JP Morgan 2018 Global High Yield & Leveraged Finance Conference February 27, 2018

Transcription

1 JP Morgan 2018 Global High Yield & Leveraged Finance Conference February 27, 2018

2 McClatchy Team Craig Forman President & Chief Executive Officer Elaine Lintecum Vice President, Chief Financial Officer & Treasurer

3 Forward-Looking Statements This presentation includes forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Those risks are detailed from time to time in the company s publicly filed documents, including the company s annual 10-K filed for the year ended December 25, 2016, and the company s quarterly report on Form 10-Q for the quarter ended September 24, 2017, and Form 8-K on February 16, 2018, each filed with the Securities and Exchange Commission. The company disclaims any intention and assumes no obligation to update the forward-looking information contained in this presentation. Reconciliation of non-gaap amounts to GAAP amounts can be found at

4 McClatchy Diversified Growth Markets Tacoma, WA The News Tribune Bellingham, WA The Bellingham Herald Olympia, WA The Olympian Kennewick,WA Tri-City Herald Sacramento, CA The Sacramento Bee San Luis Obispo, CA The Tribune 2017 Total Revenues by Region Midwest 25% West 29% Modesto, CA The Modesto Bee Merced, CA Merced Sun-Star Fresno, CA The Fresno Bee Boise, ID Idaho Statesman Kansas City, MO The Kansas City Star Fort Worth, TX Star-Telegram Wichita, KS The WichitaEagle Belleville,IL BellevilleNews-Democrat Biloxi, MS Sun Herald Lexington, KY Lexington Herald Leader Rock Hill, SC The Herald Columbus, GA Ledger-Enquirer Bradenton, FL Bradenton Herald State College, PA Centre Daily Times Macon, GA The Telegraph Durham, NC Durham Herald-Sun Raleigh, NC The News & Observer Charlotte, NC The CharlotteObserver Columbia, SC The State Myrtle Beach, SC The Sun News Beaufort, SC The Beaufort Gazette Hilton Head, SC The Island Packet East 22% Source: Company reports Carolinas 24% Miami, FL Miami Herald el Nuevo Herald

5 McClatchy at a Glance Renowned news brands reaching 17 million people in local markets and 72 million globally Reputation for high quality journalism that is nationally significant and locally relevant 54 Pulitzer Prizes two added in 2017 An industry leader in profitability Track record of strong growth in digital-only ad revenues Focused management of financial position and de-levering balance sheet Repaid $143.7 million of debt over last 13 months Monetized real estate for proceeds of ~$90 million in 2017 Additional real estate monetization in 2018

6 What We Said We Would Do Last Year Sales reinvention Newsroom reinvention Product and technology reinvention Business process and cost structure reinvention

7 Sales Reinvention Total Revenue Composition Audience Revenues Digital Revenues Direct Marketing Revenues Other Revenues 70.6% 75.2% Newspaper Print Advertising Revenues 29.4% 24.8%

8 What We Said We Would Do Last Year Sales reinvention Newsroom reinvention

9 Newsroom Reinvention As a result of reinvention, newsroom productivity across McClatchy was up 30.9% in 2H 2017 vs. 2H 2016

10 What We Said We Would Do Last Year Sales reinvention Newsroom reinvention Product and technology reinvention

11 Product & Technology Reinvention People Anjali Joshi, McClatchy Board member Current VP of product management at Google Vijay Ravindran, McClatchy Board member Current CEO of Floreo Scott Manuel, VP of Digital Product and Technology Former Vice President of Applied Innovation at Thomson Reuters Products and Technology ios / Mobile product improvements Audience Management System Paid, digital-only subscriber growth of 24% to nearly 103,000 Continued investment in products and services that will impact 2018 excelerate TM, Video Lab West, home assistant playback

12 What We Said We Would Do Last Year Sales reinvention Newsroom reinvention Product and technology reinvention Business process and cost structure reinvention

13 Business Process and Cost Structure Reinvention Reinvention efforts: $45 million of cash expenses removed from the business Unique visitors up 18% to 71.2M Pageviews up 9% to 3.9B Video views up 62% Digital-only advertising revenue up 9.8%

14 What We Said We Would Do Last Year Sales reinvention Newsroom reinvention Product and technology reinvention Business process and cost structure reinvention Good progress in 2017, and work continues in 2018

15 Our Mission Accelerate our digital-dna, journalism-driven media business, essential in our communities and with our customers by increasing the pace and cadence of our digital transformation

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18 Journalism Awards 54 Pulitzer Prizes for McClatchy markets 11 Public Service Gold Medals 2017 Pulitzer Prize for Editorial Cartooning Miami Herald, Jim Morin 2017 Pulitzer Prize for explanatory journalism, Panama Papers Miami Herald, Washington Bureau & McClatchy Video Lab The Star-Telegram and Video Lab teams win Edward R. Murrow Innovation award for Titletown, TX series

19 Transformation Strategies Invest in products and technology Newsroom regionalization/centralization efforts Continue to remove legacy costs Develop one comprehensive view of our customers

