New Media Announces Solid Fourth Quarter & Full Year 2018 Results, Dividend of $0.38 per Common Share

NEW YORK–(BUSINESS WIRE)–New Media Investment Group Inc. (“New Media” or the “Company”, NYSE:
NEWM) today reported its financial results for the fourth quarter and
full year ended December 30, 2018.

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

Full Year 2018 Financial Summary

  • Operating income of $58.1 million
  • Net income attributable to New Media of $18.2 million
  • Total revenues of $1.53 billion, an increase of 13.7% compared to the
    prior year on a reported basis and a decrease of 5.3% compared to the
    prior year on an organic same store basis excluding, for
    comparability, the impact of ASC Topic 606
  • Digital revenue of $179.2 million, an increase of 25.2% year-over-year
    on a reported basis
  • As Adjusted EBITDA of $181.8 million
  • Free Cash Flow of $131.9 million

Business Highlights

  • Closed the acquisition of The Oklahoman in Oklahoma City, OK
    for $12.5 million on October 1, 2018
  • Closed the acquisition of Progressive Business Media for $35.0 million
    on November 16, 2018
  • UpCurve, our small and medium business (“SMB”) solutions platform,
    achieved $26.9 million in revenue for the fourth quarter, a 29.6%
    increase as compared with the same quarter in the prior year.
    Excluding the $1.6 million impact of ASC Topic 606, UpCurve revenue
    growth increased 37.5% compared to prior year period.
  • GateHouse Live and Promotions achieved $10.2 million in revenue, a
    23.8% increase compared with the prior year period
  • Subsequent to year end, closed the acquisition of the publishing arm
    of Schurz Communications for $30.0 million on January 31, 2019
 
Summary of Fourth Quarter and Full Year 2018 Results
($ in million, except per share)
GAAP Reporting Q4 2018

FY 2018

Revenues $ 416.0 $ 1,526.0
Operating income $ 25.2 $ 58.1
Net income $ 13.3 $ 18.2
 
Non-GAAP Reporting* Q4 2018

FY 2018

As Adjusted EBITDA $ 56.4 $ 181.8
Free Cash Flow $ 42.7 $ 131.9
 

*For definitions and reconciliations of Non-GAAP Reporting measures,
please refer to the Non-GAAP Financial Measures Note and reconciliations
below.

“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 revenue foundation.
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.”

Fourth Quarter 2018 Financial Results

New Media recorded total revenues of $416.0 million for the quarter, up
5.5% to the prior year, and down 6.6% on an organic same store basis,
excluding the $1.6 million impact of ASC Topic 606. This is a 180bps
decrease as compared with our third quarter organic same store revenue
performance, due to weaker print trends, natural disasters, and
investments made in circulation. Natural disasters affected several of
our southeast locations, which we estimate resulted in approximately
$2.3 million loss in revenue, As Adjusted EBITDA and Free Cash Flow
within the fourth quarter, adjusting for the natural disasters, organic
same store revenue decreased 6.0% as compared with the prior year
period. Traditional Print advertising revenue decreased 15.0% on an
organic same store basis to prior year, reflecting a weak holiday season
for traditional brick and mortal retailers.

Digital revenue increased 16.4% on a reported basis from the prior year
to $48.5 million or 20.4% excluding the $1.6 million impact of ASC Topic
606. The Company adopted ASC Topic 606 – “Revenue from Contracts with
Customers” on January 1, 2018 using a modified retrospective method. The
impact is the revenue treatment of certain UpCurve Cloud transactions at
“net” vs. previously being at “gross”, with no adjustment to the prior
year or 2018 beginning Retained Earnings. UpCurve generated $26.9
million in revenue, an increase of 29.6% to the prior year on a reported
basis. Excluding the $1.6 million impact of ASC Topic 606, UpCurve
performance increased 37.5% as compared with the prior year period.

Circulation revenue declined 3.3% on an organic same store basis, due in
large part to our shift away from pricing increases to stabilizing
volume trends. Our digital-only subscription base grew to 145,000, an
increase of 35% year-over- year. Commercial Print, Distribution and
Events revenue increased 1.7% versus the prior year on an organic same
store basis, with GateHouse Live driving this growth.

