Q1 2020 Tribune Publishing Co Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly he's going to name a standby. Thank you for your patience.
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Tribune Publishing company earnings Conference call at this time, all participants are no listen only mode. After the speaker presentation. There will be a question answer session touched the question. During the session. You want me to press Star one on your telephone. Please be advised that today's conference is being recorded if you acquire any further systems. Please press star drew I would now like.
The conference over to your Speaker today, Amy Boyer Vice President Finance. Please go ahead ma'am.
Thank you and welcome to our first quarter 2020 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 be leave anticipates expects intend plan will continue estimate outlook or other similar expressions are forward looking statements material differences in our actual results from that was describing these forward looking statements may result in the actions taken by the company.
<unk> 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.
I should also mentioned 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 isn't available on our website at Investor Day trip pub Dotcom. Joining me today is chief Executive Officer, Teria minutes, an interim Chief Financial Officer, Mike Layby I will now turn the call over to Chief Executive Officer carry a minute.
Well good morning, everyone and thank you for joining todays call and for your interest in Tribune Publishing I Trust and hope you are all those things sake.
I will provide a high level perspective on our business.
Mike walk through our Q1 numbers a lot has changed in the world since our last update my appointment as CEO.
These are uncertain times those come with some significant impact to our communities our people our families our advertising partners and our business.
He told me 19 pandemic and the recent civil unrest are unprecedented my lifetime. Despite these challenges we remain optimistic about the long term prospects for our company.
Like myself many of US have never lived through times like this.
However, our newspapers have seen at all our oldest title the capital one Annapolis, Maryland traces its roots all the way back to 17 27.
The Hartford Conn was founded in 17 64, the Baltimore, Shannon 18, 37, and Chicago Tribune 18, 40, so the Virginian pilot 18 64.
Well Mandel Sandal 18, 76 wanting called 18 83, the Daily Press 18 96, that's on Sentinel 19, Ted.
The daily News 1919.
The story brands have lived through and courageously covered everything from the American Revolution through the current pandemic and so on rust and they will continue to provide our readers.
I think full journalism in the future illustrating even during belt.
I'd like to make a special mention of the Baltimore, Some south which was awarded a 2020 Pulitzer Prize for local reporting related to its coverage of the Baltimore Mayor who had a lucrative undisclosed financial relationship.
Public Hospital system. She helped oversea, we're extremely proud of the change brought about by that coverage and humbled by the recognition.
We're also problems the award we received from the International News media lines in the category Best New initiative to enhance corporate culture.
And we are honored by the recognition of our 18 47.
Studio 18, 47 agency received at the 2020 Telly Awards.
Our teams creativity and effort is all appropriately recognized by these works.
And my first four months as CEO, our strong leadership team and the organization has responded with resiliency speed at an urgency to all the challenges that we have faced.
Has helped to accelerate our digital transformation.
I'd now like to touch on our approach to navigating the pandemic.
Our key priority was focusing on the safety of our employees and our communities. We continued to deliver a thorough news report on the impact of the virus and its physical mental and economic implications. In addition to providing facts and visibility we provided perspective from frontline workers in health care and an essential busy.
Yes I.
I would like to thank all individuals on the front line in a central organizations, including our team for helping guiding us true.
Yeah, this extremely challenging period.
After ensuring the safety of our employees, we quickly assess the potential impact to our business. We had to move rapidly to successfully navigate through turbos without a lot of visibility.
The first stream focused on liquidity.
We entered this pandemic with no debt insufficient operating cash, but we still focused on preserving liquidity, including the falling initiatives optimizing working capital to preserve cash and build cash reduction of Capex take advantage of the care xactware applicable and prudent and suspending our dividend.
Second current scream focused on reducing opex in the falling areas outside services.
Occupancy expenses.
Reconfiguring production schedules in order to streamline our work flow will reduce expenses.
We halted or significantly reduced all discretionary spending and we also made the difficult decision to reduce compensation through targeted staff reductions pay reductions in furloughs, which are action similar to what other media companies have deployed.
Our third shrink focused on the digital opportunity our traffic purse Comscore and March had 69 million users coming to our digital sites, which was up 48% year over year.
We did open up paywalls for key story is vital to the public health.
We grew digital only subscribers by 36000, you Q1 from the end of 2019, and we anticipate that we will significantly past that level gross Q2 of this year.
While we froze most discretionary spending and capital projects, we continue to make enhancements to our customer experience along with sophisticated marketing capabilities to further drive customer growth areas of investment we're in the digital only subscriber experience.
The mobile platforms and experience sites speed recommender tools, and heavy use of data and analytics to make informed product marketing decisions to optimize our gross.
Our journalism was highly sought after during this phase as consumer Sadat credible and reliable information.
