Q2 2020 Tribune Publishing Co Earnings Call
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That's fine all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session to actually cuts changing decision you want me to past Barb on your telephone keypad. If you recall any further assistance.
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The like they had become friends over to your first speaker today. He missed your nibbled. Please go ahead.
Thank you and welcome to our second quarter 2020, <unk> 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 or actual results could differ materially.
Statements containing words, such as may be leave anticipate expects intend plan will continue estimates outlets or other similar expressions are forward looking statement.
Material differences in our actual results from those described in these forward looking statements May result in actions taken by the company as well as some 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 mentioned that our remarks today will include references to non-GAAP financial measures.
Putting adjusted EBITDA adjusted total operating expenses adjusted net income adjusted diluted earnings per share.
Adjusted EBITDA margin and met.
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 investors that trips hub dot com.
Joining me today, it's Chief Executive Officer, Terry You mentioned, an interim Chief Financial Officer, Mike Lately.
I'll now turn the call over to Chief Executive Officer, Harry Jimenez.
Thank you Amy and good afternoon, everyone. Thank you for joining todays call and for your interest in Tribune publishing I Trust that everyone has been staying safe and healthy as we continue navigating this pandemic.
I'll provide some perspective in insights on our performance in the second quarter and then we'll ask Mike to walk through our financials.
Our World has continued changing dramatically last several months as a company faces unforeseen challenges brought about by the pandemic.
Circumstances have demanded that we alter our approach I am pleased with how our company has performed in our team is collectively responded.
Our journalism and marketing solutions now more than ever are extremely valuable to our readers and our advertising partners.
Our readers audiences and communities need the information we provide depend on our great journalists.
We continued to deliver through reporting and information on the impact of buyers as hot.
In addition to providing faxon visibility, we provide perspective from frontline workers in health care in the central businesses.
As a virus has progressed in different communities and local governments have dropped a new guidelines and regulations. We continue to keep our readers informed all the relevant information they need to navigate their day to day lives.
The first two quarters this year, our strong leadership team and the rest of our organization has stepped up and advance our business.
We have responded with resiliency speed and urgency and have continued toward a digitally focus enterprise.
I would like to thank all of the frontline.
And then and in the central organizations, including our own team for their continued helping guiding us through these unchartered territory.
He shine with large stories impacting our audience is like the pandemic civil discussions and hurricane preparations and updates. We also continued to deliver key stories in each of our communities on crime government local business and the ever changing World Cup Sports Entertainment.
As mentioned in her last earnings call.
Quickly responded with meaningful action as events as a pandemic unfolded.
We focused on four main areas first we took action to maintain the strength of our balance sheet.
Unlike many of our peers, we entered into the pandemic virtually no debt and significant cash.
To maintain that we optimize our use of working capital reductions in capital expenditures and suspended or did that.
These actions ensured that we maintained significant financial flexibility as we continue facing many unknowns and we're confident that shrink the balance sheet will help us continue to whether that's in other future storms.
Second concurrent focus was on Opex in virtually every part of our business. These actions included reductions and outside services, where we start to save on contract costs across the company occupancy cost, where we've reduced our rent and related expenditures, especially relevant as a result, not working out of our own offices.
Changes in our production schedules, which were optimized to secure additional said.
We also significant significantly reduced where were moved altogether discretionary spending.
In addition, we've made the difficult decision.
To reduce compensation expenses through targeted staff reductions pay reductions and for lunch. So difficult. These actions helped ensure we maintain cash flows are topline advertising revenues were impacted by the slowdown.
Our third area of focus was on the digital opportunity.
In the second quarter, we saw more than 60 million average monthly unique visitors to our digital footprint, placing us above most of our regional peers and this was a 52% growth year over year, which also placed us with greater growth and most media outlets on a year over year basis, we grew our digital only subscribers by 49000.
Sequentially in the second quarter, the first quarter, representing our single largest quarter of subs growth. Since we began these efforts several years ago or chose our subs total ended at 419000 for the quarter, representing a year over year gain of 40%.
We continue to make targeted enhancements to our customer experience and improve the sophistication of our marketing solutions.
We've made significant strides in our digital only subscriber experience mobile experience and we continue to utilize data and analytics and former decision making.
These efforts have yielded significant gains as we grow our audience and our subscriber base.
We have now posted 22 consecutive quarters of digital subscriber growth, 30% or more.
We are continually reminded of the success of our best reviews business, which the company has a majority stake in.
The second quarter shop, best reviews post substantial revenue growth as well as year over year bottom line improvements.