Operating income was $25.2 million and Net income attributable to New
Media was $13.3 million.

As Adjusted EBITDA and Free Cash Flow were $56.4 million and $42.7
million, respectively.

Full Year 2018 Financial Results

New Media recorded revenues of $1,526.0 million in 2018, which
represents an increase of 13.7% when compared to the prior year on a
reported basis, and a decrease of 5.3% on an organic same store basis.

Total Print Advertising decreased 13.7% from prior year on an organic
same store basis to $618.3 million.

UpCurve contributed $95.8 million to Digital revenue, an increase of
34.4% compared to the prior year on a reported basis, and up 42.9%
excluding the impact of ASC Topic 606. Total digital revenue was $179.2
million for the year, growing 25.2% over the prior year on a reported
basis.

Circulation revenue, our largest individual revenue category, achieved
revenue of $575.0 million in 2018, down 2.2% to the prior year on an
organic same store basis. Commercial Print, Distribution and Events
revenue was $153.6 million, growing 5.7% versus the prior year on an
organic same store basis.

Operating income ended the year at $58.1 million and Net income
attributable to New Media totaled $18.2 million.

As Adjusted EBITDA and Free Cash Flow were $181.8 million and $131.9
million for the year, respectively.

New Media’s 2018 dividends will not be treated as taxable dividends, as
they are a return of capital.

Fourth Quarter 2018 Dividend

New Media’s Board of Directors declared a fourth quarter 2018 cash
dividend of $0.38 per share of common stock. The dividend is payable on
March 20, 2019 to shareholders of record as of the close of business on
March 11, 2019.

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.

Additional Information

For additional information that management believes to be useful for
investors, please refer to the presentation posted on the Investor
Relations section of New Media’s website, www.newmediainv.com, and the
Company’s most recent Quarterly Report on Form 10-Q or Annual Report on
Form 10-Kwhich will be available on the Company’s website.
Nothing on our website is included or incorporated by reference herein.

Earnings Conference Call

New Media’s management will host a conference call on Wednesday,
February 27, 2019 at 9:00 A.M. Eastern Time. A copy of the earnings
release will be posted to the Investor Relations section of New Media’s
website, www.newmediainv.com.

All interested parties are welcome to participate on the live call. The
conference call may be accessed by dialing 1-855-319-1124 (from within
the U.S.) or 1-703-563-6359 (from outside of the U.S.) ten minutes prior
to the scheduled start of the call; please reference “New Media Fourth
Quarter Earnings Call” or access code “4063209.”

A simultaneous webcast of the conference call will be available to the
public on a listen-only basis at www.newmediainv.com. Please allow extra
time prior to the call to visit the website and download any necessary
software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available
approximately two hours following the call’s completion through 11:59
P.M. Eastern Time on Wednesday, March 13, 2019 by dialing 1-855-859-2056
(from within the U.S.) or 1-404-537-3406 (from outside of the U.S.);
please reference access code “4063209.”

About New Media Investment Group Inc.

New Media supports small to mid-size communities by providing
locally-focused print and digital content to its consumers and premier
marketing and technology solutions to our small and medium business
partners. The Company is one of the largest publishers of locally based
print and online media in the United States as measured by our 146 daily
publications.
As of December 31, 2018, New Media operates in over
580 markets across 37 states reaching over 22 million people on a weekly
basis and serves over 199,000 business customers.

For more information regarding New Media and to be added to our email
distribution list, please visit www.newmediainv.com.

Same Store and Organic Same Store Revenues

Same store results take into account material acquisitions and
divestitures of the Company by adjusting prior year performance to
include or exclude financial results as if the Company had owned or
divested a business for the comparable period. The results of several
acquisitions (“tuck-in acquisitions”) were funded from the Company’s
available cash and are not considered material. Organic same store
revenues are same store revenues adjusted to remove non-material
acquisitions and non-material divestitures, and to adjust for Commercial
Print revenues that are now intercompany.

Non-GAAP Financial Measures

The Company strongly urges stockholders and other interested persons not
to rely on any single financial measure to evaluate its business. In
addition, because Adjusted EBITDA, As Adjusted EBITDA, and Free Cash
Flow are not measures of financial performance under GAAP and are
susceptible to varying calculations, these non-GAAP measures, as
presented in this press release, may differ from and may not be
comparable to similarly titled measures used by other companies.