Additionally, our best reviews business had a terrific quarter with revenue growth of nearly 50% year over year. It continues to grow profitability significantly.
We're very excited about the growth and prospects of this business. We believe the value of this business has grown significantly since we became 60% owners a little over two years ago.
Finally, we made a concerted efforts to help the businesses in our communities recover from the negative business impact they've suffered as a result of the virus. We look forward to helping our advertising partners emerge out of covert 19, and the civil unrest stronger than ever.
We support the businesses in our communities, we're looking forward to helping them opened their doors as the economy begins moving in a positive direction again.
We believe we positioned ourselves to whether through this storm and we're confident in our titles and companies succeeding as our nation and communities get to a better place.
Our unrestricted cash position of nearly 50 million along with our expectation that continue to generate positive cash. This year is a testament to the strength of our business and the ability to enter the most challenging times.
With that I would like to turn the call over to Mike to speak to some of the specifics on our financial performance.
Thank you Jerry first quarter 2020 was pivotal quarter for the company as result of the pandemic, we Didnt assessment of our goodwill intangible and long lived assets. This assessment resulted in a $51 million noncash impairment charge, which significantly impacted our GAAP earnings now I'll speak to our.
Financial results for the first quarter as reminder, for all of 2020, there will be no same business comparisons necessary as weve cycled all of our prior acquisitions.
For the first quarter 2020 revenue declined $28 million or 11.5% on a year over year basis $5.4 million were 2.2% of the declined from the prior year is associated with the reduction in transition services provided the California properties as we complete that agreement in the next.
One.
Accordingly core revenue declines excluding the TSA were 9.5% on a year over year basis, which is comparable with the fourth quarter of 2019.
We also also included in the current period decline is $1.7 million related to cars Dot com.
We'll see the impact of the cars that com driving down our digital revenue comparisons for the next four quarters as we've concluded that the agreement in the first quarter 2020.
Regarding operating expenses, we continue to focus on managing expenses in the face of the pandemic and the industry wide revenue headwinds with total operating expenses, excluding the non cash impairment charges down $24.4 million were 9.7% in the first quarter 2020 versus the same quarter last year.
Included in the current year operating expenses $16.9 million of severance expense, which increased $9.5 million year over year, primarily related to the voluntary severance program, we executed in the first quarter of 2020.
For the quarter, we reported net loss of $44 million compared to a net loss in the prior year of $4.7 million driven largely by the $51 million impairment charges.
Net loss attributable to Tribune shareholders. In Q1 of 2020 was $1.26 per share compared to net loss of 13 cents per share in 2019.
Adjusted EBITDA totaled $13.3 million compared to $21.3 million in the prior year period, despite softness of revenue related to the pandemic, we're able to offset revenues client specific to pandemic with expense reductions thus delivering above our previously guided adjusted EBITDA for Q1 2020.
Okay.
Let me speak for a moment about the impairment charge. The cobot 19 pandemic impact on economy in our company in particular is considered a triggering event for assessment of impairment of goodwill other intangibles, including Mastheads and long lived assets.
The impairment charge related to cobot 19 totaled approximately $42.9 million. Additionally actions, we've taken to reduce our real estate footprint in Chicago in Los Angeles resulted in impairment of.
Lease right of use assets and leasehold improvements totaling $7 million in total roughly half of the overall impairment charge was related to leases, which the company's activity negotiating to terminate or restructure.
Turning to the balance sheet and cash flow, we ended the quarter with $86.1 million of cash of which $48.8 million was unrestricted and 37.3 is restricted as previously disclosed and Terry mentioned the board exceptionally suspended the quarterly shareholder dividend payment program in May.
We are very actively managing our cash balances on several fronts, including by extending terms negotiating with vendors and landlords more favorable terms utilizing the cares acts to defer remitting of the employer portion of social security taxes, and assessing deferral of contributions due under the company sponsored pension plan.
We're closely monitoring proposed legislation for any additional items, which may impact the company.
During the quarter Capex totaled $3.5 million was offset by $9 million and proceeds from the sale of our Virginian pilot office building.
Cash from operations declined $7.5 million for the quarter versus the prior year, primarily due to lower collections on receivables.
You may have notice that there was no disclosure of segments in the earnings release in the first quarter 2020, the company realigned its operations combining its print and digital operations of its media groups together the desegregation the digital business triggered devaluation of the company's operating and reportable segments. We've determined that find good financial statements should refer.
Like one reportable segment prior periods have been restated to reflect the change in reportable segments.
With respect to guidance in light of the uncertainties related to cope with 19 pandemic. The company is not providing full year 2020 guidance at this time, but we do believe the company will be cash flow positive for the year for the second quarter 2020. The company expects total revenues of 172 to 175 million.
In dollars and adjusted EBITDA of tenant a half to $12 million.
