Billionaire Investor Says “No One Believes the Numbers” of Projo’s Parent Co. -Ad & Circulation Fall
Tuesday, November 05, 2019
The numbers for GateHouse Media are bad and getting worse -- and this sparked direct questions during the third-quarter investors' call from hedge fund billionaire Leon Cooperman. He is questioning the value of the company's numbers and whether the upcoming merger and financial claims are viable.
He is listed as #268 on the Forbes list of wealthiest Americans and has a net worth of a reported $3.2 billion.
GateHouse and Gannett shareholders are scheduled to vote on the proposed merger on November 14.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe deal between GateHouse Media and Gannett creates a massive national newspaper group owning nearly 300 daily newspapers across the country with major holdings in New England.
GateHouse owns the Providence Journal, Worcester Telegram, Fall River Herald, Standard of New Bedford, Newport Daily News, and dozens of other daily and weekly newspapers across New England.
According to third-quarter numbers — year-over-year at the same stores — GateHouse's print revenue declined by 15.9 percent. In the second quarter, print revenue fell 15.3 percent and first quarter it declined 14.8 percent.
And, print circulation declined 5.8 percent in the third quarter — after declining 5.5 percent in both the first and second quarters.
Even the company’s bright spot -- digital -- is slowing and revenue is declining. In the same store and year over year, digital revenue growth dropped from first-quarter growth of 23.8 percent to 12.2 percent in the 2nd quarter and just 7.3 percent in the third quarter.
Overall digital growth fell from $51.2 million in the second quarter to $50 million in the third.
Cooperman “Nobody Believes the Numbers”
In an unusual exchange, Cooperman said to Mike Reed Chairman and CEO of GateHouse during the call:
Leon Cooperman -- Omega Family Office -- Analyst
When I listen to you, Mike, on the call, I'm reminded of the deceased comedian, Rodney Dangerfield, who used to complain he gets no respect. And so I look at Page 88 of the S4, the proxy statement that came out and connects with the merger. And if I take the numbers there, the stock is presently trading at 2.7 times EBITDA. And this assumption -- so nobody believes the numbers, no, on the resized dividend, the stock gives 9%, your 2.7 times EBITDA.
In 2021, you're going to fix the financing. Nobody believes it. And I think, part of the problem is Gannett's total revenues have been declining at over 9% over the past few quarters. New Media's revenues have been declining at around 7%.
In fact, I think, the Q3 was 7.9%. Post merger, you're projecting declines 3.5% in 2020, 1.5% in 2021 and down 0.4% in 2022. As regards margins, they're running 11% to 12% currently. Post merger, you're expecting 15.6%, 18.6%, 21.3%, '20, '21, '22.
Now I can understand the margin expansion stemming from the synergies, but I don't understand how we go from revenue declines that are 7% or 8% to 3% or 4%. What is behind that and how confident they are that this is going to be the case?
Mike Reed -- Chairman and Chief Executive Officer
Yes. Thanks, Lee. I'm highly confident that that's going to be the case. And what's really driving the historical declines, which you'll see reverse as we go forward is print advertising.
And in the combined company over the next three years, print advertising is projected to go from over 30% to less than 15% of the total revenue. So 85% of our revenues will be driven by categories that we feel we can have either stable or growing. So we feel very confident over the three-year period that the biggest driver of declines, print advertising, will be a very small portion of our overall business. And that leads to the continuous revenue improvement you see on the page you noted in the proxy.
That's why we feel confident. And you're exactly right on margin. As we stabilize the top line, the synergies that we realize will improve our margin.
Read more from the transcript here
This story was first published 11/4/19 1:56 PM
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