Postmedia Reports Fourth Quarter Results

TORONTO--(BUSINESS WIRE)--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.

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, 2023	August 31, 2022	August 31, 2023	August 31, 2022
Revenues
Advertising	46,709	59,178	221,019	249,258
Circulation	34,377	41,559	147,043	166,050
Parcel Services	11,553	8,214	43,257	15,508
Other	8,651	8,097	37,180	27,408
Total revenues	101,290	117,048	448,499	458,224
Expenses
Compensation	32,542	41,287	155,455	169,569
Newsprint	3,716	5,069	17,636	17,935
Distribution	32,222	34,566	129,999	112,107
Production	12,088	15,980	56,135	69,384
Other operating	18,831	18,971	78,620	76,249
Operating income before depreciation, amortization, impairment, and restructuring	1,891	1,175	10,654	12,980
Depreciation	3,253	2,697	12,894	10,995
Amortization	2,396	2,566	9,411	9,345
Impairment	-	7,845	-	15,745
Restructuring	4,249	3,675	25,784	5,875
Operating loss	(8,007)	(15,608)	(37,435)	(28,980)
Interest expense	8,486	7,696	33,988	30,998
Net financing expense related to employee benefit plans	350	234	1,398	938
(Gain) loss on disposal of property and equipment, assets held-for-sale, right of use assets and other assets	(5,065)	37	(8,242)	260
Loss on derivative financial instruments and financial assets at fair value through profit and loss	330	173	470	3,873
Loss on debt refinancing	-	-	-	1,477
Foreign currency exchange (gains) losses	(1,064)	7,666	7,519	8,186
Loss before income taxes	(11,044)	(31,414)	(72,568)	(74,712)
Provision for income taxes	-	-	-	-
Net loss attributable to equity holders of the Company	(11,044)	(31,414)	(72,568)	(74,712)
Loss per share attributable to equity holders of the Company
Basic	$(0.11)	$(0.32)	$(0.73)	$(0.78)
Diluted	$(0.11)	$(0.32)	$(0.73)	$(0.78)

Postmedia Network Canada Corp. Consolidated Statements of Financial Position (UNAUDITED)
(In thousands of Canadian dollars)			As at August 31, 2023			As at August 31, 2022
Assets
Current Assets
Cash			6,191			12,061
Restricted cash			6,968			730
Trade and other receivables			46,764			49,118
Assets held-for-sale			2,560			17,727
Inventory			3,408			4,950
Prepaid expenses and other assets			8,837			8,275
Total current assets			74,728			92,861
Non-Current Assets
Property and equipment			48,299			66,747
Right of use assets			26,780			30,095
Derivative financial instruments and other assets			3,335			3,742
Intangible assets			16,236			17,930
Total assets			169,378			211,375
Liabilities and Deficiency
Current Liabilities
Accounts payable and accrued liabilities			35,409			39,440
Provisions			10,401			3,766
Deferred revenue			17,841			21,262
Current portion of lease obligations			8,320			8,312
Current portion of long-term debt			17,772			13,000
Total current liabilities			89,743			85,780
Non-Current Liabilities
Long-term debt			292,524			260,909
Employee benefit obligations and other liabilities			35,131			38,169
Lease obligations			24,286			27,749
Total liabilities			441,684			412,607
Deficiency
Capital stock			820,131			820,131
Contributed surplus			18,923			17,973
Deficit			(1,111,360)			(1,039,336)
Total deficiency			(272,306)			(201,232)
Total liabilities and deficiency			169,378			211,375

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, 2023		August 31, 2022			August 31, 2023			August 31, 2022
Cash Generated (Utilized) by:
Operating Activities
Net loss attributable to equity holders of the Company		(11,044)		(31,414)			(72,568)			(74,712)
Items not affecting cash:
Depreciation		3,253		2,697			12,894			10,995
Amortization		2,396		2,566			9,411			9,345
Impairment		-		7,845			-			15,745
Loss on debt refinancing		-		-			-			1,477
Loss on derivative financial instruments and financial assets at fair value through profit and loss		330		173			470			3,873
Non-cash interest		7,078		6,483			26,709			22,711
(Gain) loss on disposal of property and equipment, assets held-for-sale, right of use assets and other assets		(5,065)		37			(8,242)			260
Non-cash foreign currency exchange (gains) losses		(1,221)		7,720			7,342			8,173
Share-based compensation plans		164		1,353			950			1,403
Net financing expense relating to employee benefit plans		350		234			1,398			938
Employee benefit plan funding in excess of compensation expense		(101)		(839)			(2,983)			(4,153)
Net change in non-cash operating accounts		(4,345)		(3,182)			1,210			(19,901)
Cash flows used in operating activities		(8,205)		(6,327)			(23,409)			(23,846)
Investing Activities
Net proceeds from the sale of property and equipment, assets held-for-sale and other assets		7,002		762			29,464			2,736
Purchases of property and equipment		(96)		(211)			(502)			(2,005)
Purchases of intangible assets		(371)		(132)			(794)			(948)
Acquisition, net of cash acquired		-		-			-			(6,636)
Cash flows from (used in) investing activities		6,535		419			28,168			(6,853)
Financing activities
Repayment of long-term debt		(1,569)		(1,368)			(22,629)			(19,754)
Restricted cash		(5,379)		655			(6,238)			(293)
Advances from senior secured asset-based revolving credit facility		6,800		8,000			25,300			8,000
Repayment of senior secured asset-based revolving credit facility		(27,300)		-			(27,300)			-
Proceeds on issuance of unsecured promissory notes		27,300		-			27,300			-
Debt issuance costs		-		-			-			(418)
Lease payments		(1,818)		(1,376)			(7,062)			(6,771)
Cash flows from (used in) financing activities		(1,966)		5,911			(10,629)			(19,236)
Net change in cash for the period		(3,636)		3			(5,870)			(49,935)
Cash at beginning of period		9,827		12,058			12,061			61,996
Cash at end of period		6,191		12,061			6,191			12,061
Supplemental disclosure of operating cash flows
Interest paid		1,357		763			9,860			8,757
Income taxes paid		-		-			-			-

Contacts

Media Contact
Phyllise Gelfand
Vice President, Communications
[phone]
[e-mail]

Investor Contact
John Bode
Executive Vice President, Chief Financial Officer and Chief Transformation Officer
[e-mail]