GateHouse Media Announces First Quarter 2013 Results
Posted: 5/7/2013 | By: Press Release | GateHouse Media
FAIRPORT, N.Y. May 2, 2013 - GateHouse Media, Inc. (the “Company” or “GateHouse Media”) (OTC Pink Sheets: GHSE), a leading multi-media company providing news and information to local communities, today reported financial results for the first quarter ended March 31, 2013. Total revenues were $110.9 million, a decrease of 6.0% versus the prior year. On a same store basis total revenues declined 5.7% compared to the prior year. Further, excluding the impact of the reduced Massachusetts foreclosure revenues due to recently enacted legislation, total revenues were down 4.5% to prior. As Adjusted EBITDA was $8.4 million. As Adjusted EBITDA on the core business, excluding new growth initiatives, was $11.6 million.
Commenting on GateHouse Media’s results, Michael E. Reed, Chief Executive Officer of GateHouse Media, said, “We continue to make strides in our new growth initiatives, particularly in the roll out of Propel Marketing, our digital solutions company. While still a small part of GateHouse, Propel’s new business pipeline is growing and revenues in the first quarter surpassed all of 2012 revenues, which contributed to our overall 14.9% digital growth. We are still making net investments in this initiative as we ramp up the business, which negatively impacted our year over year expense and profit comparisons in the quarter.
“Our total revenue on a same store basis, which was down 5.7% (4.5% decline excluding the particular Massachusetts foreclosure issue), continues to be impacted by heavy pressure on local print retail and classified advertising. These two categories combined account for 39% of our total revenue and 61% of our advertising revenue. Although we face continued secular pressures in these categories, we are also seeing particular softness in local retail print from reduced small business advertising spend. Currently our larger regional and national advertising spend is holding up well, as evidenced by our preprint revenues being flat to prior year. However, small businesses are holding back on spending. Classified revenues continued to be impacted by lower foreclosure revenue in Massachusetts, which accounted for 20% of our total revenue decline and 40% of our classified revenue decline. We will cycle this particular issue by the end of Q3. We also saw weaker employment advertising in the quarter. On a positive note, our preprint advertising has held up quite well and is flat year over year. In addition, digital advertising revenue grew by 14.9% in the quarter and circulation was also up slightly over the prior year.
“After adjusting for one-time and non-cash items, our operating expenses declined 1.8% on a same store basis compared to the prior year and if you adjust for our investments in new growth initiatives our core businesses expenses were down 5.2%. As Adjusted EBITDA was $8.4 million, a decline of $4.8 million compared to the prior year. Half of the decline was due to our investment in new growth initiatives. As Adjusted EBITDA in our core business was $11.6 million, a decline of $2.3 million compared to the prior year. And a significant portion of the core business EBITDA decline was the result of $1.5 million loss in foreclosure revenue in Massachusetts.
“Investing in and growing our new digital services platforms will continue to be a primary focus throughout 2013. And while our classified revenue has been impacted by the foreclosure issues in Massachusetts, we expect this to subside by the end of the third quarter and possibly reverse. We will remain focused on stabilizing our print advertising revenues while remaining diligent in our efforts to reduce core expenses. We continue to explore alternatives to strengthen our capital structure as we move closer to the August 2014 maturity date on our long-term debt.”
First Quarter 2013
Total revenues were $110.9 million for the quarter, a decline of 6.0% compared to the prior year and 5.7% on a same store basis. The same store results were driven by strong digital revenue growth of 14.9% offset by declines in print advertising. The improvement in digital revenue was driven primarily by increases from new growth initiatives, particularly Propel Marketing, and digital advertising in our core business. Total advertising revenue declined 9.6% on a same store basis as growth in digital advertising was more than offset by declines in local print and classified revenue, which were down 9.1% and 16.2%, respectively. Circulation revenue also increased slightly from the prior year.
Total operating and SG&A expenses in the quarter were $103.1 million, down 2.6% compared to the prior year and down 1.8% on a same store basis. The expense declines were primarily from lower compensation. Excluding investments made in new growth initiatives, operating and SG&A expenses declined $5.4 million, or 5.2%, on a same store basis.
Operating loss for the quarter was ($2.7) million compared to operating income of $0.6 million in the prior year. As Adjusted EBITDA for the quarter was $8.4 million, a decline of $4.8 million from the prior year. Both the decline in Operating income and As Adjusted EBITDA are primarily due to lower revenues and investments in growth initiatives partially offset by lower core operating expenses. Excluding new growth initiatives, core business As Adjusted EBITDA was $11.6 million, a decline of $2.3 million compared to the prior year.
Levered Free Cash Flow for the quarter was ($8.2) million. Adjusting for the timing of interest payments, Levered Free Cash Flow was ($5.9) million compared to ($1.8) million in the prior year. The decline is primarily due to the additional $2.4 million net investment made in new growth initiatives.
One-time costs incurred and other non-cash expenses in the quarter were $1.5 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.