High drama at Tronc takes an intermission
Still fending off an ongoing takeover bid by Gannett and developing a futuristic video news product, Tronc Inc. today released a largely uneventful second-quarter financial report.
The headline on the company's press release said that it anticipates bringing in more revenue and posting higher profits than it had previously stated. The increases were tiny, though. For instance, Tronc now projects EBITDA (earnings before interest, taxes, depreciation and amortization) of $170 to $175 million. Three months ago, the company had placed the figure at $166-$172 million.
Like the five public newspaper companies previously reporting, Tronc saw a sharp drop in advertising revenue — 9.2 percent from the period a year ago, excluding The San Diego Union-Tribune, which it had just acquired in 2015.
The company did manage a small net profit — $4.1 million on revenues of $405 million, a margin of about 1 percent.
CEO Justin Dearborn described the company's key strategy in a conference call with analysts as investing in "digital tools to make our journalism more visible." But he conceded in a later comment that the content initiative was "still in its infancy" and requires further buildout of a content management system to launch fully.
Chairman Michael Ferro previously said that Tronc will eventually be able to produce as many as 2,000 videos per day, relying on artificial intelligence to achieve that volume.
Gannett has a $15 per share bid for the company on the table and has indicated it will consider whether to raise, hold or withdraw the offer after assessing the second-quarter results.
No immediate announcement from Gannett was forthcoming.
(Oddly, Tronc stock closed at exactly $15 per share before the post-market earnings release).
Another curiosity: Positives in revenue and earnings were mainly the result of initiatives started during the regime of deposed CEO Jack Griffin and his lieutenants.
Griffin conceded in previous quarterly calls that the then-Tribune Publishing was "playing catch-up" in digital — especially in selling digital-only subscriptions.
Dearborn reported an increase of 15,000 such subscriptions during the second quarter, bringing the total to 116,000. (By contrast, The New York Times added 55,000 in the second quarter and has a total of more than 1.2 million).
The company also continues expense reductions started by Griffin, taking them down $26 million year-to-year in the quarter. That same level of savings should roll through the second half of the year, Dearborn said.
Tronc also reported its cash balance has risen from $96 million at the end of the first quarter to $170 million. That means the $70.5 million in new stock sold to billionaire Dr. Patrick Soon-Shiong in May essentially sits in the bank waiting to be deployed.
Media analyst Ken Doctor speculated Tuesday that Tronc will use the money to buy or partner with a tech company that can provide cheap, citizen-generated, ready-to-run video production capacity.
That would be logical, given the prominence of Tronc's video initiative and the pressure to get it going. But there was no immediate announcement.
The company also said that it is now treating its traditional publishing businesses —including the Chicago Tribune and Los Angeles Times — as one segment and the Tronc video product and all other digital revenues as a separate one.
The idea appears to highlight over time how growth in digital makes up for continued revenue losses in print.
These conference call sessions often run for as long as an hour as analysts press for details on operations, trends and strategy. Only one analyst asked a question, and the call was over in 20 minutes.