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Edited Transcript of PNC.A.TO earnings conference call or presentation 6-Apr-17 6:30pm GMT

Thomson Reuters StreetEvents

Q2 2017 Postmedia Network Canada Corp Earnings Call

Apr 6, 2017 (Thomson StreetEvents) -- Edited Transcript of Postmedia Network Canada Corp earnings conference call or presentation Thursday, April 6, 2017 at 6:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew MacLeod

Postmedia Network Canada Corp. - COO and EVP

* Paul Victor Godfrey

Postmedia Network Canada Corp. - CEO, President and Non-Independent Director

* Phyllise Gelfand

Postmedia Network Canada Corp. - VP of Communications

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Postmedia Investor Call. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, April 6, 2017. I would now like to turn the conference over to Ms. Phyllise Gelfand, Vice President, Communications. Please go ahead, ma'am.

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Phyllise Gelfand, Postmedia Network Canada Corp. - VP of Communications [2]

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Thank you, operator, and welcome to Postmedia's quarterly results conference call for Q2 fiscal 2017, the 3 months ended February 28, 2017.

On the call this afternoon are Paul Godfrey, President and Chief Executive Officer; and Andrew MacLeod, Executive Vice President and Chief Operating Officer. They will provide some brief opening comments, after which we will open the line for questions. Also with us today is Lorna McLeod, different spelling, no relation to Andrew. Lorna is Postmedia's Senior Vice President Shared Services. Investors and analysts are welcome to participate in the Q&A session. (Operator Instructions)

Before we get started, I would like to remind you that everything in today's discussion and presentation is subject to the safe harbor for forward-looking statements qualification contained in today's earnings news release and which is incorporated in full for the purposes of today's proceedings.

The following discussion and presentation may contain forward-looking information and forward-looking statements within the meaning of applicable Canadian Securities laws. We caution you that forward-looking information and statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking information and statements contained in this discussion and presentation.

Our forward-looking information and statements are based on certain material assumptions. Additional information on the material risks that could impact our actual results and the assumptions behind our forward-looking information and statements can be found in the management's discussion and analysis that is available on our website, www.postmedia.com and at www.sedar.com. Also available on our website is a brief Q2 investor presentation which our speakers will refer to in their comments. The direct link to the presentation is postmedia.com/investors/presentations.

As a reminder, all dollar amounts are in Canadian dollars unless otherwise noted.

And now I'll turn the call over to President and CEO of Postmedia Network, Paul Godfrey, for some opening comments.

Paul?

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Paul Victor Godfrey, Postmedia Network Canada Corp. - CEO, President and Non-Independent Director [3]

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Thank you very much, Phyllise. Good afternoon, everyone, and thank you for joining us today. Today, we're reporting on our second quarter results. We continue to market real estate properties in our portfolio which are generating considerable interest. While not material, a few of our smaller properties closed this past quarter, and we hope to continue to generate interest in other of our real estate holdings.

In a climate of continued legacy revenue decline, our focus on cost saving is crucial to moving our industry forward. In Q2, we implemented cost savings [ initiatives ], expected to result in $43 million of net annualized cost savings for a total of $61 million annualized cost savings for first half of the year. The majority of those savings are attributed to the salary cost savings initiatives we announced in October of last year.

We must continue to work towards a cost structure that reflects the revenue reality that we face and ensure that resources are aimed at strategic initiatives that moves us forward. I'm pleased to report that we continue to see positive signs from our digital revenue line, up 10.3% in the quarter. That include -- that increase includes an 18% increase in digital advertising revenue. Aiming our energies in areas where the new revenue is coming from a digital marketing services, programmatic and new offerings we're working on in our development lab is part of our future focus strategy that we intend to fully leverage.

A summary of the quarter's financial highlights can be found on Slide 4. Total revenue for the quarter -- total revenue for the quarter was down 13.5%, primarily due to decreases in print advertising revenue of 22.6% and print circulation revenue of 8.7%. As I mentioned earlier, digital revenue increased by 10.3% in the quarter, and we're seeing continued digital revenue growth in the third quarter as well. The revenue decline in this quarter was partially offset by reduced operating expenses, which decreased 11% in Q2 versus prior year.

As a result of these factors, Q2 operating income before depreciation, amortization, impairment and restructuring, EBITDA decreased $6.7 million versus the prior year. Net loss in the quarter was $26.5 million as compared to $225.1 million in the same period in the prior year. This decrease in net loss was primarily a result of $187 million noncash impairment charge and higher interest expense in the prior year.

Slide 5 summarizes key revenue trends for the quarter and year. The automotive category continues to be our largest decline from a print advertising perspective and accounts for 32% of the first quarter print advertising decline.

I'll now turn the call over to our Chief Operating Officer, Andrew MacLeod, for some comments. Andrew?

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Andrew MacLeod, Postmedia Network Canada Corp. - COO and EVP [4]

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Thanks, Paul. As Paul stated, we did see 10% digital revenue growth in the quarter, fueled by the 18% growth in digital advertising. When we unpacked this, we've been able to grow our digital advertising via continued execution of our strategy, based largely upon our ability to offer products and services, like search and social as well as website offerings to small and medium business. We're trying to develop new products and services aligned to where the growth in the industry is, and the growth is largely centered around the new platform offerings, like search and social.

We're seeing that when we combine these new types of services with our existing offerings of display and retargeting style offers, this allows Postmedia to position ourselves in the market as a full service digital shop. And by doing this, we're able to lock down our existing offerings as well as generate substantial growth in the new styles of offers. And as Paul mentioned, we're seeing good momentum, and we'll continue to focus and execute against the strategy we've outlined.

I'll hand it back now to Paul or any questions that may be out.

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Paul Victor Godfrey, Postmedia Network Canada Corp. - CEO, President and Non-Independent Director [5]

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There is no doubt that there's much work to be done both on the cost restructuring side and the revenue development side of our strategy. Our senior executive team believes the progress we are making on both fronts will continue, and that is thanks to the hard work being done across Postmedia and our people who are focused on the future and marketing -- making tremendous efforts to move our company forward.

If you have any questions for me or for Andrew or Lorna, we'd be glad to hear them right now and try to answer them as best we can.

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Phyllise Gelfand, Postmedia Network Canada Corp. - VP of Communications [6]

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Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question comes from the line -- no. Okay. (Operator Instructions) It seems there'll be no questions on the phone lines at this time. I'll turn the call back to you.

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Paul Victor Godfrey, Postmedia Network Canada Corp. - CEO, President and Non-Independent Director [2]

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Well, thank you very much, ladies and gentlemen, for coming, and we'll no doubt be speaking to you in the next quarters.

Thanks very much.

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Operator [3]

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Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and we ask that you please disconnect your line.