Postmedia Reports Fourth Quarter Results

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months and year ended August 31, 2023 which includes 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”).

“With the vast majority of digital revenue flowing to foreign platforms, Canada’s domestic media sector remains under immense pressure, said Andrew MacLeod, Postmedia President and Chief Executive Officer. “Postmedia continues to focus on our core strategies: building the most efficient cost model, reinventing our digital platforms and delivering the news media journalism to Canadians from coast to coast. Never has the need for trusted journalism been more urgently required and never has our resolve been more committed to delivering it for Canadians.”

Fourth Quarter Operating Results

Revenue for the quarter was $101.3 million as compared to $117.0 million in the same period in the prior year, representing a decrease of $15.8 million (13.5%). The revenue decrease was primarily due to decreases in advertising revenue of $12.5 million (21.1%) and circulation revenue of $7.2 million (17.3%), partially offset by increases in parcel revenue of $3.3 million and other revenue of $0.6 million.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $16.5 million or 14.2% for the quarter ended August 31, 2023, relative to the same period in the prior year. The decrease was experienced across all expense categories.

Operating income before depreciation, amortization, impairment and restructuring in the quarter was $1.9 million, an increase of $0.7 million relative to the same period in the prior year. The increase in operating income before depreciation, amortization, impairment and restructuring is due to the decrease in operating expenses, partially offset by the decrease in total revenue.

Net loss in the quarter ended August 31, 2023 was $11.0 million, as compared to $31.4 million in the same period in the prior year. The decrease in net loss was primarily the result of impairment expense in the three months ended August 31, 2022, a gain on disposal of property and equipment and assets held for sale and foreign exchange gains in the three months ended August 31, 2023 and the increase in operating income before depreciation, amortization, impairment and restructuring, partially offset by increases in restructuring and interest expenses.

Fiscal 2023 Operating Results

Revenue for the year ended August 31, 2023 was $448.5 million as compared to $458.2 million in the prior year, a decrease of $9.7 million or 2.1%. The revenue decrease was primarily due to decreases in advertising revenue of $28.2 million or 11.3% and circulation revenue of $19.0 million or 11.4%, partially offset by increases in parcel services revenue of $27.7 million and other revenue of $9.8 million. Excluding the impact of the BNI Acquisition, revenue for the year ended August 31, 2023 was $385.9 million, a decrease of $46.1 million (10.7%) relative to the prior year. The revenue decline, excluding the impact of the BNI Acquisition, was primarily due to decreases in advertising revenue of $35.1 million (14.6%) and circulation revenue of $22.9 million (14.2%).

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $7.4 million or 1.7% for the year ended August 31, 2023, relative to the prior year. Excluding the impact of the BNI Acquisition, total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $44.5 million or 10.7%. The decrease, excluding the BNI Acquisition, relates to decreases in compensation, distribution, production and newsprint expenses.

Operating income before depreciation, amortization, impairment and restructuring of $10.7 million in the year ended August 31, 2023 represents a decrease of $2.3 million relative to the prior year. Excluding the impact of the BNI Acquisition, operating income before depreciation, amortization, impairment and restructuring was $14.0 million, a decrease of $1.6 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, impairment and restructuring.

Net loss in the year ended August 31, 2023 was $72.6 million, as compared to $74.7 million in the prior year. The decrease in net loss was primarily the result of impairment expense in the year ended August 31, 2022, a gain on disposal of property and equipment, assets held-for-sale, right of use assets and other assets, a decrease in loss on derivative financial instruments and financial assets at fair value through profit and loss and a loss on debt refinancing in the year ended August 31, 2022, partially offset by a decrease in operating income before depreciation, amortization, impairment and restructuring and increases in depreciation, amortization, restructuring and interest expenses.

Business Transformation Initiatives

In the quarter, the Company implemented an additional $15 million in annualized cost savings bringing the full year total to $76 million in annualized savings from various cost reduction and transformation initiatives including compensation expense reductions, real estate rationalization, production efficiencies and other programs.

In F24 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 external vendor and expense management, product mix rationalization, outsourcing where possible and real estate divesture.

Debt Repayment and Refinancing

During the year ended August 31, 2023, the Company redeemed $22.6 million of first-lien debt with the proceeds of asset sales. Subsequent to August 31, 2023, the Company redeemed $6.8 million of first-lien debt with the proceeds of asset sales. After this redemption, the Company has $17.7 million of first-lien debt outstanding of the original $225.0 million that was issued in October 2016.

Acquisition of Brunswick News Inc.

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

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 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, 2023 and 2022. 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.

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