Digital Advertising Continues Its Strong Performance
NEW YORK, Oct. 28 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the third quarter
ended September 30, 2008. The company reported third quarter revenue of $66.5
million, led by robust growth in the Merchandising segment, and strong online
advertising revenues.
Charles Koppelman, Executive Chairman of the Board, said, "MSLO delivered
results right in line with our expectations, supporting our confidence in our
strategy and the strong positioning of our business. Performance was led by
Merchandising's adjusted EBITDA, which more than doubled from the prior-year
period and strong growth in Broadcasting led by the addition of Chef Emeril
Lagasse to our team. Our digital business also continued to perform well,
while our print business held its own in a tough environment. We are
sensitive to economic concerns but feel good about our businesses in the
fourth quarter and beyond as we continue to expand our brand franchises both
at home and internationally. At the same time, we will continue to attract
and delight our customers and audiences every day with the content, ideas and
products that they expect and want."
Third Quarter 2008 Summary
Revenues were $66.5 million in the third quarter of 2008, compared to
$69.3 million in the third quarter of 2007. Excluding Blueprint, comparable
revenues in the third quarter of 2007 were $66.6 million. Merchandising
demonstrated strong results in the quarter due to new and expanded
initiatives, including the Emeril business, Martha Stewart Crafts and Martha
Stewart for 1-800-Flowers.com, the revenues for which are now recorded in
Merchandising. The addition of Emeril cable programming, including the
recently launched Emeril Green, was the primary driver behind Broadcasting
revenue growth during the quarter. The Publishing segment performed in line
with expectations, and the Internet segment continued to post gains in
advertising revenue and audience metrics.
Addressing Merchandising performance, Robin Marino, President of
Merchandising and Co-Chief Executive Officer, said, "Sales across the Martha
Stewart and Emeril product portfolios were very encouraging in the third
quarter, especially in light of the difficult retail environment. This
performance validates our diversification strategy and demonstrates that our
customers are finding value in our merchandise, with our products available at
attractive price points. In the near future, we look forward to introducing
several new products as well as a holiday favorite at Costco, and to the
continued performance of the Martha Stewart Collection exclusively at Macy's.
We also continue to grow our flowers program with 1-800-Flowers.com and our
craft lines with EK Success, available at Wal-Mart, Michaels stores and
independent retailers. As we continue to broaden our portfolio, our ultimate
goal is to make Martha Stewart products available to consumers across every
channel."
Wenda Harris Millard, President of Media and Co-Chief Executive Officer,
commented on the performance of the Company's Media businesses, stating,
"Advertising revenues from our magazines have held up well relative to a
difficult industry environment, while digital ad revenues grew 35%
year-over-year. Our commitment to developing both the content and tools our
users want is underscored by our investments in WeddingWire and, as we
announced this morning, we have agreed to invest in the invitation and event
management company Pingg Corp. and its website Pingg.com. These investments
will help continue to drive momentum in our Internet business. Our ability to
perform in this environment owes to both the volume of fresh, original content
we bring to our readers and users, as well as our 'omni' platform capability,
which provides advertisers unique ways to reach their audiences with both
their products and their brand messages."
Operating loss for the third quarter of 2008 was $(3.5) million, compared
to an operating loss of $(4.9) million for the third quarter of 2007.
The third quarter of 2008 includes cash and non-cash charges related to
severance and other one-time expenses, which negatively impacted the operating
loss by $3.5 million and Adjusted EBITDA by $3.2 million in the current
period.
Adjusted EBITDA for the third quarter of 2008 was $0.6 million, compared
to $(0.7) million in the prior-year period. Adjusted EBITDA for the third
quarter excluding the unusual corporate expenses would have been $3.8 million.
The improvement in Adjusted EBITDA was fueled by solid contributions from
Merchandising and Broadcasting.
Net loss per share from continuing operations was $(0.07) for the third
quarter of 2008, compared to a loss per share of $(0.08) for the third quarter
of 2007. Excluding the additional corporate costs, net loss would have been
$(0.3) million, or $(0.01) per share.
