Tribune Publishing Company
Q4 2019 Earnings Call Transcript

Published: 5 Mar 2020

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Tribune Publishing Fourth Quarter and Full-Year Earnings Conference call. At this time, all participant lines are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to hand the conference to your speaker today, Amy Bullis, Vice President of Finance. Please go ahead, ma'am.

[Amy Bullis:]

Thank you, and welcome to our fourth quarter and full-year 2019 earnings conference call. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call, and our actual results could differ materially. Statements containing words such as may, believe, anticipates, expects, intend, plan, will, continue, estimate, outlook or other similar expressions are forward-looking statements. Material differences in our actual results from those described in these forward-looking statements may result in the actions taken by the Company as well as from risks and uncertainties beyond the Company's control. Some of these risks and uncertainties that could impact our businesses are included in documents publicly filed with the Securities and Exchange Commission, including our annual report on Form 10-K.I should also mention that our remarks today will include references to non-GAAP financial measures, including adjusted EBITDA, adjusted total operating expenses, adjusted net income, adjusted diluted earnings per share, adjusted EBITDA margin and net debt. And we have provided definitions and reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our website at investor.tribpub.com.Joining me today is President and Chief Executive Officer, Terry Jimenez; and Interim Chief Financial Officer, Mike Lavey.I will now turn the call over to President and Chief Executive Officer, Terry Jimenez.

[Terry Jimenez:]

Thank you, Amy. Good afternoon, everyone, and thank you for joining today's call and your interest in Tribune Publishing. We are pleased with how our fiscal year 2019 turned out, and we want to share with you some of the highlights from throughout the year. But before we dive in deep, I want to take a step back and talk higher level for a moment.First, I am honored and humbled to be working with all of our passionate, energetic and mission-driven employees. Our employees have seen and worked through a lot of challenges and change over the years, and I'm confident we can proactively drive positive change and not just react to change.In the first four weeks of my transition from CFO to CEO, our leadership team has developed a new shared vision and mission as well as having outlined key strategies driving our near and long-term success. Allow me to review these with you now.Our vision is to engage, inspire and empower our communities every day. Our mission is based on four major elements

[Michael Lavey:]

