October 26, 2017 Last Updated 8:20 am

Despite acquisitions, revenue and earnings fall in Q3 at New Media Investment Group

Despite the results, the company says it continues ‘to see an attractive pipeline of acquisition opportunities that can expand or strengthen our existing business segments’

The newspaper chain New Media Investment Group, which publishes under the GateHouse Media name, today reported third quarter earnings before the markets opened.

New Media has been implementing an expansion business model in hopes that having greater reach will offset losses happening in print advertising. The strategy is, in reality, a race against time, as newspaper print advertising has been hit hard by its digital competitors, and audience growth has only occasionally been seen to be a strategy that can produce results.

“We are not satisfied with our third quarter financial results, despite some great accomplishments in the quarter that continue to better position the Company for long term success,” said Michael E. Reed, New Media President and CEO.

“The tragic events resulting from the hurricanes in Florida and Texas did negatively impact our third quarter results, however, this is short term and we do not expect any lingering impact in the fourth quarter.”

Despite the results, New Media does not seem deterred in its strategy of making acquisitions.

“(W)e continue to see an attractive pipeline of acquisition opportunities that can expand or strengthen our existing business segments,” Reed said.

Here is New Media Investment Group’s earnings announcement for Q3 of 2017:


NEW YORK, NY — October 26, 2017 — New Media Investment Group Inc. today reported its financial results for the third quarter ended September 24, 2017.

Third Quarter 2017 Financial Summary

  • New Media declares a cash dividend of $0.37 per common share, an increase of 5.7% from the prior quarter
  • Total revenues of $317.2 million, up 3.4% to prior year on a reported basis, and down 6.4% to the prior year on an organic same store basis, negatively impacted in September by the hurricanes in Florida and Texas
  • Digital revenue increased to $35.6 million, up 11.1% to prior year on a reported basis
  • Net loss of $2.0 million, negatively impacted by $6.2 million of charges relating to the upsizing and maturity date extension of our credit facility and consolidation of press equipment°
  • As Adjusted EBITDA of $37.1 million*, up 0.4% to prior year, inclusive of negative impact in September of approximately $1 million due to the hurricanes
  • Free Cash Flow of $27.3 million*, up 1.6% to prior year, inclusive of negative impact in September of approximately $1 million due to the hurricanes

Third Quarter 2017 & Subsequent Business Highlights

  • Closed the acquisition of Calkins Media on June 30, 2017 for $17.5 million
  • Closed the acquisition of certain newspapers and related assets of Morris Publishing Group (“Morris”) on October 2, 2017 for $120.0 million
  • Entered into an agreement with ZipRecruiter, the fastest growing online employment marketplace, to power the Company’s print and online recruitment pages across its 540 markets
  • Closed on an amendment to our term loan extending the maturity date to July 14, 2022, increasing the outstanding term loan by $20 million, and increasing the accordion availability to $80 million
  • Liquidity, consisting of cash on the balance sheet and undrawn revolver, of $200.5 million as of September 24, 2017; $120.0 million was deployed subsequent to the quarter for the Morris transaction
  • UpCurve, our SMB solutions provider, had revenue of $17.9 million, a 22.0% increase as compared to prior year

“We are not satisfied with our third quarter financial results, despite some great accomplishments in the quarter that continue to better position the Company for long term success,” said Michael E. Reed, New Media President and CEO. “The tragic events resulting from the hurricanes in Florida and Texas did negatively impact our third quarter results, however, this is short term and we do not expect any lingering impact in the fourth quarter.”

“We have successfully deployed nearly $140 million in capital over the past few months with our acquisitions of the family newspaper groups of Morris and Calkins. I am confident that we will get great contributions going forward from both of these acquisitions. Importantly, both of these transactions were accretive to cash flow on day one. We were pleased in the quarter to amend our credit facility, both upsizing the amount and accordion availability, as well as extending the maturity date to July of 2022. In addition to the $80 million of accordion availability, we closed the quarter with $200.5 million of cash on the balance sheet and availability under the revolver, or $80 million in pro-forma liquidity after the purchase of Morris.”

“Another exciting event from the quarter was an agreement we entered into with ZipRecruiter, the fastest growing online employment marketplace, to power our print and online recruitment pages. Subsequent to the quarter, ZipRecruiter-powered pages launched across our 540 markets, reaching over 21 million U.S. readers each week. Not only do our small and medium sized businesses now have access to a top recruitment platform, but our community residents do as well. With this relationship, our local media businesses strive to once again become the go-to employment marketplace for our communities. We can now offer a reach that community businesses would not have had easy access to previously.”

Mr. Reed went on to say, “We saw great progress and growth within UpCurve, especially as it relates to our UpCurve Cloud business. This is the business focused on bringing cloud-based products to small and medium sized businesses in our communities that will help them grow faster, smarter and more efficiently. Revenue is up 74.9% to prior year for this product line and we now fulfill over 91,000 SugarCRM and G-Suite licenses. This is a major focus area for expansion in our UpCurve business as we are experiencing less than 10% annual churn and seeing recurring revenue of over 65%. Across the entire UpCurve business, revenue grew 22.0% from the prior year to $17.9 million.”

“Despite the challenges we encountered in the third quarter, we remain enthusiastic about the fourth quarter and 2018. We continue to pursue innovative opportunities that make our products more relevant and valuable to consumers and small businesses in our communities. Further, we continue to see an attractive pipeline of acquisition opportunities that can expand or strengthen our existing business segments. As a result of our confidence in the future, we were pleased to announce this morning that our board approved an increase to our quarterly dividend, bringing it to $0.37 per common share. That marks the fourth consecutive year we have been able to increase our dividend and a 37% increase from our initial dividend back in 2014.”

Third Quarter 2017 Financial Results

New Media recorded total revenues of $317.2 million for the quarter, up 3.4% to prior year and down 6.4% on an organic same store basis. Our third quarter revenues were negatively impacted in September by the hurricanes in both Florida and Texas. We expect our trends to improve again as we head into the fourth quarter. Traditional Print Advertising decreased 14.0% to prior year on an organic same store basis, reflecting the continued challenges we are experiencing in print advertising stemming primarily from the struggle of the brick and mortar retail sector.

Digital revenue closed at $35.6 million, an increase of 11.1% to prior year. UpCurve generated $17.9 million in revenue, an increase of 22.0% to prior year and now comprises 50.4% of total digital revenue.

Circulation revenue was down 1.5% to prior year on an organic same store basis. We view this performance as an anomaly due to some shifting of resources into better growth opportunities during the quarter. We expect circulation revenue trends to improve bringing the category back toward stable to modest growth. Commercial Print, Distribution, and Events revenue increased 3.7% to prior year on an organic same store basis.

Operating income was $11.5 million and Net loss was $2.0 million. Both were negatively impacted by approximately $6.2 million of charges related to the upsizing and extension of our credit facility and consolidation of press equipment.

As Adjusted EBITDA was $37.1 million, which is up 0.4% to prior year, and Free Cash Flow was $27.3 million, which is up 1.6% to prior year, both of which were negatively impacted in September by approximately $1 million due to the hurricanes.

Third Quarter 2017 Dividend

New Media’s Board of Directors declared a third quarter 2017 cash dividend of $0.37 per share of common stock. This represents an increase of 5.7% to the prior quarter. The dividend is payable on November 16, 2017 to shareholders of record as of the close of business on November 8, 2017.

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.

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