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Postmedia Reports First Quarter Results

TORONTO--(BUSINESS WIRE)--Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2022 which include the results of the daily and weekly newspapers, digital properties and parcel delivery business acquired from J. D. Irving, Limited on March 25, 2022 (the “BNI Acquisition”).


“Reflected in our first quarter results is the impact of continued headwinds coming out of a pandemic into an uncertain economic landscape. Nearly every company, especially those in the media industry, has had to face these challenges with accelerated transformation, Postmedia included,” said Andrew MacLeod, President and Chief Executive Officer, Postmedia. “In Fiscal 2023 we are strengthening our focus and seeing progress from key revenue areas including digital subscriptions and parcel services. We will continue proactively transforming the Company to capitalize on a new business model.”

First Quarter Operating Results

Revenue for the quarter was $124.2 million as compared to $118.1 million in the same period in the prior year, representing an increase of $6.1 million (5.2%). The revenue increase was primarily due an increases in parcel services revenue of $8.6 million partially offset by decreases in advertising revenue of $4.1 million (5.9%) and circulation revenue of $2.3 million (5.4%). Excluding the impact of the BNI Acquisition, revenue for the three months ended November 30, 2022 was $108.5 million, a decrease of $9.6 million (8.1%) relative to the same period in the prior year. The revenue decline, excluding the impact of the BNI Acquisition, was primarily due to decreases in advertising revenue of $9.2 million (13.3%) and circulation revenue of $4.6 million (11.0%).

Total operating expenses excluding depreciation, amortization and restructuring increased $13.2 million or 12.4% for the quarter ended November 30, 2022, relative to the same period in the prior year. Excluding the impact of the BNI Acquisition, total operating expenses excluding depreciation, amortization and restructuring decreased $4.1 million or 3.8%. The decrease, excluding the BNI Acquisition, relates to compensation, distribution and production expenses partially offset by increases in newsprint and other operating expenses.

Operating income before depreciation, amortization and restructuring in the quarter was $4.8 million, a decrease of $7.1 million relative to the prior year. Excluding the impact of the BNI Acquisition, operating income before depreciation, amortization and restructuring in the quarter was $6.4 million, a decrease of $5.5 million relative to the prior year. The decrease, excluding the impact of the BNI Acquisition, is due to the decrease in total revenues, partially offset by the decrease in operating expenses excluding depreciation, amortization and restructuring.

Net loss in the quarter ended November 30, 2022 was $15.9 million, as compared to $4.4 million in the same period in the prior year. The increase in net loss was primarily the result of a decrease in operating income before depreciation, amortization and restructuring, increases in restructuring and interest expenses and foreign exchange losses, partially offset by a gain on disposal of assets held-for-sale and other assets.

Acquisition of Brunswick News Inc.

On February 17, 2022 the Company entered into a purchase agreement with J. D. Irving, Limited (“JDI”) to purchase all of the issued and outstanding shares of Brunswick News Inc. (“BNI”). The acquisition closed on March 25, 2022 and included BNI’s daily and weekly newspapers, digital properties and parcel delivery business. The purchase price consisted of cash consideration of $7.5M and share consideration of 4,282,920 Class NC variable voting shares with a fair value of $7.6 million.

Debt Repayment and Refinancing

During the three months ended November 30, 2022, the Company obtained consent of the lender to increase the senior secured asset-based revolving credit facility (“ABL Facility”) to $25.0 million. Subsequent to November 30, 2022, the Company further amended the ABL Facility to increase both the availability to the maximum amount of $30.0 million and the interest rate on amounts drawn to the bankers acceptance rate plus 8.0% and extended the maturity date to October 1, 2026. In addition, the Company entered into a $5.0 million Unsecured Revolving Promissory Note with the lender of the ABL Facility at similar terms.

Subsequent to November 30, 2022, the Company redeemed $5.2 million of first-lien debt with the proceeds of asset sales. After this redemption, the Company has $41.9 million of first-lien debt outstanding of the original $225.0 million that was issued in October 2016.

