Postmedia Reports Fourth Quarter Results

Postmedia Reports Fourth Quarter Results

Media Contact
Communications
inquiries@postmedia.com

Investor Contact
John Bode
Executive Vice President, Chief Financial Officer and Chief Transformation Officer
investors@postmedia.com

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months and year ended August 31, 2024.

“While we continue to operate in a challenging advertising marketplace dominated by large, foreign media platforms, Postmedia achieved some important milestones during the quarter that give us optimism around the future of Canadian news media. It is clear from our digital audience that Canadians look to us to provide accurate and timely local, provincial, and national news,” said Andrew MacLeod, President and CEO.

“We are appreciative of the Ontario government’s recent policy change to support local media in Ontario. We hope to see similar initiatives from governments and corporate Canada.

We are encouraged by the successful completion of the C-18 negotiations and look forward to the release of funding.

The improving environment gave us confidence to both step into a challenging situation in Atlantic Canada and save local news brands that have operated in those provinces for over 150 years and to invest millions of dollars in a new digital platform with improved capabilities.

While we are seeing successes, this work must be augmented and supported by a renewed commitment from Canadian governments to ensure trusted journalism is delivered for Canadians across the country.”

Fourth Quarter Operating Results

Revenue for the quarter was $93.2 million as compared to $101.3 million in the same period in the prior year, representing a decrease of $8.1 million (8.0%). The revenue decrease was primarily due to decreases in advertising revenue of $3.6 million (7.7%) circulation revenue of $2.3 million (6.7%) and other revenue of $2.8 million (32.8%), partially offset by increases in parcel revenue of $0.6 million (5.1%).

Total operating expenses excluding depreciation, amortization and restructuring decreased $18.5 million, or 18.6%, for the quarter ended August 31, 2024, relative to the same period in the prior year. The decrease relates to decreases in compensation, newsprint, production and other operating expenses, partially offset by an increase in distribution expense.

Operating income before depreciation, amortization and restructuring in the quarter was $12.2 million, an increase of $10.3 million relative to the same period in the prior year. The increase in operating income before depreciation, amortization and restructuring is due to a decrease in operating expenses excluding depreciation, amortization and restructuring, partially offset by a decrease in total revenue.

Net loss in the quarter ended August 31, 2024 was $3.1 million, as compared to a net loss of $11.0 million in the same period in the prior year. The decrease in net loss was primarily the result of an increase in operating income before depreciation, amortization and restructuring, an increase in foreign currency gains, and a decrease in restructuring expenses, partially offset by an increase in interest expense, loss on disposal of property, plant and equipment, right-of-use assets, and assets held-for-sale.

Fiscal 2024 Operating Results

Revenue for the year ended August 31, 2024 was $395.9 million as compared to $448.5 million in the same period in the prior year, a decrease of $52.6 million or 11.7%. The revenue decrease was primarily due to decreases in advertising revenue of $35.9 million (16.2%), circulation revenue of $16.9 million (11.5%) and other revenue of $7.6 million (20.4%), partially offset by increases in parcel revenue of $7.8 million (17.9%).

Total operating expenses excluding depreciation, amortization and restructuring decreased $56.7 million or 13.0% for the year ended August 31, 2024, relative to the same period in the prior year. The decrease relates to decreases in compensation, newsprint, production and other operating expenses, partially offset by an increase in distribution expense.

Operating income before depreciation, amortization and restructuring of $14.8 million in the year ended August 31, 2024 represents an increase of $4.2 million relative to the same period in the prior year. The increase is due to a decrease in operating expenses excluding depreciation, amortization and restructuring, partially offset by a decrease in total revenue.

Net loss in the year August 31, 2024 was $49.7 million, as compared to a net loss of $72.6 million in the same period in the prior year. The decrease in net loss is primarily the result of an increase in operating income before depreciation, amortization and restructuring, an increase in gain on derivatives and financial assets and foreign currency gains, and a decrease in interest expense, partially offset by an increase in interest expense, an increase in loss on disposal of property and equipment, right-of-use assets, and assets held-for-sale.

Acquisition of The Halifax Herald Limited and Saltwire Network Inc.

On August 25, 2024, PNI Maritimes LP completed the purchase (the “Saltwire Asset Purchase Transaction”) of certain businesses and assets of Saltwire Network Inc. and The Halifax Herald Limited (collectively, “Saltwire”), pursuant to an Asset Purchase Agreement dated July 25, 2024 (the “Saltwire Purchase Agreement”). Postmedia intends to continue operations of certain Saltwire publications, leveraging existing Postmedia newsmedia back-office resources and operational infrastructure to ensure there continues to be reliable and high-quality local news provided to the affected communities. The acquisition included Saltwire’s daily and weekly papers, and parcel delivery business. The purchase price consisted of $1 million of cash consideration and $3.1 million of estimated contingent consideration.

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.sedarplus.ca.

