Glacier Media Inc. (“Glacier” or the “Company”) reported revenue
and earnings for the period ended September 30, 2020.
SUMMARY RESULTS
(thousands of dollars) |
Three months ended September 30, |
|
Nine month ended September 30, |
|
except share and per share amounts |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
Revenue |
$ |
35,314 |
|
$ |
48,256 |
|
$ |
109,594 |
|
$ |
138,191 |
|
EBITDA |
$ |
8,577 |
|
$ |
2,089 |
|
$ |
16,701 |
|
$ |
6,334 |
|
EBITDA margin |
|
24.3% |
|
|
4.3% |
|
|
15.2% |
|
|
4.6% |
|
EBITDA per share |
$ |
0.07 |
|
$ |
0.02 |
|
$ |
0.13 |
|
$ |
0.06 |
|
Capital expenditures (3) |
$ |
999 |
|
$ |
1,992 |
|
$ |
3,536 |
|
$ |
8,540 |
|
Net (loss) income attributable to common shareholder |
$ |
1,133 |
|
$ |
(3,166 |
) |
$ |
(18,892 |
) |
$ |
35,415 |
|
Net (loss) income attributable to common shareholder per share |
$ |
0.01 |
|
$ |
(0.03 |
) |
$ |
(0.15 |
) |
$ |
0.31 |
|
|
|
|
|
|
|
Weighted average shares outstanding, net |
|
125,213,346 |
|
|
122,036,089 |
|
|
125,213,346 |
|
|
113,942,566 |
|
|
|
|
|
|
|
Results including joint ventures and associates: |
|
|
|
|
|
Revenue (1)(2) |
$ |
42,868 |
|
$ |
58,727 |
|
$ |
133,314 |
|
$ |
172,851 |
|
EBITDA (1)(2) |
$ |
10,144 |
|
$ |
3,446 |
|
$ |
21,324 |
|
$ |
12,437 |
|
EBITDA margin (1)(2) |
|
23.7% |
|
|
5.9% |
|
|
16.0% |
|
|
7.2% |
|
EBITDA per share (1)(2) |
$ |
0.08 |
|
$ |
0.03 |
|
$ |
0.17 |
|
$ |
0.11 |
|
(1) |
Certain results are presented to include the Company’s
proportionate share of its joint venture and associate operations,
as this is the basis on which management bases its operating
decisions and performance. The Company’s joint ventures and
associates include Continental Newspapers Ltd, Great West
Newspapers Limited Partnership, the Victoria Times-Colonist, Rhode
Island Suburban Newspapers, Inc., Village Media Inc. and Borden
Bridge Development Corporation. |
(2) |
The Company sold its interest in Fundata for $55.0 million in April
2019. Results were included up to March 31, 2019. |
(3) |
Includes $3.1 million purchase of land for Canada’s Outdoor Farm
Show in Woodstock, Ontario in Q1 2019. |
SIGNIFICANT DEVELOPMENTS IN Q3 2020, OPERATING
HIGHLIGHTS AND OUTLOOK
Impact of COVID and Actions
Taken
The Company’s consolidated revenues were off
26.8% for the quarter ending September 30, 2020 as compared to the
same period in the prior year, as a result of the impact of the
COVID pandemic, the resulting restrictions and cut-back in consumer
and business activity.
EBITDA for the Company including joint ventures
and associates was $2.4 million for the quarter before wage
subsidies. Wage subsidies from the Canadian Emergency Wage Subsidy
(“CEWS”) were $7.7 million recorded for the quarter including joint
ventures and associates. EBITDA including joint ventures and
associates was $10.1 million including the CEWS funding.
The $2.4 million included 1) six months of new
Aid to Publishers (“ATP”) funding received from the federal
government, including three months of funding for the prior quarter
and 2) the operating losses incurred from the conversion of the two
outdoor farm shows to virtual shows that Glacier FarmMedia runs
once a year in July and September. After adjusting for the extra
quarter of ATP funding and the losses, EBITDA including joint
ventures and associates for the quarter was $2.7 million excluding
wage subsidies.
The federal government announced that the CEWS
will continue until at least June 2021, but at significantly
reduced levels (a reduction of more than 70% currently, with the
level of reduction increasing in phases).
EBITDA was $1.4 million excluding joint ventures
and associates before wage subsidies, and $8.6 million including
wage subsidies.
In response to the pandemic, the Company has
implemented a comprehensive program in order to operate with the
significant reduction in revenues and maintain adequate cash flow
and liquidity, as well as the required changes in the workplace.