Adjusted EBITDA, As Adjusted EBITDA, and Free
Cash Flow

The Company defines Adjusted EBITDA as net income (loss) from continuing
operations before income tax expense (benefit), interest/financing
expense, depreciation and amortization, and non-cash impairments. The
Company defines As Adjusted EBITDA as Adjusted EBITDA before transaction
and project costs, merger and acquisition related costs, integration and
reorganization costs, gain/loss on sale or disposal of assets, non-cash
items such as non-cash compensation, and Adjusted EBITDA from non-wholly
owned subsidiaries. The Company defines Free Cash Flow as As Adjusted
EBITDA less capital expenditures, cash taxes, interest paid, and pension
payments.

Management’s Use of Adjusted EBITDA, As
Adjusted EBITDA, and Free Cash Flow

Adjusted EBITDA, As Adjusted EBITDA, and Free Cash Flow are not measures
of financial performance under GAAP and should not be considered in
isolation or as alternatives to income from operations, net income
(loss), cash flow from continuing operating activities or any other
measure of performance or liquidity derived in accordance with GAAP. New
Media’s management believes these non-GAAP measures, as defined above,
are useful to investors for the following reasons:

  • Evaluating performance and identifying trends in day-to-day
    performance because the items excluded have little or no significance
    on the Company’s day-to-day operations; and
  • Providing assessments of controllable expenses that afford management
    the ability to make decisions which are expected to facilitate meeting
    current financial goals as well as achieving optimal financial
    performance.

We use Adjusted EBITDA, As Adjusted EBITDA, and Free Cash Flow as
measures of our deployed revenue generating assets between periods on a
consistent basis. We believe As Adjusted EBITDA and Free Cash Flow
measure our financial performance and help identify operational factors
that management can impact in the short term, mainly our operating cost
structure and expenses. We exclude mergers and acquisition, transaction,
and project related costs such as diligence activities and new financing
related costs because they represent costs unrelated to the day-to-day
operating performance of the business that management can impact in the
short term. We consider the loss on early extinguishment of debt to be
financing related costs associated with interest expense or amortization
of financing fees, which by definition are excluded from Adjusted
EBITDA. Such charges are incidental to, but not reflective of our
day-to-day operating performance of the business that management can
impact in the short term.

Forward-Looking Statements

Certain items in this press release may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including, but not limited to, statements regarding
our ability to execute on our business plan, the availability of future
acquisitions and strategic opportunities, finding, pursuing and
completing future acquisitions and strategic opportunities and the
benefits associated with such opportunities, deliver shareholder value,
expected revenue trends, including expectations for revenue growth in
our UpCurve and GateHouse Live businesses, and our ability to identify,
implement, and realize expense savings. These statements are based on
management’s current expectations and beliefs and are subject to a
number of risks and uncertainties, such as continued declines in
advertising and circulation revenues exceeding what we have seen in the
past 12 months, economic conditions in the markets in which we operate,
including natural disasters, tariffs and other factors affecting
economic conditions generally, competition from other media companies,
the possibility of insufficient interest in our digital and other
businesses, technological developments in the media sector, an ability
to source acquisition opportunities with an attractive risk-adjusted
return profile, inadequate diligence of acquisition targets, and
difficulties integrating and reducing expenses, including at our newly
acquired businesses. These and other risks and uncertainties could cause
actual results to differ materially from those described in the
forward-looking statements, many of which are beyond our control. The
Company can give no assurance that its expectations will be attained.
Accordingly, you should not place undue reliance on any forward-looking
statements contained in this press release. For a discussion of some of
the risks and important factors that could cause actual results to
differ from such forward-looking statements, see the risks and other
factors detailed from time to time in the Company’s Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the
Securities and Exchange Commission. Furthermore, new risks and
uncertainties emerge from time to time, and it is not possible for the
Company to predict or assess the impact of every factor that may cause
its actual results to differ from those contained in any forward-looking
statements. Such forward-looking statements speak only as of the date of
this press release. The Company expressly disclaims any obligation to
release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company’s
expectations with regard thereto or change in events, conditions or
circumstances on which any statement is based.