Third Quarter 2008 Results by Segment
Publishing
Revenues in the third quarter of 2008 were $34.5 million, compared to
$46.2 million in the prior year's third quarter. Lower advertising pages, a
shift in timing of special issues and the absence of Blueprint were partially
offset by rate gains.
Operating income was $2.1 million for the third quarter of 2008, compared
to $6.2 million in the third quarter of 2007.
Adjusted EBITDA was $3.0 million in the third quarter of 2008, compared to
$7.7 million in the prior year's quarter.
Highlights
- Total ad revenue decreased 18% in the quarter, when excluding the
prior-year contribution of special issues and Blueprint, which was
discontinued in December 2007. Ad rates witnessed continued strength
in the quarter.
- Comparable fourth quarter 2008 advertising revenue is currently
trending down in the high teens on a percentage basis, and visibility
remains limited.
Internet
Revenues were $3.0 million in the third quarter of 2008, compared to $2.2
million in the third quarter of 2007, when excluding $1.0 million revenue from
our flowers business in the prior year. Flowers revenue was previously
recorded in the Internet segment and is now recorded in the Merchandising
segment. The increase in revenue for the quarter resulted from advertising
revenue growth of 35% that was more than offset by the transition to the
Merchandising segment for the Martha Stewart for 1-800-Flowers.com program.
Operating loss was $(1.5) million in the third quarter of 2008, compared
with an operating loss of $(2.1) million in the third quarter of 2007.
Adjusted EBITDA was $(1.1) million in the third quarter of 2008, an
improvement from a loss of $(1.7) million in the third quarter of 2007.
Highlights
- Third quarter page views increased 57% over the prior year's quarter.
- The first-ever Halloween workshop on marthastewart.com has drawn
approximately 45,000 participants, averaging 10 return visits/month
with more than 80% returning in less than a day from their last visit.
Broadcasting
Revenues in the third quarter of 2008 were $14.3 million, up 62% from $8.8
million in the third quarter of 2007, with the growth primarily driven by
contributions from the Emeril business.
Operating income was $2.5 million for the third quarter of 2008, compared
with an operating loss of $(0.9) million in the third quarter of 2007.
Adjusted EBITDA was $3.0 million for the third quarter of 2008, compared
to a loss of $(1.0) million in the prior year's third quarter.
Highlights
- The fourth season of The Martha Stewart Show, which launched on
September 15th, continues to resonate with our core demographic.
- Emeril completed 26 episodes of Essence of Emeril and continued
shooting Emeril Green, which has been well received on Discovery's
Planet Green network.
- Whatever Martha!, a new weekly half-hour series premiered in primetime
on Fine Living Network.
Merchandising
Revenues were $14.6 million for the third quarter of 2008, as compared to
$11.0 million in the prior year's third quarter. The increase was driven by
the Emeril business, Martha Stewart Crafts, Martha Stewart for
1-800-Flowers.com, Martha Stewart Everyday at Sears Canada and the Martha
Stewart Collection exclusively at Macy's.
Operating income was $8.6 million for the third quarter of 2008, compared
to $3.6 million in the third quarter of 2007.
Adjusted EBITDA was $8.8 million for the third quarter of 2008, more than
double Adjusted EBITDA of $4.0 million in the prior year's third quarter.
Highlights
- Building on successes since last year's launch, the Martha Stewart
Collection at Macy's has expanded in key categories, including luxury
bedding, whiteware, cooks' tools and enameled cast iron cookware.
- Martha Stewart Crafts continues to perform well with healthy increases
in sales of Halloween products and crafts tools in Michaels stores and
independent retailers. The quarter also benefited from the extension
of the line to Wal-Mart stores.
- Martha Stewart for 1-800-Flowers.com will launch a Martha
Stewart-designed gift basket program for the holidays, along with an
advertising campaign across all MSLO media properties.
- During the fourth quarter, the Company is planning to roll out several
new products at Costco. The Kirkland Signature Martha Stewart Favorite
Holiday Ham, a popular product last holiday season, will also be
available.