Specifically, the Company:
- Has taken extensive measures to
ensure employees are kept safe while continuing to maintain
community and customer connections. Measures have included working
from home, self-distancing, creating a safe environment for those
who want to work in the office, staggering in-office work days,
rigorous cleaning, etc.;
- Moved quickly to reduce operating
costs. Measures included wage roll-backs, reduced work weeks,
temporary layoffs and a wide variety of other cost reduction
measures;
- Applied for and is receiving the
government wage subsidy, work share funding and ATP grants;
- Raised capital and amended its bank
facility.
RELATED PARTY TRANSACTION
On July 7, 2020, GVIC Communications Corp.
(“GVIC”), an affiliated company of Glacier, sold a 45%
non-controlling interest in its ERIS and STP businesses (ERI
Environmental Risk LP) to Madison Venture Corporation (“Madison”).
GVIC received $11 million in cash and retained 100% of the cash
flow of the businesses relating to the 45% interest for two years.
A $1.6 million deferred consideration receivable has been recorded
with respect to the additional cash flows being received over two
years. The transaction reflected a value of $28 million for the ERI
Environmental Risk businesses. The transaction allows Madison to
acquire an additional 4% interest in the businesses at the
acquisition date pricing and an additional 2% at fair market value,
and includes a mutual right of first refusal. There is a buy/sell
provision that is exercisable after three years that allows either
party to offer to acquire the other party’s interest at fair market
value.
The Company considered a variety of financial
restructuring options with the objective of raising sufficient
capital in the time required while preserving financial value for
shareholders. Selling part of an asset at the valuation attained in
the time required was deemed significantly more favourable for
shareholders than raising equity at current market prices, or
attempting to sell an entire asset to a third-party during the
pandemic. The transaction allowed GVIC to retain ownership in the
businesses, retain 100% of the cash flow for operating and debt
service needs, maintain operating scale, and have the opportunity
to repurchase the interest sold in the future.
Madison is a related party to both Glacier and
GVIC. As such, a special committee of GVIC was formed, independent
financial and legal advisors were retained, and a fairness opinion
was provided advising that the transaction is fair from a financial
point of view. Due to the serious financial difficulty caused by
the pandemic, the Company relied on the “financial hardship”
exemptions in sections 5.5(g) and 5.7(e) of Multilateral Instrument
61-101 with respect to valuation and minority approval
requirements. A special committee of Glacier was also formed to
review the transaction, and was supportive of the transaction.
Due to the financial impact of the pandemic and
the level of the Company’s leverage prior to the transaction, the
Company requested and received temporary covenant relief from its
lenders and worked with its banking syndicate to implement a
financial restructuring plan that would provide access to
sufficient ongoing liquidity with which to operate through the
pandemic. As a result of the transaction, the banking agreement was
amended to provide ongoing additional borrowing capacity.
Outlook and Operating
Highlights
The Company has been working to strengthen its
financial position and operating profitability during the pandemic.
Revenues have been impacted significantly, and it is unclear how
the pandemic will continue to unfold and affect conditions for the
market in general and the Company’s businesses in particular.
The extensive measures taken to reduce operating
expenses were implemented to ensure the Company’s businesses can
operate profitably at the reduced revenue levels without the wage
subsidy. It was unclear initially as to how long and how much
subsidy would be received. The subsidies have helped, but are, as
of September, at much lower levels. The wage roll-backs have been
viewed as temporary measures that are not sustainable for a
prolonged period. Alternative cost savings initiatives have been
pursued and management and staff have been working hard to generate
higher levels of revenue to allow the wage roll-backs to be
reversed as much as possible.
The Company is now in a significantly stronger
financial position with which to 1) operate at the lower levels of
revenue and profitability currently being experienced, 2) have the
financial capacity to handle restructuring costs required, weaker
receivables and other cash obligations and 3) withstand further
economic uncertainty, additional waves of the pandemic and any
related impact on revenues and cash flow.
OPERATING HIGHLIGHTS
While the pandemic is still affecting the
Company’s businesses to varying degrees, the Company’s digital
media, data, and information businesses have held up relatively
well. The underlying fundamentals and value of these products have
proven resilient despite the challenging market conditions.
Revenues have begun to recover in a number of
areas and are gradually improving on an overall basis. The 26.8%
decline in consolidated revenues for the third quarter was an
improvement from the 32% decline in the second quarter. Third
quarter revenues were impacted significantly by the cancellation of
the Company’s two outdoor farm shows in July and September. Virtual
shows were run instead, which attracted a large audience and
offered good value to attendees and sponsors, but had significantly
less revenue.
