July 7, 2017 Last Updated 1:58 pm

Postmedia reports Q3 earnings: Print ad revenue falls 19.1%, breakeven through 3 quarters

But restructuring charge allows publisher to report a small profit, and big gains for the same quarter last year when the company took a $207M impairment charge

TORONTO, Ontario — July 7, 2017 — Postmedia Network Canada Corp today released financial information for the three and nine months ended May 31, 2017.

Third Quarter Operating Results

Net earnings in the quarter ended May 31, 2017 was $13.0 million, as compared to a net loss of $23.7 million in the same period in the prior year. The change was primarily the result of one-time non-cash items including a gain of $22.8 million related to changes in the Company’s employee benefit plans and a decrease of $15.2 million in impairment charges as well as a decrease in interest expense as a result of a recapitalization transaction in Q1 of fiscal 2017, partially offset by unrealized foreign currency exchange losses.

Operating income before depreciation, amortization, impairment and restructuring of $20.4 million in the quarter represents an increase of $0.6 million relative to the same period in the prior year. The increase is due to increased digital revenues and operating cost savings related to cost savings initiatives.

Revenue for the quarter was $194.0 million as compared to $218.3 million in the prior year, a decrease of $24.3 million (11.1%). The revenue decline was primarily due to decreases in print advertising revenue of $22.0 million (19.1%) and print circulation revenue of $5.5 million (8.5%). Digital revenue increased $3.9 million (13.7%) in the quarter with digital advertising revenue up 22.8%.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $24.9 million (12.5%) for the quarter, relative to the same period in the prior year. The decrease was primarily related to cost savings initiatives.

Year-to-Date Operating Results

Net earnings in the nine months ended May 31, 2017 was $4.4 million, as compared to a net loss of $253.0 million in the same period in the prior year. The change was primarily the result of one-time non-cash items including a gain of $22.8 million related to changes in the Company’s employee benefit plans, a decrease of $181.2 million in impairment charges and a gain on debt settlement of $78.6 million realized as part of a recapitalization transaction as well as a decrease in interest expense, partially offset by an increase in restructuring expense.

Operating income before depreciation, amortization, impairment and restructuring for the nine months ended May 31, 2017 was $48.2 million, a decrease of $26.7 million relative to the same period in the prior year. The decrease is due to revenue declines which were only partially offset by operating cost savings.

Revenue for the nine months ended May 31, 2017 was $589.7 million as compared to $678.5 million in the prior year, a decrease of $88.8 million (13.1%). The revenue decline was primarily due to decreases in print advertising revenue of $78.4 million (21.2%) and print circulation revenue of $17.2 million (8.7%). Digital revenue increased $7.7 million (9.2%) in the nine months ended May 31, 2017 with digital advertising up 15.4%.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $62.0 million (10.3%) for the nine months ended May 31, 2017, relative to the same period in the prior year. The decrease was primarily related to cost reduction initiatives.

Business Transformation Initiatives

During the three and nine months ended May 31, 2017, the Company implemented initiatives which are expected to result in $14 million and $75 million of net annualized cost savings, respectively.

The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.

Management Commentary

“This is our second quarter of steady growth in digital advertising revenue,” said Paul Godfrey, President and CEO, Postmedia. “It is a strong endorsement of the hard work done by teams across Postmedia to accelerate our transformation and focus on maximizing new revenue opportunities.”

Infomart Transaction

On June 22, 2017, the Company announced an agreement with Meltwater News Canada Inc. to sell Infomart, its media monitoring division, for gross proceeds of approximately $38.25 million subject to certain adjustments (the “Infomart Transaction”). The net proceeds of the Infomart Transaction will be used to redeem a portion of the Company’s long-term debt. Included in the Infomart Transaction are Infomart’s media monitoring business, direct feed business and professional services operations, including clients of such services. The Infomart Transaction is expected to close on or about August 15, 2017.

Executive Appointment

Postmedia also announced today the appointment of Brian Bidulka as Executive Vice President and Chief Financial Officer. Mr. Bidulka is an experienced finance executive with a 30-year career that includes senior roles in the food & beverage, telecommunications and technology industries. Mr. Bidulka joins Postmedia on July 17.

Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.

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