dollar/British pound exchange rate changes, Advertising revenues would have decreased 7%.

Circulation Revenues decreased $33 million or 14% in the first quarter of 2017 from the year-earlier quarter to $205 million as a result of fewer issues served to customers, primarily due to a change in frequency, and the continued shift in consumer preferences from print to digital media. The stronger U.S. dollar relative to the British pound had a $6 million adverse impact on Circulation revenues for the quarter ended March 31, 2017. Excluding the impact of U.S. dollar/British pound exchange rate changes, Circulation revenues would have decreased 11%.

Other Revenues, which include marketing and support services provided to third parties, book publishing, events and licensing, increased $8 million or 9% in the first quarter of 2017 from the year-earlier quarter to $100 million, primarily driven by an increase in revenues from content and photo syndication and book publishing, particularly related to bookazines. The stronger U.S. dollar relative to the British pound had a $1 million adverse impact on Other revenues for the quarter ended March 31, 2017. Excluding the impact of U.S. dollar/British pound exchange rate changes, Other revenues would have increased 10%.

osts of Revenues and Selling, General and Administrative Expenses decreased $46 million or 7% in the first quarter of 2017 from the year-earlier quarter to $615 million. The decrease in Costs of revenues and Selling, general and administrative expenses was driven by the benefits realized from previously announced cost savings initiatives, lower printing, production and distribution costs driven by lower paper volume and prices and the removal of the exigent USPS surcharge effective April 10, 2016, that was originally imposed in December 2013, and lower circulation promotional expenses. Additionally, included in Selling, general and administrative expenses were $2 million and $14 million of Other costs related to mergers, acquisitions, investments and dispositions for the quarters ended March 31, 2017 and 2016, respectively. These costs have been excluded from our Adjusted OIBDA calculation. The stronger U.S. dollar relative to the British pound had a $10 million favorable impact on Costs of revenues and Selling, general and administrative expenses for the quarter ended March 31, 2017. Excluding the impact of U.S. dollar/British pound exchange rate changes, Costs of revenues and Selling, general and administrative expenses would have decreased 5%.

Restructuring and Severance Costs increased $15 million in the first quarter of 2017 from the year-earlier quarter to $16 million.

Operating Income (Loss) was a loss of $26 million and $3 million for the quarters ended March 31, 2017 and 2016, respectively. The increase in Operating loss was primarily driven by declines in Print and other advertising revenues and Circulation revenues and higher Restructuring and severance costs, partially offset by the benefits of lower Costs of revenues and Selling, general and administrative expenses.

Adjusted OIBDA decreased $20 million in the first quarter of 2017 from the year-earlier quarter to $23 million, primarily due to higher Operating loss.

Cash Provided By (Used In) Operations increased $67 million in the first quarter of 2017 from the year-earlier quarter to $15 million, primarily due to the benefits of completing buyouts of the leases of our former corporate headquarters and another leased property for $95 million in the first quarter of 2016 and higher collections of Receivables in the first quarter of 2017. These benefits were partially offset by lower domestic net income tax refunds received in the first quarter of 2017.

Free Cash Flow was an outflow of $6 million in the first quarter of 2017 versus an outflow of $87 million for the year-earlier quarter, primarily reflecting improvements in Cash provided by (used in) operations as well as lower Capital expenditures.

On May 10, 2017, our Board of Directors declared a dividend of $0.04 per common share to stockholders of record as of the close of business on May 31, 2017, payable on June 15, 2017.

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