Our fourth our fourth focus is on reconnecting with the businesses in our communities. 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.
As businesses have begun to open back up we have worked with them as marketing partners to ensure their business rebalance our advertising and marketing solutions continue to support the business is that our readers in audiences patronage and we're confident that our client partnerships will proactively assist in restarting our local economies.
In recent weeks the company is made several announcements that I'd like to touch on here, we first announced an extension to the standstill agreement with our largest shareholder disagreement allows the board of directors, our leadership team and our employees the ability to focus on executing against our initiatives and advancing our digital transformation.
We later announced stockholder rights agreement.
The agreement is intended to enable all Tribune publishing stockholders to realize the full potential value of their investment and protect the interest of the company and its stockholders by helping to reduce the likelihood that outside groups can acquire shares in order to control the company without the payment of inappropriate premium.
We remain focused on operating these businesses to the highest degrees of efficiency.
While investing in our digital future.
Our substantial cash cash position of over 80 million along with our expectation. It continued to generate positive cash and this year is a testament to the strength of our business and the ability to endure the most challenging at times.
As our nation at communities get to better place, our reporting our journalism and our marketing solutions will continue to play their part in our recovery.
With that I'd like to turn the call over to Mike to speak to some of the specifics financial performance.
Thank you Terry second quarter, 2020 was a challenging quarter for our country economy, our customers for our company in our staff.
The kroner virus epidemic is assessed stated that we take significant cost me if it measures responds to unprecedented revenue declines, particularly in advertising as we position the company for digital future.
These included efforts focused on reducing our fixed cost infrastructure, including outsourcing of printing and packaging. It the bridging pilot taking steps to reduce our leased facility footprint the difficult decisions to reduce our compensation costs now we'll speak to our financial highlights for the second quarter.
As a reminder, for all of 2020 there'll be no same business comparisons necessary cycled all prior year acquisitions.
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Additionally, there'll be no segment comparison, just beginning in the first quarter fiscal 2020, that's disclosed their first quarter results Tribune began managing it's business as one business and one reportable segment prior periods have been restated to reflect the change in reportable segments.
The second quarter, 2020 revenue declined $67.2 million or 26.9% on a year over year basis advertising declined 49.8 million or 48.1% with retail advertising, taking the big decline off by $39.3 million or 55.2.
Hooper said in the prior year.
Included in this decline is $2.8 million associated with the cars that calm agreement, which concluded last quarter.
National advertising decreased $5.4 million worth 36.9% classified advertising decreased $5.3 million worth 32.7%.
Circulation declined $4.3 million, 4.7% and declines in home delivery in single copy were only partially offset by increased digital only circulation revenue, which increased 49.9%.
Other revenue declined $13.1 million or 23.8% with commercial printing revenue commercial free delivery revenue down $6.8 million or 28.5% as our customers are these services were equally impacted by the pandemic an additional five point million dollar.
Declined from the prior year is related to transition services provided to California properties as we wrapped up that agreement in the second quarter.
These declines were partially offset by a 3.1 million dollar were 37.1% increase in revenue at best reviews as a public turned even more so to online shopping during the quarter.
We did exceed our previous revenue guidance for the second quarter as each week in June sequentially improved compared to expectations.
On the expense side, we continue to aggressively manage expenses in the face a pandemic industrywide revenue headwinds with total operating expenses down $58.4 million were 24.1% and the second quarter 2020 on a year over year basis.
Reductions incurred your operating expenses included $25.5 million or 26.7% in compensation expense.
$14.3 million or 17.7% in outside services $7.7 million or 51.1% in newsprint, and ink and $9.2 million or 23% in others other expenses.
For the quarter reported net income from continuing operations $1.6 million compared to $5.3 million in the prior year with the decline written driven by lower revenues.
Net loss attributable to Tribune shareholders. In Q2 of 20.8 was two cents per share compared to net income attributable to the Tribune sure shareholders of eight cents per share in 2018.
Adjusted EBITDA totaled $18.8 billion in the second quarter 20.8, compared to $24.4 million in the prior year period.
Favorable revenue in June and strong cost control allowed us to deliver above our previously guided adjusted EBITDA for Q2 2020.
Now turning to cash flow cash flows it very bright spot for the company with cash flow from operations of $33.1 million for the quarter compared to $12.8 billion for the prior year quarter, an increase of $20.3 million were 158% driven primarily by strong cost control and focus managed.
On cash outflows for the year to date period cash flow from operations, its $30.3 million compared to $17.6 million in the prior year.
