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McClatchy reports second quarter loss; digital subscribers, ad revenue continue to grow

The Sacramento-based media company McClatchy reported Friday that its digital-only subscribers grew by 34 percent compared from the same period last year.

The publisher of 30 daily newspapers, including The Sacramento Bee, also said its digital advertising revenue continued to outpace print revenue in the months of May and June.

Still, the company, which has pivoted toward digital growth, reported a net loss in the second quarter of 2018 of $20.4 million, or $2.62 per share.

“We ended the quarter with 122,400 digital-only subscribers, up 34.5 percent from the same period in 2017, an accelerated pace of growth from the first quarter,” McClatchy president and CEO Craig Forman said in a statement. “We continue to be excited about our digital future and to invest in the growth engines of our business.”

The company also cut its first-lien debt by 10 percent and extended future debt payments to 2026, Forman said.

“In our new debt structure, we will pay down the first lien notes from excess cash flows and certain asset sales and this ability to prepay debt is a positive term of the 2026 notes indenture that we sought from investors,” he said.

Revenues, overall, declined by 9.2 percent in the second quarter. The widest drops were in print advertising which fell by double-digits. Meanwhile, digital-only advertising revenues exceeded print newspaper advertising revenues, growing by more than 20 percent.

Like many newspaper publishers, McClatchy has faced tough headwinds in recent years as it tried to revamp its business.

Forman said he expects cost-reductions to continue but the company will also make strategic investments that support digital growth.

McClatchy will relocate of printing operations in Belleville, Ill. to Kansas City, Mo. in August, reducing its printing presses in all 30 markets. The company has already reorganized advertising teams that work in the same region, he said.

“Best in class digital journalism and advertising has become the mainstay of our business that was once print-centric and this transition takes time,” Forman said during an earnings call with investors Friday.

Lately, newspaper owners, including McClatchy, have also found challenges in the trade environment as tariffs threaten to boost the cost of paper products from abroad.

“The one item we cannot control is newsprint pricing,” said Elaine Lintecum, McClatchy chief financial officer said during the call. She also noted that newsprint makes up less than 4 percent of the operating budget. “We’re hopeful that the tariffs on newsprint from Canada, which are under a more intense review from the International Trade Commission and are the subject of bipartisan legislation, will be rolled back.”

McClatchy (MNI) shares closed at $10.06, up six cents, Friday.

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