Q3 HIGHLIGHTS:
|
• |
Local Digital Media revenues, including a partial interest in
Village Media, were off only 1% for the quarter compared to the
same period in the prior year, an improvement from the 10%
year-over-year decline in the second quarter. |
|
|
|
• |
Efforts to adjust sales focus and product offerings and pivot to
areas of demand have been effective in maintaining digital revenues
and providing marketing results for advertisers during the
pandemic. |
|
|
|
• |
Digital audience growth was strong as the Company’s Local News
Network monthly page views grew 23% vs. last year. This growth
continued a consistent pre-COVID trend and accelerated due to the
focus on local news and COVID related issues. |
|
• |
Environmental and Property Information revenues were up 12% during
the quarter compared to the same period in the prior year. |
|
|
|
• |
REW (the Company’s residential real estate portal) had record
traffic and revenues were up 50% in the quarter as the residential
real estate market rebounded. |
|
|
|
• |
STP and ERIS were up 6% in revenue during the quarter. |
|
• |
Glacier FarmMedia revenues decreased 44% as compared to the same
period in the prior year as a result of the conversion of the farm
shows to virtual from outdoor. Revenues were off 14% during the
quarter excluding the farm shows. Demand for food and agricultural
output has remained strong during the pandemic. |
|
• |
The energy and mining group revenues were off 15%, a significant
improvement from the 25% decline in the second quarter. Significant
cost reductions have offset the decline in revenues. |
|
• |
Print community media advertising revenues, including joint
ventures and associates, were off 30% for the quarter compared to
last year, an improvement from the 49% year-over-year decline in
Q2. Operating costs have been reduced significantly in response to
the revenue declines. The federal government Aid to Publishers
(“ATP”) program was expanded to include non-paid publications. The
majority of the Company’s publications are free distribution, so
the expansion of the ATP program helped offset the revenue declines
in these markets. |
|
• |
Overall, the Company’s operating profitability is improving.
Consolidated EBITDA including joint ventures and associates was
$2.4 million for the quarter excluding wage subsidies. |
It is encouraging that the efforts and
investment made in the core areas of focus for the Company prior to
the pandemic have allowed demand for these products and services to
be resilient during the pandemic. The respective brands, market
positions and value to customers have remained strong.
Print advertising revenues have declined the
most, but are improving. They are expected to recover further from
current levels in the near term then continue their secular
decline. The Company is planning for the financial costs relating
to newspaper restructurings that may be required in the future. It
owns real estate in some of its newspaper markets that can be sold
to partially offset these costs. The new ATP program will help
extend the life of the newspapers if it continues.
The Company and its partners are seeing that
local digital media businesses can operate on a standalone basis
without newspapers, and can be operated with newspaper staff as
well as new staff. The Company’s objective is to transform local
media operations from mostly print newspaper revenue to digital
operations over time.
Overall, the Company expects that as time
progresses, and the pandemic abates, revenues will recover. Due to
the uncertainty surrounding the continued magnitude and impact of
the COVID pandemic on the economy, it remains unclear what the
impact will be on the Company’s operations and financial position
in the short-term.
The Company is working to reach the inflection
point where the revenue, profit and cash flow from its data,
analytics and intelligence products and digital media products
exceeds the decline of its print advertising related profit and
cash flow. The Company had made good progress in this regard in the
first two months of the first quarter of 2020 before the impact of
the pandemic set in. The Company can operate at lower levels of
revenue from its digital media, data and information operations in
the future and generate strong profit and cash flow without print
newspapers.
Q3 2020 OPERATIONAL
PERFORMANCE
Consolidated revenue for the period ending
September 30, 2020 was $35.3 million, down $12.9 million or 26.8%
from the same period in the prior year. Consolidated EBITDA was
$8.6 million for the period, up $6.5 million from the same period
in the prior year. Including the Company’s share of joint ventures
and associates, revenue was $42.9 million, down $15.9 million or
27.0% and EBITDA was $10.1 million, up $6.7 million.
The Company recorded wage subsidies from the
Canadian Emergency Wage Subsidy of $7.1 million for the quarter.
Consolidated EBITDA was $1.4 million excluding the wage subsidy and
the Company’s share of joint ventures and associates.
The federal government announced that the wage
subsidy program will continue until June 2021, but at reduced
levels (a reduction of more than 70% currently, with the level of
reduction increasing in phases).
As stated, the Company has implemented a wide
variety of cost reductions in response to the decline in revenues.
These have included wage roll-backs, reduced work weeks, layoffs
and a wide variety of other cost reduction measures.