20 Invest in Products and Technology Continued investment in the new audience management platform Data warehouse for better understanding and monetization of all customers, audience and advertising Investment in excelerate TM, video, and new revenue streams

21 excelerate TM Digital Agency A digital agency that designs custom marketing plans for businesses, tracking and measuring success every step of the way. Strong sales pipeline of $28 million as of the end of 2017 Added $3 million to the sales pipeline each month in the fourth quarter of 2017 Investing in additional solutions to support verticals i.e. automotive

22 McClatchy Video Investment Video views across all platforms grew 62% reaching 336 million in 2017 compared to 226 million in 2016 Video revenues up 57% year over year Diverse revenue streams, including branded content, distribution and audience extension

23 Transformation Strategies Invest in products and technology Newsroom regionalization/centralization efforts

24 Newsroom Regionalization Regionalize leadership of newsrooms Focus coverage on areas of maximum local impact and relevance Combine resources for greater efficiency, i.e. social media teams serving all of California

25 Transformation Strategies Invest in products and technology Newsroom regionalization/centralization efforts Continue to remove legacy costs

26 Remove Legacy Costs Continued momentum Cost savings of $45 million in 2017, $171 million over the last three years Full time equivalents down 13% in 2017, or 28% over the last three years Newsprint costs down 15.8% in 2017 Outsourced 21 markets, Biloxi in early 2018

27 Transformation Strategies Invest in products and technology Newsroom regionalization/centralization efforts Continue to remove legacy costs Develop one comprehensive view of our customers

28 Build a Data Warehouse Consolidate data to a single view of the customer Use vendor tools (inc. Adobe TM ) to gain insights and optimize Drive engagement and revenue Ad Cloud End-to-End platform for managing advertising across traditional TV and digital formats McClatchy Audience Systems Omniture Reader Activity McClatchy Advertising systems Enterprise Data Platform Analytics Track user behavior and content engagement. Report and Segment Marketing Cloud ID ID Service will establish a common id across all tools Target Targeted content. A/B/N testing to optimize experiences. Automated decisioning and targeting. Audience Manager Unify profile data from multiple sources including all 1st, 2nd, and 3rd party data for activation Campaign Cross channel campaign orchestration and message delivery Sales News Customer Service Marketing Audience

29 Elaine Lintecum, VP Finance and CFO Results and Outlook

30 2017 Results Revenues Total revenues down 7.5% Ad revenues declined 12.3% Digital-only advertising revenues grew 9.8% Audience revenues down 0.4%

31 Deeper Dive Into Digital Results Focused on growing key digital revenues Programmatic revenues up 35% Video revenue up 57%, views up excelerate TM recorded nearly $8 million of revenue in its first full year of operations Digital advertising now 34.7% of total advertising Focused on adding new products more quickly

32 2017 Results Revenues Strong digital audience growth Total unique visitors up 18.3% Page views reached 3.9 billion Digital-only subscribers reached nearly 103,000 up 24%

33 2017 Results Revenues Strong digital audience growth Cost controls help mitigate impact of revenue declines Adjusted EBITDA was down 16.3% Adjusted EBITDA margin of 16.3%, second highest among regional media companies

34 2017 Results Revenues Strong digital audience growth Cost controls help mitigate impact of revenue declines Net debt reduced $162.8 million

35 $ in Millions Debt Maturities January 2018 $800 Average annual interest rate 8.0% $600 Cash on hand approx. $30 million $ $200 $0 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 89

36 Results and Outlook Summary of 2017 results 2018 outlook

37 2018 Housekeeping Changed the accounting for obituaries to reflect shift to digital, increasing digital and decreasing print by $11 million. Total revenues remains unchanged Change in accounting for delivery costs paid for 3 rd party distribution contracts, $10 million increase to other revenues and other operating expenses. No change to EBITDA These changes are included in our guidance and shown here to assist investors in modeling

38 2018 Financial Outlook Total digital revenue expected to exceed in-print advertising Digital-only advertising revenues expected to grow strongly Expect print advertising to remain volatile Small decline in audience revenues Growth in digital subscribers and digital audience revenues Further re-engineering of operations to improve efficiencies

39 Monetization of Real Estate 2017: Sold Sacramento, SLO, Kansas City office facility and parking lot, Raleigh, Merced, and other smaller building and land for combined gross proceeds of approximately $90 million Sacramento, CA Columbia, SC 2018: Columbia sale/leaseback and two other smaller buildings and land for combined gross proceeds of $25 million Kansas City Pavilion and several other buildings still being marketed for sale Kansas City, MO

40 2018 Expected Uses of Cash Further debt reduction Invest in products and technology Capital expenditures between $10 million and $14 million Expect no cash contribution to pension plan

41 Transformation Strategies Invest in products and technology Newsroom regionalization/centralization efforts Continue to remove legacy costs Develop one comprehensive view of our customers Focus on the Future: Accelerate our digital-dna, journalism-driven media business, essential in our communities and with our customers by increasing the pace and cadence of our digital transformation

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