In closing the pandemic has provided a boost to our transportation transformation to a digital company as demonstrated by the growth we experience in digital only subscribers in Q1 and on into Q2 2020.
However in order to sustain ourselves for long run we must position the company is a smaller more nimble operation.
Accordingly, we are taken and are taking steps to reduce our cost base in many areas, including reducing our cost fixed cost infrastructure such as the recently announced transition of printing of the Virginian pilots from our plants to an outside printer.
Reducing our real estate footprint by ending or restructuring leases and monetizing our owned properties, reducing compensation by flattening, our management organization, reducing headcount, eliminating incentive and discretionary bonuses and implementing pay reductions in furloughs.
Many of these changes were introduced late in the first quarter. Thereafter, so we have not yet seen the full benefit of these and many other property do profitability actions we have taken.
Certain of these discussions decisions were very difficult, particularly the plant closure and the compensation related items as a directly impact the likelihood of our team members.
However, all the expense actions, we've taken our necessary to ensure both short and long term ability of the company to achieve its mission mission and produce meaningful journalism.
And now we will open up to questions.
Thank you as a reminder to ask a question you want me to press Star one on your telephone switch all your question press the pound key.
My first question comes from Doug Arthur as Hyper Research. Your line is now open.
Yeah. Thanks can you hear me.
Yes, yes.
Yes, I'm wondering if you could give a little bit more color around the second quarter revenue guide.
In terms of.
Underlying.
Great advertising circulation and.
Some of the.
Moving parts in digital advertising I mean, I to go head to head.
Advertising down 48% in the.
In the EMS segment.
I guess, maybe I missed the pace.
And I was coming out overall with the revenue figure look quite a bit higher than one.
Given so I'm wondering if you could just give us just some color on that thank you.
Sure you on the on the on the print advertising side, our numbers probably can be a few points higher than that that's where we were pacing in April and May add preliminarily, that's what we're looking.
Like for June So, we're a couple of points.
Higher to climb there and then on the digital advertising side. We've also obviously obscene declines Kevin.
While our traffic is up significantly the rates.
For programmatic are down considerably.
And then the direct sales that we have from our teams are also down just given.
What's happening with our advertiser.
Advertisers businesses and then we also have.
Doug as we've talked about the cars Dot Com agreement, which we had rolling through the first quarter of this year.
Come Q2 that will be gone on a year over year basis altogether. So so that's about a $3.3 million $3.2 million in Q2.
Okay.
Okay, Yes, because I was assuming digital advertising now we've seen a lot of yes.
Guidance in the sector on digital.
As you guys down 35% it sounds like that's not severe enough.
And digital advertising.
Yes, so we won't got specifically to digital but.
I think I think overall, prince probably a little bit worse.
I think mathematically get digital would imply to be a little bit worse as Paul and then you called out the growth in digital.
Circulation.
Subs that revenues, what's what's going on in the criticized of circulation.
So there we are seeing declines so theres theres the two components.
Print circulation so the home delivery subscription we had.
See our customers that are sheltered in place.
Still hold onto the paper and engage with the paper so in terms of the number of.
Collins for cancellations versus trend that had slowed down, especially during the first part of the shelter in place provisions.
What we had on the on the flip side of that as we weren't able to kind of have.
A strong marketing campaign.
Pressured starts as we call them.
To bring new subscribers and so we saw a little bit of a slippage in print subscribers not significant.
But a little bit of a slippage and then on the.
Newspapers that are sold in newsstands and retail outlets given most of those locations were closed down, especially in heavy transit foot traffic areas.
We saw some negative impact to that that was partially offset we did see sales at grocery stores and and drugstores definitely outperform what it had been trending so it it partially offset some of the bigger drops there.
So I think on balance it's it's a it's a decline.
The home delivery is a little bit slightly worse than trend and then single copy of is definitely worse than what we had been trending.
All right and then just finally I sort of missed what you said on the T. as say with the with daily time says that is that 100% wound down now or is that fading out in Q2, I assume that's sort of that.
Fading out in Q2.
Okay. Okay. Okay, great. Thank you.
Thank you.
Thank you and our next question comes from Michael Kupinski of novel Capital market. Your line is now open.
Thank you.
I was wondering if you can talk little bit about the compensation cost saving. Thank you said there was mostly inflict implemented in the first quarter. I was wondering if you can quantify that as we you go into the second quarter and maybe for the balance of the year.
Sure, Yes, we took a number of actions at the beginning of the year.
Before as a pandemic. So in January we had announced the voluntary program and then become coming in the beginning of February we were realizing those savings we had also.
With with the change in leadership at the company. We also had reduce the size of the executive team as well and so that was kind of mid quarter first quarter.
Yes happen all before the pandemic and then as the pandemic came into play.