We ended the quarter with $114 million in cash, which $80.5 million is unrestricted and $33.4 million is restricted.
We are actively managing our cash balances on several fronts, driven primarily by aggressive cost control, but also extending payment terms reduced rent payments as we negotiate with landlords for more favorable terms utilizing the care Jack to defer readmitting the employer portion of social security taxes, we continue to closely monitored.
Oppose legislation for items, which may further impact the company.
As mentioned previously the board suspended the quarterly dividend program in day care.
Capital expenditures for the quarter totaled $3.1 million with respect to guidance in light of the uncertainties associated with the Kobin 18 pandemic. The company is not providing full year 2020 guidance, but our expectation is a company will continue to generate positive cash flow for the remainder of the year.
For the third quarter 2020, the company expects total revenues of 188 million $293 million and adjusted EBITDA of $24 million to $27 million.
In closing the pandemic has accelerate our transformation to a digital company as demonstrated by the growth experience in digital only subscribers in first half of 2040.
However in order to sustain ourselves for long term this position the company as a smaller more agile operation to do so we have and are taking steps to reduce our primary expense drivers by focusing on our fixed cost infrastructure, reducing our real estate footprint, reducing compensation expense.
We believe we are well positioned withstand the challenges of the Corona virus pandemic and be successful in the future due to the excellent journalism marketing solutions, we provide streak the character of our team and our solid balance sheet fit your featuring strong liquidity minimal debt.
And now we will open up the call the questions.
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Your first question comes from the line of Mr., Michael Kupinski <unk>. Your line is now.
Hi, This is a bike and ski thanks for taking the questions and good afternoon.
First of all I want to congratulate you guys I'm for some obviously tough choices and some sacrifices that as a company in employees that have made to deliver on these types of results I mean, it's its.
Significant that you over achieved a expectations and and what's interesting to us as you look at your guidance for Q3 that your revenues being down roughly in the 20% range, it's actually better than many of the other traditional media companies are guiding towards the third quarter and also.
We're seeing that your cash flow, you're actually looking for that to be up year over year, which is very surprising.
I was wondering if you can just talk little bit about the revenues because you know where we're hearing about store bankruptcies and closings and so forth and bringing it to deliver our that type of revenue performance, it's kind of look a little bit remarkable so there has to be.
Obviously, some key drivers in the digital side can you just kinda give us a flavor the components of your guide for Q3, and you know just kind of help us out there.
Yes, it's a terry.
On the advertising side I think we'll still continue to see some headwinds there I think well we anticipate a slight improvement in trend line from where Q2 was just given in Q2, a lot of our advertising partners were shut down for a pretty big portion of the second quarter for our fiscal second quarter I should.
Say.
Whereas in Q3, they'll they'll be open, albeit a little bit of a softer than normal environment, but certainly not as soft as it was in Q2 and while there are for obvious reasons why some retailers are going.
The bankruptcy entering into bankruptcy.
We have limited exposure with those that have announced today, but certainly we're conscious.
And trying to support other retailers and fight through a circumstances as it is.
The other component of our bar guide was we.
We had brought in a lot of new digital only subscribers really in the first half of the year. Since Q1, we had you know what at the time was a record growth sequentially in terms of growth and digital only subscribers from the end of Q4 of 19 into Q1 of 2020.
So we'll have the benefit of those subscribers.
Paying.
At a at a normalized rate in Q3 and beyond and then the same story on Q2, where we we broke her previous record sequentially in Q2 top that by quite a bit and civil have you know a lot more digital subscribers and our ecosystem.
In Q3 and beyond so we'll have the benefit.
Of those groups as well and then in terms of the expense side and as Mike laid out we had taken a lot of actions in order to kind of make sure that we're going to being a stable position natural short term, but also long term and so we're confident that we'll see the savings from those actions.
I continue on and we obviously need to continue given the revenue declines we need to continue to be thoughtful about how we spend our money and so we'll see some additional.
Actions, albeit at a smaller scale than what we saw in Q2, but we'll see some ongoing expense management actions in Q3 as well.
Sorry, I just one quick follow up in terms of their digital subscriber growth as you look into the Q3, obviously Q2 was kind of a perfect storm of up where where people were at home and of course looking for news and that seems like digital subscriber activity would probably increase but as you look into Q3 and.
The economies are starting to open up and so forth and or are you seeing that's what type of growth are you seeing and how sticky are the subs as you kind of go into Q3.
