Business News
PRIMEDIA Reports Third Quarter 2009 Results
Friday 06. November 2009 - Announces Regular Quarterly Dividend
PRIMEDIA Inc. (NYSE: PRM), a leading provider of Internet, print and mobile solutions to help consumers find a place to live, today reported results for the quarter ended September 30, 2009.
Third Quarter Highlights
Total revenue of $63.0 million, a $13.4 million decrease compared to third quarter 2008, primarily due to lower New Homes and DistribuTech revenue.
Apartments division revenue of $51.7 million, a $1.9 million decrease compared to third quarter 2008, primarily due to declines in sales of premium print advertising.
Adjusted EBITDA of $17.0 million, a $2.1 million decrease compared to third quarter 2008; Adjusted EBITDA margin increased to 27.0% from 25.0% for third quarter 2008.
Income from Continuing Operations decreased $3.0 million to $5.7 million, or $0.13 per common share, primarily due to lower revenue and an increase in provision for income taxes of $2.0 million, partially offset by cost and expense reductions of $12.4 million.
Net Income of $3.7 million, or $0.08 per common share.
Adjusted EBITDA is a non-GAAP financial measure that is described and reconciled to the corresponding GAAP measure in the accompanying Financial Tables.
“During the third quarter, we continued to focus on areas of our business that we can control in this challenging economic environment,” said Charles Stubbs, president and CEO of PRIMEDIA. “Apartment Guide, our largest business, saw a revenue decline over the quarter as higher national unemployment rates and lower effective rents led apartment owners to reduce spending on our premium print products. Yet, despite this environment, Apartment Guide and Rentals.com again achieved gains in customer count and expanded markets. This leaves us well positioned for an eventual turn in the economy. The ongoing weakness in residential real estate sales continued to adversely impact our New Homes and DistribuTech businesses, which contributed to a decline in total revenue.
“We continued to implement permanent reductions in our cost structure and make significant strides in improving the efficiency and effectiveness of our organization. As of the end of the quarter, we achieved a $20 million operating expense reduction from our 2008 operating expense base, and we are now expecting to see at least $25 million in reductions for the full year. Our cost reductions have been part of a permanent streamlining of our organization that is enabling us to aggressively evolve with a changing media landscape by building upon our historical position as the leading print solution for consumers and our advertisers to become the leading online and mobile vertical search network of websites in our space.
“We made significant progress toward this goal in the third quarter as we expanded content, gained consumer traffic – ranking #2 among all apartment vertical search websites for each of July, August and September* – and produced millions of quality leads for our advertisers. The total number of leads we produced for our advertisers has grown year over year, and two-thirds of our leads are now generated through our websites and mobile applications.
“PRIMEDIA has a strong financial foundation, and we remain committed to managing our businesses with focused discipline, while investing in innovative growth opportunities to enhance long-term shareholder value,” added Mr. Stubbs.
Third Quarter Revenue and Operations
Apartments – Apartment Guide, ApartmentGuide.com, Rentals.com and RentalHouses.com
The Apartments division, representing approximately 93% of third quarter 2009 advertising revenue, declined by 3.6% to $51.7 million from $53.6 million in the third quarter of 2008. Apartment Guide, including ApartmentGuide.com, increased customer count and grew the number of apartment community listings, while revenue declined 3.5% primarily due to declines in sales of premium print advertising. Apartment Guide clients generally continue to struggle with a weakened national economy and, at present, are more focused on total spending than on ROI. Overall, this has resulted in reduced spending on the Companys premium print products. Revenue from the Companys online single-unit real estate rental product line, Rentals.com, decreased by 5.2% compared to the third quarter of 2008, primarily due to a decrease in paid listings through the self-provisioning feature of its websites, partially offset by an increase in the number of listings generated from property managers.
For the remainder of the year, the Company is focused on continuing to grow its customer count in Apartments, while enhancing the product portfolio. The Company will continue to increase its investment in search engine optimization and marketing compared to the prior year. The Company currently anticipates that Apartments division revenue for full year 2009 is likely to be down 2 – 3% year over year.
