A. H. Belo Corporation Announces Third Quarter 2018 Financial Results
DALLAS – A. H. Belo Corporation (NYSE: AHC) today reported a third quarter 2018 net loss of $1.0 million, or $(0.05) per share. In the third quarter of 2017, the Company reported net income of $2.6 million, or $0.12 per fully diluted share.
For the third quarter of 2018, on a non-GAAP basis, A. H. Belo reported operating income adjusted for certain items (“adjusted operating income”) of $2.6 million, a decrease of $1.6 million, or 39.0 percent, when compared to adjusted operating income of $4.2 million reported for the third quarter of 2017.
Robert W. Decherd, chairman, president and Chief Executive Officer, said, “The forces at work in the newspaper industry continue to affect advertising revenues at The Dallas Morning News. And while circulation levels are fairly stable, the benefits of increased investment in both digital and print circulation are just beginning to be defined. The Management Committee and leaders throughout The Morning News are well along in building the framework for a sustainably profitable newspaper in the digital world, with specific initiatives being developed for 2019 and beyond. I’m convinced that A. H. Belo has the right leadership focusing on the right questions in order to achieve this long-term result.
“Operating results at Belo + Company in the third quarter did not meet expectations, as the replenishment of contracts that terminated at the end of 2017 and early in 2018 moved at a slower pace than anticipated. However, the basic attributes of our digital marketing business continue to be compelling as Belo + Company meets the needs of a very large market comprising companies of $5 million to $100 million in revenue. We are counting on improved results in 2019.
“Attention to A. H. Belo’s non-core assets continues to be a major priority for the Board of Directors and the Management Committee. We are very pleased to have announced yesterday the sale of the former Dallas Morning News campus for $33 million. The transaction involves capable buyers who are cognizant of the importance of this site. The transaction is scheduled to close on December 28 and the Company expects to realize cash proceeds of approximately $32 million. As a result of previously-discussed tax loss carry-forwards, the proceeds will be tax free; at year-end 2018, A. H. Belo will have cash in excess of $85 million on its balance sheet and no debt.”
Third Quarter Results
Total revenue was $49.1 million in the third quarter of 2018, a decrease of $11.5 million, or 19.0 percent, when compared to the third quarter of 2017.
Revenue from advertising and marketing services, including print and digital revenues, was $25.3 million in the third quarter of 2018, a decrease of $9.6 million, or 27.6 percent, when compared to the third quarter of 2017. The Company adopted the new revenue standard (Topic 606) as of January 1, 2018, which requires revenue to be recorded net for certain transactions where the Company acted as an agent. Prior to adoption, such revenue was generally recorded gross. As a result of adopting this new guidance, advertising and marketing services revenue was reduced by $3.0 million for the three months ended September 30, 2018, with the offsetting change recorded as a reduction to operating expense.
Excluding the impact of the new revenue guidance, advertising and marketing services revenue decreased $6.6 million, or 18.9 percent, when compared to the prior year period. For the third quarter of 2018, total digital and marketing services revenue was 41.6 percent of total advertising and marketing services revenue, up from the 39.3 percent reported in the third quarter of 2017. Total digital and marketing services revenue was 22.5 percent of total Company revenue, flat when compared to the third quarter of 2017.
Circulation revenue was $17.9 million, a decrease of $0.9 million, or 5.0 percent, when compared to the third quarter of 2017. The decline was primarily due to a decrease in home delivery and single copy volumes, partially offset by single copy rate increases. Circulation revenue was also affected by the adoption of the new revenue guidance, including a decline of $0.3 million related to the grace period for home delivery subscriptions where the Company records revenue for newspapers delivered after a subscription expires. Prior to adoption, non-payment of grace was recorded as bad debt to operating expense; under the new guidance, revenue is directly reduced.
Printing, distribution and other revenue decreased $0.9 million, or 13.8 percent, to $5.9 million, primarily due to a $0.4 million decrease in commercial printing revenue and a decrease of $0.2 million related to a discontinued product line.
Total consolidated operating expense in the third quarter of 2018, on a GAAP basis, was $50.4 million, a decrease of $10.2 million, or 16.8 percent, compared to the third quarter of 2017. Excluding the expense decrease related to the adoption of the new revenue guidance, consolidated operating expense decreased $6.9 million, or 11.4 percent, when compared to the prior year period. The improvement was primarily due to decreases of $3.5 million in employee compensation and benefits expense, $1.8 million in distribution expense, $0.4 million in advertising and promotion expense, and $0.2 million in legal fees.
In the third quarter of 2018, on a non-GAAP basis, total consolidated operating expense adjusted for certain items (“adjusted operating expense”) was $49.8 million, an improvement of $6.6 million, or 11.7 percent, compared to $56.4 million of adjusted operating expense reported in the third quarter of 2017. The improvement is primarily due to expense decreases in employee compensation and benefits, distribution, advertising and promotion, and legal fees.
Non-GAAP Financial Measures
Reconciliations of operating income (loss) to adjusted operating income, total net operating revenue to adjusted operating revenue, and total operating costs and expense to adjusted operating expense are included in the exhibits to this release.
Financial Results Conference Call
A. H. Belo Corporation will conduct a conference call on Wednesday, October 31, 2018, at 9:00 a.m. CDT to discuss financial results. The conference call will be available via webcast by accessing the Company’s website at www.ahbelo.com/invest. An archive of the webcast will be available at www.ahbelo.com in the Investor Relations section.
To access the listen-only conference call, dial 1-866-233-3843 (USA) or 651-291-5254 (International). A replay line will be available at 1-800-475-6701 (USA) or 320-365-3844 (International) from 11:00 a.m. CDT on October 31, 2018 until 11:59 p.m. CST on November 7, 2018. The access code for the replay is 455876.
About A. H. Belo Corporation
A. H. Belo Corporation is the leading local news and information publishing company in Texas with commercial printing, distribution and direct mail capabilities, as well as a presence in emerging media and digital marketing. While focusing on extending the Company’s media platforms, A. H. Belo delivers news and information in innovative ways to a broad spectrum of audiences with diverse interests and lifestyles. For additional information, visit www.ahbelo.com or email invest@ahbelo.com.
Statements in this communication concerning A. H. Belo Corporation’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, dispositions, impairments, business initiatives, acquisitions, pension plan contributions and obligations, real estate sales, working capital, future financings and other financial and non-financial items that are not historical facts, are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Such risks, trends and uncertainties are, in most instances, beyond the Company’s control, and include changes in advertising demand and other economic conditions; consumers’ tastes; newsprint prices; program costs; labor relations; technology obsolescence; as well as other risks described in the Company’s Annual Report on Form 10-K and in the Company’s other public disclosures and filings with the Securities and Exchange Commission. Forward-looking statements, which are as of the date of this filing, are not updated to reflect events or circumstances after the date of the statement.