Thank you, Terry. In spite of the revenue headwinds, Terry mentioned, in 2019, we were able to deliver solid growth in income from continuing operations, an 8% increase in adjusted EBITDA and 120 basis point improvement in adjusted EBITDA margin. The actions we have taken to aggressively manage costs over the last year are paying off.With that lead-in, I'll speak to our financial highlights for the full-year 2019 and for the fourth quarter. As a reminder, in the fourth quarter, there are no same business comparisons necessary as we cycled all 2018 acquisitions in previous quarters.For the full-year 2019, revenue totaled $983.1 million, a 4.6% decline from 2018. On a same business basis, revenue declined 8% for the full-year driven by a 14.4% decline in advertising partially offset by a $10.2 million or 56.4% increase in digital-only subscriptions.For the year, expenses declined $100.9 million or 9.4%. On a same business basis, expenses declined $126.5 million, a $12.6% decline with both metrics reflecting strong expense management throughout the year. As a result, income from continuing operations for 2019 totaled $3.1 million compared to a loss from continuing operations in 2018 of $39.9 million, a $43 million year-over-year improvement.Adjusted EBITDA for the full-year was $101.4 million, a $7.5 million increase over 2018. Our adjusted EBITDA margin for the year was 10.3% compared to 9.1% in 2018 as mentioned, 120 basis point improvement. Loss per share from continuing operations for 2019 improved by $0.39 a share from $1.15 loss in 2018 to a $0.76 loss in 2019.Full-year EPS was negatively impacted by $0.71 a share by the impact of the non-controlling interest carrying value adjustment. This adjustment will end beginning in first quarter of 2020 due to amendment of the BestReviews, LLC agreement in January of 2020 to eliminate the put and call features to that agreement.Turning to the fourth quarter. Revenue declined 11% on a year-over-year basis. $4.9 million or 1.7% of the decline in the prior year is associated with the reduction in transition services provided to the California properties as we near the end of that agreement in 2020. Accordingly, core revenue declines, which exclude the transition service agreement, are under 10% at 9.3% on a year-over-year basis.Regarding operating expenses. We continue to focus on managing expenses in the face of industry-wide revenue headwinds, with total operating expenses down $32.2 million or 11.2% in the fourth quarter of 2019 versus the same quarter last year.For the quarter, we reported net loss from continuing operations of $4.4 million compared to income from operations in the prior year of $4 million. The decline in income from operations was driven primarily by a $5.6 million tax increase compared to last year.Loss from continuing operations for 2019 was $0.46 a share compared to income per share from continuing operations of $0.10 a share in 2018. EPS for the fourth quarter was also negatively affected by the non-controlling interest carrying value impact in the EPS calculation.Adjusted EBITDA for the quarter totaled $30.8 million, compared to $46.5 million in the prior year period. In the fourth quarter of 2019, we reported another large item in discontinued operations.As disclosed in the third quarter, we recorded revenue – a reserve related to a judgment in a lawsuit brought by a former employee of Los Angeles Times from a period when we owned the business. Based on our post-trial motions, the judgment was vacated, we, therefore, adjusted the reserve down in the fourth quarter. A new trial date has been set for this matter in August 2020.Turning to the balance sheet and cash flow. CapEx totaled $4.7 million in the quarter and $18.6 million for the full-year. Cash generation remains strong, with cash provided by operations of $21.1 million for the quarter and $53.1 million for the year. We exited the year with $98.3 million of cash, of which $61 million was unrestricted and $37.3 million is restricted.As a result of our strong cash generation and cash position, in the fourth quarter, the Board declared a regular dividend of $0.25 per share, which was paid out in December, and another $0.25 dividend has been declared in the first quarter and will be paid in March.Let's turn now to fourth quarter results for our segments. For the M segment, total revenue declined 13.3% driven by print advertising, which declined 21%. Through the fourth quarter holiday season advertising, print advertising increased slightly to approximately 32% of our total revenue in the fourth quarter compared to nearly 36% of total revenue in Q4 of last year.However, we are relying on print advertising less and less, and print circulation exceeded print advertising every quarter this year. Operating expenses in the M segment declined 14%, which resulted in a $1.6 million increase in income from continuing operations in the segment.Turning to the X segment. Total revenue was up $3.8 million or 7.7% in the fourth quarter this year versus the same quarter last year. Content and e-commerce revenue grew 18.6% in the quarter due to digital subscription growth, which was up 33.6% in volume and 52.4% in revenue and solid year-over-year growth at BestReviews.Partially offsetting this growth was a slight decline in digital advertising decreased 1.8% from last year. However, we showed substantial sequential improvement from Q3 of this year, which was down 15.2% compared to last year. The advertising decline is directly attributable to lower advertising revenue from Cars.com, the exclusion of which would have resulted in a 4.4% increase in digital advertising. As Terry mentioned the Cars.com agreement ends in Q1 of 2020.Operating expenses for the X segment increased 4.4% due to a shift in allocations for newsroom costs from the M segment as digital now comprises a larger percentage of our revenue. As a result of strong content and e-commerce revenue, only partially offset by lower digital advertising revenue increased expenses, income from operations in the X segment increased year-over-year by $1.9 million or 31%.With respect to guidance, 2020 adjusted EBITDA will be in the range of $100 million to $105 million. And for the first quarter of 2020, the company expects revenue to range from $210 million to $215 million and adjusted EBITDA to range from $12 million to $13 million.In closing, we continue to manage cost aggressively as we transform to a digitally focused company. In the first quarter of 2020, we implemented a voluntary severance program and made a number of management changes to continue to streamline our operations.And currently, we are making strategic investments in our digital product offerings and in our digital future. And we continue to deliver strong operating performance across all our key metrics as we manage the transformation of the company.And now we'll open up the call for questions.

[Operator:]

[Operator Instructions]

[Operator:]

And I am not showing any questions at this time.

[Terry Jimenez:]

Terrific. Well, thank you very much for joining us this afternoon, and thank you for your interest.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.