Business Transformation Initiatives

During the three months ended November 30, 2022, the Company implemented cost reduction and transformation initiatives related to compensation expense reductions, real estate rationalization, production efficiencies and other programs, which are expected to result in approximately $19 million of net annualized cost savings.

As previously stated, in F23 the Company intends to focus on key growth areas of Digital Advertising, Digital Subscriptions and Parcel Services. Transformation initiatives for the year ahead include a combination of streamlining resources, product mix rationalization, outsourcing where possible and real estate divesture.

Additional Information

Additional information, including financial statements and management’s discussion and analysis can be found on the Company’s website at www.postmedia.com or on SEDAR at www.sedar.com.

Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.

About Postmedia Network Canada Corp.

Postmedia Network Canada Corp. (TSX:PNC.A, PNC.B) is the holding company that owns Postmedia Network Inc., a Canadian newsmedia company representing more than 130 brands across multiple print, online, and mobile platforms. Award-winning journalists and innovative product development teams bring engaging content to millions of people every week whenever and wherever they want it. This exceptional content, reach and scope offers advertisers and marketers compelling solutions to effectively reach target audiences Our expertise in home delivery and expanding distribution network powers Postmedia Parcel Services. For more information, visit www.postmedia.com, www.postmediasolutions.com and www.postmediaparcelservices.com.

Forward-Looking Information

This news release may include information that is “forward-looking information” under applicable Canadian securities laws. The Company has tried, where possible, to identify such information and statements by using words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “may,” “will,” “could,” “would,” “should” and similar expressions and derivations thereof in connection with any discussion of future events, trends or prospects or future operating or financial performance. Forward-looking statements in this news release include statements with respect the implementation and results of the Company’s transformation initiatives, continued benefits of historical results into future periods, the realization of anticipated cost savings and the identification and undertaking of ongoing cost savings initiatives. By their nature, forward-looking information and statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These risks and uncertainties include, among others: competition from digital and other forms of media; the effect of economic conditions on advertising revenue; the ability of the Company to build out its digital media and online businesses; the failure to maintain current print and online newspaper readership and circulation levels; the realization of anticipated cost savings; possible damage to the reputation of the Company’s brands or trademarks; possible labour disruptions; possible environmental liabilities, litigation and pension plan obligations; fluctuations in foreign exchange rates and the prices of newsprint and other commodities.

For a complete list of our risk factors please refer to the section entitled “Risk Factors” contained in our annual management’s discussion and analysis for the years ended August 31, 2022 and 2021. Although the Company bases such information and statements on assumptions believed to be reasonable when made, they are not guarantees of future performance and actual results of operations, financial condition and liquidity, and developments in the industry in which the Company operates, may differ materially from any such information and statements in this press release. Given these risks and uncertainties, undue reliance should not be placed on any forward-looking information or forward-looking statements, which speak only as of the date of such information or statements. Other than as required by law, the Company does not undertake, and specifically declines, any obligation to update such information or statements or to publicly announce the results of any revisions to any such information or statements.

Postmedia Network Canada Corp.

Consolidated Statements of Operations

(UNAUDITED)

 

(In thousands of Canadian dollars, except per share amounts)

For the three months ended November 30,

 

2022

2021

 

 

 

Revenues

 

 

Advertising

65,273

69,378

Circulation

39,650

41,901

Parcel services

9,196

554

Other

10,057

6,237

Total revenues

124,176

118,070

Expenses

 

 

Compensation

44,078

40,267

Newsprint

5,326

4,266

Distribution

33,219

23,450

Production

16,279

19,923

Other operating

20,444

18,274

Operating income before depreciation, amortization and restructuring

4,830

11,890

Depreciation

2,664

2,657

Amortization

2,135

2,190

Restructuring

1,615

700

Operating income (loss)

(1,584)

6,343

Interest expense

8,317

7,530

Net financing expense related to employee benefit plans

349

234

Gain on disposal of assets held-for-sale and other assets

(1,527)

-

Loss on derivative financial instruments and financial assets at fair value through profit and loss

441

264

Foreign currency exchange losses

6,742

2,737

Loss before income taxes

(15,906)

(4,422)

Provision for income taxes

-

-

Net loss attributable to equity holders of the Company

(15,906)

(4,422)

 

 

 

 

 

 

Loss per share attributable to equity holders of the Company

 

 

Basic

$(0.16)

$(0.05)

Diluted

$(0.16)

$(0.05)

 

Postmedia Network Canada Corp.