 
NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
   
 
December 30, December 31,
2018 2017
 
Assets
Current assets:
Cash and cash equivalents $ 48,651 $ 43,056
Restricted cash 4,119 3,106

Accounts receivable, net of allowance for doubtful accounts of
$8,042 and $5,998 at December 30, 2018 and December 31, 2017,
respectively

174,274 151,692
Inventory 25,022 18,654
Prepaid expenses 23,935 23,378
Other current assets   21,608     23,311  
Total current assets 297,609 263,197

Property, plant, and equipment, net of accumulated depreciation of
$219,256 and $171,395 at December 30, 2018 and December 31, 2017,
respectively

339,608 373,123
Goodwill 310,737 236,555

Intangible assets, net of accumulated amortization of $101,543 and
$67,588 at December 30, 2018 and December 31, 2017, respectively

486,054 403,493
Other assets   9,856     7,178  
Total assets $ 1,443,864   $ 1,283,546  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt $ 12,395 $ 2,716
Accounts payable 16,612 15,750
Accrued expenses 113,650 97,027
Deferred revenue   105,187     88,164  
Total current liabilities 247,844 203,657
Long-term liabilities:
Long-term debt 428,180 357,195
Deferred income taxes 8,282 8,080
Pension and other postretirement benefit obligations 24,326 25,462
Other long-term liabilities   16,462     14,759  
Total liabilities   725,094     609,153  
Redeemable noncontrolling interest   1,547      
Stockholders’ equity:

Common stock, $0.01 par value, 2,000,000,000 shares authorized;
60,508,249 shares issued and 60,306,286 shares outstanding at
December 30, 2018; 53,367,853 shares issued and 53,226,881 shares
outstanding at December 31, 2017

605

 

534
Additional paid-in capital 721,605 683,168
Accumulated other comprehensive loss (6,881 ) (5,461 )
Retained earnings (accumulated deficit) 3,767 (2,767 )

Treasury stock, at cost, 201,963 and 140,972 shares at December
30, 2018 and December 31, 2017, respectively

  (1,873 )   (1,081 )
Total stockholders’ equity   717,223     674,393  
Total liabilities, redeemable noncontrolling interest and
stockholders’ equity
$ 1,443,864   $ 1,283,546  
 
       
NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
 
 
Three months ended Year ended
December 30, December 31, December 30, December 31,
2018 2017 2018 2017
 
Revenues:
Advertising $ 200,998 $ 201,563 $ 728,327 $ 683,990
Circulation 154,503 140,164 574,963 474,324
Commercial printing and other   60,538     52,704     222,734     183,690  
Total revenues   416,039     394,431     1,526,024     1,342,004  
Operating costs and expenses:
Operating costs 230,299 210,287 865,234 742,822
Selling, general, and administrative 137,756 129,277 505,282 449,108
Depreciation and amortization 20,515 19,773 84,791 74,394
Integration and reorganization costs 1,768 2,086 15,011 8,903
Impairment of long-lived assets 417 657 1,538 7,142
Goodwill and mastheads impairment 27,448
Net loss (gain) on sale or disposal of assets   80     211     (3,971 )   (1,649 )
Operating income 25,204 32,140 58,139 33,836
Interest expense 9,606 8,193 36,072 30,476
Loss on early extinguishment of debt 2,886 2,886 4,767
Other expense (income)   452     (405 )   (838 )   (973 )
Income (loss) before income taxes 12,260 24,352 20,019 (434 )
Income tax (benefit) expense   (679 )   (2,076 )   1,912     481  
Net income (loss) 12,939 26,428 18,107 (915 )
Net loss attributable to redeemable noncontrolling interest   (321 )       (89 )    
Net income (loss) attributable to New Media $ 13,260   $ 26,428   $ 18,196   $ (915 )
 
 
Income (loss) per share:
Basic:
Net income (loss) attributable to New Media $ 0.22   $ 0.50   $ 0.31   $ (0.02 )
Diluted:
Net income (loss) attributable to New Media $ 0.22   $ 0.50   $ 0.31   $ (0.02 )
 
Dividends declared per share $ 0.38   $ 0.37   $ 1.49   $ 1.42  
 

Contacts

Ashley Higgins, Investor Relations
[email protected]
(212)
479-3160

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