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 and digital 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, 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, 2024 and 2023. 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		For the year ended
	August 31, 2024	August 31, 2023	August 31, 2024	August 31, 2023

Revenues
Advertising	43,115	46,709	185,134	221,019
Circulation	32,079	34,377	130,183	147,043
Parcel Services	12,146	11,553	51,016	43,257
Other	5,817	8,651	29,588	37,180
Total revenues	93,157	101,290	395,921	448,499
Expenses
Compensation	19,734	32,542	124,780	155,455
Newsprint	2,825	3,716	11,597	17,636
Distribution	34,214	32,222	137,922	129,999
Production	8,881	12,088	40,405	56,135
Other operating	15,288	18,831	66,398	78,620
Operating income before depreciation, amortization, impairment, and restructuring	12,215	1,891	14,819	10,654
Depreciation	2,395	3,253	10,431	12,894
Amortization	1,894	2,396	8,081	9,411
Restructuring	3,843	4,249	9,144	25,784
Operating loss	4,083	(8,007)	(12,837)	(37,435)
Interest expense	9,965	8,486	37,179	33,988
Net financing expense related to employee benefit plans	343	350	1,376	1,398
Loss (gain) on disposal of property and equipment, assets held-for-sale, right of use assets and other assets	295	(5,065)	156	(8,242)
Loss (gain) on derivative financial instruments and financial assets at fair value through profit and loss	146	330	(1,076)	470
Loss on debt refinancing	-	-	367	-
Foreign currency exchange (gains) losses	(3,589)	(1,064)	(1,177)	7,519
Net loss attributable to equity holders of the Company	(3,077)	(11,044)	(49,662)	(72,568)


Loss per share attributable to equity holders of the Company
Basic and diluted	$(0.03)	$(0.11)	$(0.50)	$(0.73)

Postmedia Network Canada Corp. Consolidated Statements of Financial Position (UNAUDITED)
(In thousands of Canadian dollars)	As at August 31, 2024	As at August 31, 2023

Assets
Current Assets
Cash	2,454	6,191
Restricted cash	-	6,968
Trade and other receivables	53,931	46,764
Assets held-for-sale	2,560	2,560
Inventory	2,318	3,408
Prepaid expenses and other assets	8,522	8,837
Total current assets	69,785	74,728
Non-Current Assets
Property and equipment	35,089	48,299
Intangible assets	19,868	16,236
Right of use assets	19,783	26,780
Derivative financial instruments and other assets	4,399	3,335
Total assets	148,924	169,378

Liabilities and Deficiency
Current Liabilities
Accounts payable and accrued liabilities	38,509	35,609
Provisions	1,514	10,201
Contract Liabilities	16,716	17,841
Current portion of lease obligations	7,773	8,320
Current portion of long-term debt	29,509	17,772
Total current liabilities	94,021	89,743
Non-Current Liabilities
Long-term debt	323,129	292,524
Employee benefit obligations and other liabilities	34,250	35,131
Lease obligations	19,345	24,286
Total liabilities	470,745	441,684

Deficiency
Capital stock	820,357	820,131
Contributed surplus	19,511	18,923
Deficit	(1,161,689)	(1,111,360)
Total deficiency	(321,821)	(272,306)
Total liabilities and deficiency	148,924	169,378

Postmedia Network Canada Corp. Consolidated Statements of Cash Flows (UNAUDITED)
(In thousands of Canadian dollars)	For the three months ended		For the year ended
	August 31, 2024	August 31, 2023	August 31, 2024	August 31, 2023

Cash Generated (Utilized) by:
Operating Activities
Net loss attributable to equity holders of the Company	(3,077)	(11,044)	(49,662)	(72,568)
Items not affecting cash:
Depreciation	2,395	3,253	10,431	12,894
Amortization	1,894	2,396	8,081	9,411
Loss on debt refinancing	-	-	367	-
Loss (gain) on derivative financial instruments and financial assets at fair value through profit and loss	146	330	(1,076)	470
Non-cash interest	9,554	7,078	34,312	26,709
Loss (gain) on disposal of property and equipment, assets held-for-sale, right of use assets and other assets	295	(5,065)	156	(8,242)
Non-cash foreign currency exchange (gains) losses	(5,996)	(1,221)	(3,028)	7,342
Share-based compensation plans	214	164	814	950
Net financing expense relating to employee benefit plans	343	350	1,376	1,398
Employee benefit plan funding in excess of compensation expense	(777)	(101)	(3,169)	(2,983)
Net change in non-cash operating accounts	(13,900)	(4,345)	(15,610)	1,120
Cash flows used in operating activities	(8,909)	(8,205)	(17,008)	(23,409)
Investing Activities
Net proceeds from the sale of property and equipment, assets held-for-sale and other assets	3,053	7,002	6,125	29,464
Purchases of property and equipment	(126)	(96)	(575)	(502)
Purchases of intangible assets	(544)	(371)	(1,291)	(794)
Acquisition	(1,000)	-	(1,000)	-
Cash flows from (used in) investing activities	1,383	6,535	3,259	28,168
Financing activities
Repayment of senior secured notes	-	(1,569)	(24,475)	(22,629)
Repayment of first lien senior secured notes	-	-	(699)	-
Restricted cash	-	(5,379)	6,968	(6,238)
Advances from senior secured asset-based revolving credit facility	-	6,800	8,500	25,300
Repayment of senior secured asset-based revolving credit facility	-	(27,300)	(14,500)	(27,300)
Advances from asset-based lending credit facility	4,997	-	13,788	-
Repayment of asset-based lending facility	-	-	(6,347)	-
Proceeds on issuance of unsecured promissory notes	-	27,300	-	27,300
Repayment of unsecured promissory notes	-	-	(4,696)	-
Issuance of first lien senior secured notes	-	-	20,158	-
Issuance of asset-based lending facility	-	-	15,393	-
Issuance of short-term promissory note	5,000	-	5,000	-
Debt issuance costs	111	-	(2,307)	-
Lease payments	(1,642)	(1,818)	(6,771)	(7,062)
Cash flows from (used in) financing activities	8,466	(1,966)	10,012	(10,629)
Net change in cash for the period	940	(3,636)	(3,737)	(5,870)
Cash at beginning of period	1,514	9,827	6,191	12,061
Cash at end of period	2,454	6,191	2,454	6,191
Supplemental disclosure of operating cash flows
Interest paid	834	1,357	3,541	9,860