Corporate Expenses
Total Corporate expenses were $(15.2) million in the third quarter of
2008, compared to $(11.7) million in the prior year's quarter. Adjusted EBITDA
loss was $(13.1) million in the current period, compared to $(9.8) million in
the prior-year period due largely to a $3.2 million charge related to staff
reductions and other corporate costs.
Trends and Outlook
Howard Hochhauser, Chief Financial Officer, commented, "Third quarter
performance met our expectations, as strong growth in Merchandising and
Broadcasting helped to offset the impacts of an industry-wide advertising
downturn. We have also continued to be disciplined about our cost structure.
The majority of the $3.2 million charge we incurred in the quarter was in
connection with staff reductions and represents, in its totality, real savings
when you take into account salaries, benefits and related facility savings.
Our balance sheet is sound with $50 million in net cash and cash equivalents,
or approximately $1 per share, and we have the capital resources to invest in
growth when the time is appropriate."
For the fourth quarter of 2008, we are targeting revenue of approximately
$83.0 million, operating income of approximately $10.5 million and adjusted
EBITDA of approximately $15.0 million. This outlook includes contributions
from the Emeril Lagasse acquisition.
For the full-year 2008, we are targeting revenue of approximately $295.0
million. We are targeting operating income, excluding third quarter charges
of $3.5 million, to be approximately $7.5 million, and targeting Adjusted
EBITDA, excluding third quarter charges of $3.2 million, to be approximately
$23.0. Our guidance is predicated on the anticipated consummation of certain
transactions, which we cannot guarantee will occur, as well as reductions in
discretionary spending.
The Company will host a conference call with analysts and investors on
October 28 at 11:00 a.m. ET that will be broadcast live over the Internet at
www.marthastewart.com/ir.
Use of Non-GAAP Financial Information
In addition to using net income to assess the organization's overall
financial health, Company management uses net income before interest, taxes,
depreciation, amortization and non-cash equity compensation ("adjusted
EBITDA"), a non-GAAP financial measure, to evaluate the performance of our
businesses on a real-time basis. Adjusted EBITDA is considered an important
indicator of operational strength, is a direct component of the Company's
annual compensation program, and is a significant factor in helping our
management determine how to allocate resources and capital. Adjusted EBITDA is
used in addition to and in conjunction with results presented in accordance
with GAAP. Management considers adjusted EBITDA to be a critical measure of
operational health because it captures all of the revenue and ongoing
operating expenses of our businesses without the influence of (i) interest
charges, which result from our capital structure, not our ongoing business
efforts, (ii) taxes, which relate to the overall organizational financial
return, not that of any one business, (iii) the capital expenditure costs
associated with depreciation and amortization, which are a function of
historical decisions on infrastructure and capacity, and (iv) the cost of
non-cash equity compensation which, as a function of our stock price, can be
highly variable, is not necessarily an indicator of current operating
performance for any individual business unit, and is amortized over the
appropriate period.
Adjusted EBITDA provides a means to directly evaluate the ability of our
business operations to generate returns on a real-time basis. We provide
disclosure of adjusted EBITDA because we believe it is useful for investors to
have means to assess our performance as we do. While adjusted EBITDA is a
customized non-GAAP measure, it also provides a means to analyze value and
compare our operating capabilities to those of companies with whom we compete,
many of which have different compensation plans, depreciation and amortization
costs, capital structures and tax burdens. But please note that our non-GAAP
results may differ from similar measures used by other companies, even if
similar terms are used to identify such measures.
A limitation of adjusted EBITDA is that it does not reflect the periodic
costs of certain capitalized tangible and intangible assets used in generating
revenues for our overall organization. Management evaluates the costs of such
tangible and intangible assets through other financial measures such as
capital expenditures. Management also evaluates the cost of capitalized
tangible and intangible assets by analyzing returns provided on the capital
dollars deployed. A further limitation of adjusted EBITDA is that it does not
include stock compensation expense related to our workforce. Adjusted EBITDA
should be considered in addition to, and not as a substitute for, net income
or other measures of financial performance reported in accordance with GAAP.