New Homes – NewHomeGuide.com, AmericanHomeGuides.com
Revenue from New Homes, representing approximately 7% of third quarter 2009 advertising revenue, declined by 56.0% to $4.1 million from $9.3 million in the third quarter of 2008. The U.S. economy, particularly as it affects the residential real estate sales industry, continues to adversely impact this business. The revenue decline was due to reductions in the number of new home community listings and revenue per community.
The Company anticipates continued pressure on this business for the foreseeable future and remains focused on reducing costs for this business to offset expected revenue losses and maintaining close relationships with its advertising clients to best position this business for opportunities as macroeconomic conditions improve. The Company currently expects full-year percentage decline in revenue for this business compared to 2008 to be approximately 53 – 54%.
DistribuTech
DistribuTech, the Companys distribution operation, generated revenue of $7.2 million, compared to $13.5 million in the third quarter of 2008, a 46.3% decline. This decline was primarily due to the ongoing impact of lost business from third-party customers, who are scaling back or ceasing to publish resale home and automotive and employment classifieds publications or providing an Internet-only product and a decrease in the average revenue per pocket due to continued decline in demand.
For the remainder of the year, the Company intends to continue to reduce the cost structure of this business to offset, in part, expected revenue losses. The Company currently expects full-year percentage decline in revenue for this business compared to 2008 to be approximately 37 – 38%.
Other Third Quarter Financial Highlights
Operating Expenses
The decrease in Operating Expenses by 19.7% to $46.0 million was driven primarily by reductions in Distribution and Circulation, Cost of Sales, General and Administrative, and Marketing and Selling. This reflects the continued results of various cost-cutting initiatives, including reformatting print guides, distribution optimization and position eliminations, partially offset by an incremental increase in spending for Internet product development and SEM (search engine marketing) of $2.2 million. The total net expense savings from the cost-cutting initiatives were previously targeted to be at least $20.0 million compared to the 2008 operating expense base. The Company now expects that these initiatives will generate at least $25.0 million in savings during 2009.
Adjusted EBITDA
Total Adjusted EBITDA decreased 11.1% to $17.0 million from $19.1 million in the third quarter of 2008. This decline was driven primarily by a decrease in revenue of $13.4 million and a $2.2 million increase in spending for Internet product development and SEM. This was partially offset by lower operating expenses. Adjusted EBITDA as a percentage of total net revenue increased to 27.0% from 25.0% in the third quarter of 2008 and from 20.9% in the second quarter of 2009.
Income and Earnings per Share from Continuing Operations
Income from continuing operations decreased to $5.7 million from $8.7 million in the third quarter of 2008. Diluted earnings per share from continuing operations decreased $0.07 to $0.13 from $0.20 in the third quarter of 2008. These decreases were primarily due to lower revenue of $13.4 million and an increase in provision for income taxes of $2.0 million, partially offset by cost and expense reductions of $12.4 million.
Net Income
Net income decreased $8.2 million to $3.7 million, compared to $12.0 million in the third quarter of 2008. This reduction was due to lower income from continuing operations and a $5.3 million decrease in income from discontinued operations, net of tax.
Free Cash Flow and Capital Expenditures
Free cash flow was $9.6 million, compared to $16.4 million for the third quarter of 2008. This change was primarily due to $6.7 million for insurance and tax reimbursements for legacy and divested activities during the third quarter of 2008. The Company invested $3.1 million in capital expenditures, compared to $2.1 million in the third quarter of 2008. Free cash flow is a non-GAAP financial measure that is described and reconciled to the corresponding GAAP measure in the accompanying Financial Tables.
Balance Sheet
As of September 30, 2009, the Companys cash and cash equivalent balance was $8.0 million, versus $23.4 million as of September 30, 2008. The Company had debt, net of cash, of $224.4 million at September 30, 2009, compared to net debt of $239.2 million at September 30, 2008.
Dividend
The Board of Directors of the Company has authorized a regular quarterly cash dividend of $0.07 per share of common stock, payable on December 2, 2009, to stockholders of record on November 16, 2009. The Company currently expects to continue to pay a regular quarterly dividend.