Yeah from a retention point of view at least of those that we've acquired its still early days, but for those that we've acquired those are falling kind of a normal retention curve.
And so we don't see anything new with those newly acquired subscribers and then in terms of the existing basis subscribers again, we haven't seen any churn pick up.
At all as they look to.
To move on I think you know there's a there's a case to be made that certainly the pandemic is still gonna be here.
For Q3, and hopefully not much longer beyond that but it's certainly a as there's additional waves that come through.
People are going to need to stay on top of the story, but I think at the same time, we're delivering a lot of other news that people are now getting access and exposure to engaging Wes and I think people are understanding kind of the incredible news.
That you can find with our property is a place that they can invest relatively small amount or their money to kind of make sure. They're getting the right story that helps you know them navigate their lives.
And in Terry This is may not be a fair question, but obviously you have to be disappointed where the stock prices today, given the fact that if you just look at the some of the parts of the company you would think that this would be materially higher than works out, especially going off this type of cash flow the cash that you have.
The value that you haven't best views, how do you look at the stock price relative to what you see at the company and the fundamentals that you see at the company currently and what maybe you what are the best uses of cash at this point how would you look at you know capital allocation at this point.
Yes.
Obviously I agree with the point about where our stock prices that you know I don't think its appropriately valued but that's something that.
Something we really can't control Dan day out we can wake out so we're really focused on making sure we've got.
A set of assets in a group of assets that will continue to contribute value to our communities in our advertising partners and our belief is that will translate into shareholder value in show shareholder growth over the medium to longer term.
We're really focused on the softer operating the best that we can the to deliver that longer term growth.
In terms of capital allocation as as Weve navigated through you know what I think has to have you as part of the storm and exited.
But there's still a fair amount of uncertainty as we move forward and I think.
You know how we try to.
Deploy capital to to help drive.
Drive shareholder value is a discussion that you know the board certainly continues to have and be thoughtful but given the near term uncertainty. There is no definitive plans, what we do with the capital.
Just yet.
Gotcha, Thanks for the taking the questions appreciate it.
Great. Thank you.
Going to ask that question.
You want me to that story.
Thank you Pat.
Your next question comes from the line that's me since late.
Yeah, Hi.
I read the tea graduations on a great job.
Given the what's going on the world and I'm, just absolutely astounded WIDIA before obviously, you're projecting that third quarter, where your your adjusted EBITDA basically is how did the same as last year. We do revenue was much higher in the real good base called it so congratulations on holding it together congratulations on the I know sometimes.
<unk> forecast for this quarter and your job well done.
I just have two questions one.
A lot of cashier nod Tribune hours as a percentage of market cap is like more than Apple computer I mean literally a third of your market cap is now in cash and you're projecting to grow cash going forward.
And if you if you annualize third quarter, that's a $100 million an EBITDA with.
Our personal capital expenditures, so why not paid dividend I mean, you have no debt tons of cash cash coming in.
Wouldn't you paid and that's number one the second thing is in terms of best reviews.
Kind of in this odd situation, where you've owned 60% of the business for a few years now a few years now and so you kind of like you know like how Craig yes, what's the plan the interplay of the by the rest of it in.
So I'll, let just say, 60%, what's the what's the strategy here.
Those are my questions.
Sure. Thanks, Mitch you on the first one on capital allocation you, there's not much more I think it out other than what I hope I answered Michaels its.
Definitely discussion that we continue to half at the board level and there's no.
Decisions.
That we're announcing here today, but it's definitely part of the conversation as we think about capital allocation in the future.
In terms of best reviews. Its a true spent a tremendous investment for Tribune. It's it's grown tremendously since we've entered into the investment. It continues to grow quite significantly. It's it's a business that's tethered to E commerce and ecommerce markets will continue to grow and that average obviously saw.
An uptick during the pandemic.
As as a lot of retailers had a shutdown. So we're we're very excited about the prospects the best best reviews, and the progress that it's made today, but even more importantly, the growth trajectory that it's on and where it can go we think there's a lot of value in the asset and so we're really excited.
But the performance of the business.
<unk>.
Thank you.
Thank you.
Well I know one of the analysts had behavior.
Yes, I think I think we've hit all of our questions one of our analysts as in the Middle storm situation. So he won't be on.
But this is Terry men as I really just want to thank everybody for joining us today and your interest in Tribune publishing and as you could see we're we're laser focused on making sure that we're creating value for the long term. So I appreciate your interest in her once they say thank you all.
Ladies and gentlemen, this concludes today's conference call.
Thank you having been you may now disconnect.
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