The Company is monitoring conditions on an
ongoing basis and will respond accordingly. Revenues have been
recovering gradually, and the Company is working to maintain
sufficient levels of operating income within these levels, and
making concerted efforts to bring revenues back further and
increase profits and cash flow.
While costs have been reduced, the Company is
trying as much as possible to avoid the adverse impact of laying
off capable staff that are required to maintain product quality,
sales capacity, customer service, sufficient handling of workload
and general operating effectiveness. The objective is to be in as
strong a competitive and market position as possible as the
pandemic abates. The implementation of wage roll-backs was intended
to allow more staff to remain employed. As stated, the Company
expects to reverse the wage roll-backs as revenues are increased
and alternative cost savings are realized.
Although capital expenditures have been reduced,
continued operating expense investments are being made in some of
the key strategic development initiatives, including the REW
digital real estate marketplace, new weather and agricultural
markets subscription-based products, and digital community media
products.
Financial Position. As at
September 30, 2020, senior debt was $8.0 million, and total current
and long-term debt was $10.6 million, down from $26.5 million as at
June 30, 2020. The Company’s consolidated non-recourse,
non-mortgage debt is in a nil position net of cash on hand as a
result of significant debt repayment in 2019.
The Company’s revolving facility has been
classified as current based on its maturity date. The Company
expects to renegotiate its banking agreement well before
maturity.
The Company has $2.2 million of deferred
purchase price obligations owing over the next year and a $7.5
million vendor-take back receivable over the next three years
resulting from the sale of the Company’s interest in Fundata.
Shares in Glacier are traded on the Toronto
Stock Exchange under the symbol GVC.
For further information please contact Mr. Orest
Smysnuik, Chief Financial Officer, at 604-708-3264.
ABOUT THE COMPANY
Glacier Media Inc. is an information &
marketing solutions company pursuing growth in sectors where the
provision of essential information and related services provides
high customer utility and value. The Company’s products and
services are focused in two areas: 1) data, analytics and
intelligence; and 2) content & marketing solutions.
FINANCIAL MEASURES
To supplement the consolidated financial
statements presented in accordance with International Financial
Reporting Standards, Glacier uses certain non-IFRS measures that
may be different from the performance measures used by other
companies. These non-IFRS measures include earnings before
interest, taxes, depreciation and amortization (EBITDA) and all
measures including joint ventures and associates which are not
alternatives to IFRS financial measures. These non-IFRS measures do
not have any standardized meanings prescribed by IFRS and
accordingly they are unlikely to be comparable to similar measures
presented by other issuers.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking
statements that relate to, among other things, the Company’s
objectives, goals, strategies, intentions, plans, beliefs,
expectations and estimates. These forward-looking statements
include, among other things, statements relating to our
expectations regarding revenues, expenses, cash flows, future
profitability, and the effect of our strategic initiatives and
restructuring, including our expectations to grow certain
operations, invest in key strategic areas and, to realize cost
efficiencies; our expectations regarding continued federal
government wage subsidies at reduced levels; the expectation that
the effects of the COVID-19 pandemic will be temporary in nature
and the Company’s expectation that revenues will recover as the
pandemic abates; and the Company’s belief that it has adequate
liquidity to operate at lower revenue levels during the pandemic.
These forward-looking statements are based on certain assumptions,
including continued economic growth and recovery and the
realization of cost savings in a timely manner and in the expected
amounts, which are subject to risks, uncertainties and other
factors which may cause results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements, and undue reliance should not be placed
on such statements.
Important factors that could cause actual
results to differ materially from these expectations include
failure to implement or achieve the intended results from our
strategic initiatives, the failure to reduce debt and the other
risk factors listed in our Annual Information Form under the
heading “Risk Factors” and in our MD&A under the heading
“Business Environment and Risks”, many of which are out of our
control. These other risk factors include, but are not limited to,
the impact of Coronavirus, that future cash flow from operations
and the availability under existing banking arrangements are
believed to be adequate to support financial liabilities and that
the Company expects to be successful in its objection with CRA, the
ability of the Company to sell advertising and subscriptions
related to its publications, foreign exchange rate fluctuations,
the seasonal and cyclical nature of the agricultural and energy
sectors, discontinuation of government grants, general market
conditions in both Canada and the United States, changes in the
prices of purchased supplies including newsprint, the effects of
competition in the Company’s markets, dependence on key personnel,
integration of newly acquired businesses, technological changes,
tax risk, financing risk, debt service risk and cybersecurity
risk.
The forward-looking statements made in this news
release relate only to events or information as of the date on
which the statements are made. Except as required by law, the
Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated events.
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