We started making more changes throughout Q2, so I think what you'd see is the decline year over year in adjusted expenses for comp in Q1, we'll see an improvement.
In Q2, but I'd like I won't guide you to specific number that Mike.
Gotcha.
Hi, I'm, just trying to kind of quantify because your guidance for Q2, adjusted EBITDA is a little bit better than what I was looking forward I was just trying to understand.
The magnitude of those savings if it was from the from the compensation cost savings or.
Maybe you can talk a little bit about the news print.
I would imagine what the circulation clients of print circulation declined just you're you're getting something that I was wondering if you have can talk a little other outside of volume are you seeing a little pricing there as well.
Yes, so on the news print side, we've seen the volume decline both in number of poppies and without sports taking place the amount of sports pages that are papers print are also fewer so we've got pure pages.
And fewer copy is so that's helping on the volume.
Help reducing the cost because of the volume drops there and then on the pricing we are seeing prices ease up.
Quite a bit and so we are seeing a benefit year over year for price decline, which is also helping us navigate through this through these tough times.
And just kind of going back to the expenses again.
How much of the expense savings in the second quarter are related to what you would consider to be permanent expense savings versus temporary I mean, certainly some of the actions that you've had it hadn't <unk> in the quarter.
Related to maybe lack of sports three core Amedica papers.
Your vendor agreement.
The types of things me may not be considered to be Herman expenses, especially of sports comes back you may have to do some of that so can you just kinda give us a sense of what what you consider to be permanent versus temporary.
So I'd say, while were there's going to be some temporary expense reductions here, we're continuing to make sure that we're driving out as Mike referred to our fixed costs of the business. So we've just announced.
In Q3 will transition.
Renting in house in Virginia will outsource.
That to another provider. So we'll see some labor savings come through in Q3's, whereas some of the temporary actions.
Centrally bounced back to normal we're going to continue to make sure that we're focused on reducing the cost structure.
In line with where revenue.
Trends will be the future so I think.
I will size and temporary but what I would say as you you won't see a significant bounce back and expenses as those temporary actions.
Come back and because we're going to take other actions to to help reduce the expense side of the business and change the expenses in line with where revenues.
Gotcha and then in terms of best reviews, you highlighted the fact that it was growing so rapidly obviously benefiting maybe from the shelter in place.
Actions and so forth.
Was wondering as we kind of see the economy opening up whether or not you're still seeing similar trends or.
Can you kind of give us some sense of how that.
That is performing.
Yes, so that is a business that's tethered to E commerce and so as shelter in place provisions came in Walt grocery stores and.
Drug stores were opened and we're seeing some level traffic I think those that typically would like to go to stores.
Really kind of changed their behaviors. During this pandemic to buy more online and so with more buying online our best reviews business, which is.
Supportive of E commerce.
His saw a significant benefit of that and I think the the big question is for those customers that would normally go to physical store that their behaviors had the change because of the pandemic will they.
Forever be changed at some level and so.
I think we'll see some ongoing benefit from E. Commerce, just generally speaking obviously was growing tremendously before the pandemic, but it just kicked up a huge notch.
During the pandemic and so I foresee.
Ecommerce being a really good growth story generally and then for our business best reviews being together to that we'll see significant growth for that feature as well.
Gotcha, and obviously, there's some a lot of newspapers that are struggling right now.
Not the best financial position as you are what can you just talked about the.
They activity your your appetite to make acquisitions or is it just kind of like.
Bunker down at this point and just kind of manage through this crisis.
What are your thoughts whether or not to be opportunistic.
At this point.
Yes, I think on one hand from where.
The business has said that we would like to acquire look to acquire generally speaking the valuations are at pretty affordable prices are very affordable prices. So I think that's.
Interesting to us I think the flip side to that is while we are getting a little bit more clarity about the future. There's still a level fogginess that I, just don't think it'd be prudent to.
To go out and start buying up a bunch of things until we really have a better sense of what the future need and I think while were.
Very optimistic about the businesses that we own anytime you buy something new there's a number of other unknowns. There that we just don't want to have factored in and for US I think the other element that comes in the M&A is there's a great deal focus on energy that goes to integration.
Implementation and transition from one company into another and that distraction is probably not time that we can afford.
We need to focus on our core assets.
At this time.
Great. Thanks for that question depreciate it.
Great. Thank you.
Thank you and ladies and gentlemen, this does conclude our question answer session I would now like to turn the call back over to Terry eminence for any closing remarks.
Okay.
Well, we as I had mentioned throughout the call and in the question period, we continue to manager cost effectively as we transform to digitally focused company.
But we're still making investments in the company, we recognize the impact that both the pandemic in the civil unrest have had on our employees our customers and our communities and we are eager to be part of the solution for all those impacted.
Thank you for your interest in Tribune publishing stay safe and be well.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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