McClatchy Reports Second Quarter 2017 Results

McClatchy (NYSE-MNI) today reported a net loss in the second quarter of 2017 of $37.4 million, or $4.91 per share that includes after-tax non-cash impairments totaling $28.8 million on the carrying value of the company’s interest in CareerBuilder LLC (CareerBuilder) and other equity investments. In the second quarter of 2016 McClatchy reported a net loss of $14.7 million, or $1.89 per share.

The company reported an adjusted net loss of $6.1 million, which excludes severance and certain other items in the second quarter of 2017, compared to an adjusted net loss of $1.5 million in the second quarter of 2016.

Craig Forman, McClatchy’s president and CEO, said, “As we focus forward at McClatchy, the mantra of accelerating our pace and cadence is being embraced across the organization. And our changes are being well-received by customers — both long-tenured and new. In the second quarter, we moved forward by regionalizing our publisher structure, centralizing our audience department, expanding our exceleratetm digital marketing business, hastening our product release cycles and diligently working to close on our strategic real estate transactions.

“As I have mentioned before, achieving a normalized operating environment takes some time in digital transitions. While we continue to see strong headwinds in print advertising, we also are seeing our digital efforts in all aspects of the business moderate those headwinds. In the second quarter, our advertising revenue trend improved by almost one percentage point and our decline in adjusted EBITDA improved from last quarter by almost seven percentage points, important indicators of our strategic plans at work.

“Our commitment to journalism that matters is an area of focus that is unremitting. And reaching greater audiences with that journalism is at the core of what we do,” Forman continued. “Our newsroom reinvention and the rollout of our new audience management platform are key to these efforts. Two measurements of our success are growth in our digital subscriptions and in unique visitors. Digital subscriptions grew by 13.8% over the same quarter last year and our unique visitors grew by 14.6% over the same period.

“We plan to continue our digital audience growth in the second half of the year by providing relevant journalism to our readers and viewers while explaining the benefits of subscribing to our digital products,” Forman said. “We also will learn more about our customers as they begin using the new audience platform, and as a result we can engage more meaningfully with our subscribers.”

Second Quarter Results
Total revenues in the second quarter of 2017 were $225.1 million, down 7.1% compared to the second quarter of 2016. The sequential rate of decline is consistent with that reported for the first quarter of 2017 in the 7% range.

Total advertising revenues were $125.2 million, down 11.1% in the second quarter of 2017 compared to the second quarter of 2016. The rate of decline in total advertising revenue slowed in the second quarter reflecting a sequential improvement of 90 basis points compared to the decline reported in the first quarter of 2017. The decline in advertising revenues continues to be due to the softness in traditional print advertising offset by improvements in direct marketing advertising and digital-only advertising.

Digital-only advertising revenues grew 10.0% in the second quarter of 2017 while total digital advertising revenues, which includes digital-only advertising and digital advertising bundled as an upsell with print advertising, declined 0.9% compared to the same quarter last year. Direct marketing declined 1.8% in the second quarter of 2017 compared to a decline of 13.2% in the same period last year. The improvement in trend in the first half of 2017 was mainly attributable to new customers joining in the second half of last year at a few of our markets and the impact of rolling over the elimination of certain products during late 2015 and early 2016.

Audience revenues were $89.9 million, down 0.6% in the second quarter compared to the same period in 2016. Digital-only audience revenues were up 6.7% due to subscriber growth and pricing strategies implemented throughout 2016. The number of digital-only subscribers ended the quarter at 91,000, representing an increase of 13.8% from the second quarter of 2016. The strength in digital-only audience results were achieved despite the interruption that was inherent during the implementation of a new audience management platform during the quarter. New features will be rolled out in coming quarters that will enable additional revenue-generating strategies.

Average total unique and local unique visitors to the company’s online products were 66 million and 16.3 million, respectively, in the second quarter of 2017. These results represented growth of 14.6% in total unique visitors and 10.7% in local unique visitors in the second quarter of 2017 compared to the same quarter last year. Mobile users represented 60.2% of average total unique visitors in the second quarter of 2017 compared to 52.9% in the second quarter of 2016.

Revenues exclusive of print newspaper advertising accounted for 74.7% of total revenues in the second quarter of 2017, an increase from 70.4% in the second quarter of 2016.
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