Consolidated Statements of Financial Position

(UNAUDITED)

 

(In thousands of Canadian dollars)

As at

November 30,

2022

As at

August 31,

2022

 

 

 

Assets

 

 

Current Assets

 

 

Cash

9,117

12,061

Restricted cash

5,286

730

Trade and other receivables

61,298

49,118

Assets held-for-sale

14,698

17,727

Inventory

5,409

4,950

Prepaid expenses and other assets

7,570

8,275

Total current assets

103,378

92,861

Non-Current Assets

 

 

Property and equipment

64,161

66,747

Right of use assets

29,957

30,095

Derivative financial instruments and other assets

3,301

3,742

Intangible assets

17,397

17,930

Total assets

218,194

211,375

 

 

 

Liabilities and Deficiency

 

 

Current Liabilities

 

 

Accounts payable and accrued liabilities

50,178

39,440

Provisions

3,772

3,766

Deferred revenue

20,120

21,262

Current portion of lease obligations

8,390

8,312

Current portion of long-term debt

25,241

13,000

Total current liabilities

107,701

85,780

Non-Current Liabilities

 

 

Long-term debt

262,373

260,909

Employee benefit obligations and other liabilities

37,333

38,169

Lease obligations

27,542

27,749

Total liabilities

434,949

412,607

 

 

 

Deficiency

 

 

Capital stock

820,131

820,131

Contributed surplus

18,268

17,973

Deficit

(1,055,154)

(1,039,336)

Total deficiency

(216,755)

(201,232)

Total liabilities and deficiency

218,194

211,375

 

Postmedia Network Canada Corp.

Consolidated Statements of Cash Flows

(UNAUDITED)

 

(In thousands of Canadian dollars)

For the three months ended November 30,

 

2022

2021

 

 

 

Cash Generated (Utilized) by:

 

 

Operating Activities

 

 

Net loss attributable to equity holders of the Company

(15,906)

(4,422)

Items not affecting cash:

 

 

Depreciation

2,664

2,657

Amortization

2,135

2,190

Loss on derivative financial instruments and financial assets at fair value through profit and loss

441

264

Non-cash interest

6,410

5,401

Gain on disposal of assets held-for-sale and other assets

(1,527)

-

Non-cash foreign currency exchange losses

6,725

2,751

Share-based compensation plans

295

(27)

Net financing expense relating to employee benefit plans

349

234

Employee benefit plan funding in excess of compensation expense

(875)

(1,121)

Net change in non-cash operating accounts

(8,984)

(13,320)

Cash flows used in operating activities

(8,273)

(5,393)

 

 

 

Investing Activities

 

 

Net proceeds from the sale of assets held-for-sale and other assets

4,556

-

Purchases of property and equipment

(78)

(613)

Purchases of intangible assets

(2)

(159)

Cash flows from (used in) investing activities

4,476

(772)

 

 

 

Financing activities

 

 

Repayment of long-term debt

-

(2,396)

Restricted cash

(4,556)

-

Advances from senior secured asset-based revolving credit facility

7,000

-

Lease payments

(1,591)

(1,430)

Cash flow from (used in) financing activities

853

(3,826)

 

 

 

Net change in cash for the period

(2,944)

(9,991)

Cash at beginning of period

12,061

61,996

Cash at end of period

9,117

52,005

 

 

 

Supplemental disclosure of operating cash flows

   

Interest paid

2,711

3,551 

Income taxes paid

-

 -

 

 


Contacts

For more information:
Media
Phyllise Gelfand
Vice President, Communications
(647) 273-9287
pgelfand@postmedia.com

Investor
Mary Anne Lavallee
Executive Vice President, Chief Financial Officer and Chief Transformation Officer
(416) 442-3448
mLavallee@postmedia.com

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