New Media Investment Group (NEWM) Misses Q4 EPS by 24c

New Media Investment Group (NYSE: NEWM) reported Q4 EPS of $0.22, $0.24 worse than the analyst estimate of $0.46. Revenue for the quarter came in at $416 million, versus $394.43 million reported last year.

Fourth Quarter 2018 Financial Summary

• New Media declared a cash dividend of $0.38 per common share for the fourth quarter of 2018
• Operating income of $25.2 million
• Net income attributable to New Media of $13.3 million
• Total revenues of $416.0 million, an increase of 5.5% to prior year on a reported basis, and down 6.6% on an organic same store basis excluding, for comparability, the impact of ASC Topic 606
• Natural disasters affected several properties, which we estimate resulted in approximately $2.3 million of loss to revenue, As Adjusted EBTIDA and Free Cash Flow within the fourth quarter. Adjusting for this impact, organic same store revenue would have been down 6.0%.
• Digital revenue of $48.4 million, an increase of 16.4% to prior year on a reported basis
• As Adjusted EBITDA of $56.4 million
• Free Cash Flow of $42.7 million
• Liquidity, consisting of cash on the balance sheet and undrawn revolver, of $88.2 million at the close of Q4 2018

“2018 was a year of strong progress for New Media,” said Michael E. Reed, New Media President and Chief Executive Officer. “I am very pleased with the operational execution and the financial results we achieved across many areas of our business. Importantly, our same store revenue trends improved 60bps in 2018 to a decrease of 5.3%, an improvement from the 5.9% decline in 2017. We expect continued improvement in that trend in 2019, as we progress toward our goal of same store revenue growth. Overall, we delivered just over $1.5 billion in revenue for the year, an increase of 13.7% over 2017. We also delivered $181.8 million of EBITDA and $131.9 million of Free Cash Flow, both increasing over 2017. We deployed over $200 million of capital in 2018 acquiring leading media and experiential businesses in important markets which are already integrating well into our portfolio. Our track record illustrates that we are seen as a preferred acquirer of local news franchises, due to our commitment to quality local journalism and the successful execution of our business model. As a result of the continued strength of the Company’s operations and financial results, the Company’s Board of Directors increased the dividend in 2018 for the fifth consecutive year, paying total dividends in 2018 of $1.49 per share.

“We continued to make strong progress with our growth businesses in 2018, which were the primary contributors to our improved same store revenue trend. UpCurve produced $95.8 million in revenue for the year, up 34.4% over 2017, or up 42.9% excluding the impact of ASC Topic 606. Importantly, UpCurve experienced full year positive cash flow for the first time in 2018. Our GateHouse Live events business and our Promotions business also achieved strong results, with revenue of $45.7 million, up 58.0% over 2017. On a combined basis, these two businesses produced total revenue of $141.5 million, an increase of 41.2% over 2017. We expect to see these businesses continue to grow meaningfully in 2019 and beyond.

“We are also making strong progress in our core business of consumer marketing and subscriptions. We implemented a strategic shift this year to focus more on driving volumes, especially digital subscriptions, while relying less on pricing to build our consumer revenuefoundation. To accomplish this, we created a centralized consumer agency with dedicated talent who are investing into customer acquisition channels and focused on retention and our customer experience. The fourth quarter organic same store circulation trends were down modestly to previous quarters, reflecting the temporary impact associated with our strategy shift and the hurricanes. However, our overall paid circulation volumes have increased by over 1,000 subscribers per week for the past twenty weeks – results which have not been achieved for the past ten years. Continued execution of this strategy is expected to produce paid subscriber growth in the mid-term, providing a more stable and sustainable circulation revenue base. As consumer marketing and subscriptions are our single largest revenue category, it is vital that we achieve long-term revenue growth driven by customer growth, and we believe we are on that track now.

“The results of the fourth quarter of 2018 reflect the impact of hurricanes in the southeast, the temporary impact to circulation revenue trends driven by our change in strategy, and a very large commercial print job we cycled in the quarter. Excluding these temporary impacts, our performance was actually quite good. We continue to execute well on our organic revenue growth strategy, we continue to reduce and reallocate costs to both improve cash flow and invest in growth, and we continue to find highly accretive acquisitions. I am confident about the future for New Media and our ability to create outsized returns for our shareholders.

“We also are announcing this morning that our Chief Financial Officer, Greg Freiberg, is leaving to pursue other opportunities. Over the past five years, Greg has made many contributions to the Company, including building a strong finance team who will continue in his footsteps. Greg will continue to assist with the transition to his successor, a search for whom is underway. I would like to personally thank Greg for his contributions to our growth and I wish him the very best in his next endeavor.”

Greg Freiberg also commented, “It’s been an honor to work with the experienced and motivated team at New Media. During my tenure with the Company, we successfully executed over $1 billion in acquisitions and repositioned the Company’s portfolio toward higher-growth digital and experiential businesses. New Media has an unparalleled position in small to mid-markets, owning some of the most respected brands in media. With its pivot toward new media and consumer experiences, I am convinced the future is bright for the Company and I look forward to seeing its continued growth.”

For earnings history and earnings-related data on New Media Investment Group (NEWM) click here.

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