About Martha Stewart Living Omnimedia, Inc.
Martha Stewart Living Omnimedia, Inc. (MSLO) is a leading provider of
original "how-to" information, inspiring and engaging consumers with unique
lifestyle content and high-quality products. MSLO is organized into four
business segments: Publishing, Broadcasting, Merchandising, and Internet. MSLO
is listed on the New York Stock Exchange under the ticker symbol MSO.
Forward-Looking Statements
We have included in this press release certain "forward-looking
statements," as that term is defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are not historical facts
but instead represent only our current beliefs regarding future events, many
of which, by their nature, are inherently uncertain and outside of our
control. These statements can be identified by terminology such as "may,"
"will," "should," "could," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "potential" or "continue" or the negative of these
terms or other comparable terminology. The Company's actual results may differ
materially from those projected in these statements, and factors that could
cause such differences include: adverse reactions to publicity relating to
Martha Stewart by consumers, advertisers and business partners; downturns in
national and/or local economies; shifts in our business strategies; a loss of
the services of Ms. Stewart; a loss of the services of other key personnel; a
softening of the domestic advertising market; changes in consumer reading,
purchasing and/or television viewing patterns; unanticipated increases in
paper, postage or printing costs; operational or financial problems at any of
our contractual business partners; the receptivity of consumers to our new
product introductions; and changes in government regulations affecting the
Company's industries.
Certain of these and other factors are discussed in more detail in the
Company's most recent Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission, especially under the heading "Risk Factors," which
may be accessed through the SEC's World Wide Web site at http://www.sec.gov.
The Company is under no obligation to update any forward-looking statements
after the date of this release.
Web site: http://www.marthastewart.com
http://www.marthastewart.com/ir
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Three Months Ended, September 30,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $34,544 $46,215
Merchandising 14,616 10,951
Internet 3,032 3,270
Broadcasting 14,320 8,820
Total revenues 66,512 69,256
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 32,334 35,060
Selling and promotion 15,194 19,800
General and administrative 20,974 17,684
Depreciation and amortization 1,542 1,623
Total operating costs and expenses 70,044 74,167
OPERATING LOSS (3,532) (4,911)
OTHER INCOME / (EXPENSE)
Interest income, net - 774
Other income 366 -
Loss in equity interest (272) -
Total other income 94 774
LOSS BEFORE INCOME TAXES (3,438) (4,137)
Income tax provision (309) (277)
NET LOSS $(3,747) $(4,414)
LOSS PER SHARE -- BASIC AND DILUTED
Net loss $(0.07) $(0.08)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 53,590 52,479
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Nine Months Ended September 30,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $121,602 $134,311
Merchandising 43,931 34,904
Internet 9,686 11,983
Broadcasting 36,236 28,208
Total revenues 211,455 209,406
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 105,090 113,718
Selling and promotion 51,959 62,203
General and administrative 56,329 52,874
Depreciation and amortization 4,422 5,863
Total operating costs and expenses 217,800 234,658
OPERATING LOSS (6,345) (25,252)
OTHER (EXPENSE) / INCOME
Interest income, net 540 2,321
Other (expense)/income (765) 432
Loss in equity interest (486) -
Total other (expense)/income (711) 2,753
LOSS BEFORE INCOME TAXES (7,056) (22,499)
Income tax provision (597) (520)
NET LOSS $(7,653) $(23,019)
LOSS PER SHARE -- BASIC AND DILUTED
Net loss $(0.14) $(0.44)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 53,256 52,415
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
2008 2007
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $72,949 $30,536
Short-term investments - 26,745
Accounts receivable, net 44,603 94,195
Inventories 7,833 4,933
Deferred television production costs 4,386 5,316
Income taxes receivable 9 513
Other current assets 5,008 3,921
Total current assets 134,788 166,159
PROPERTY, PLANT AND EQUIPMENT, net 14,514 17,086
GOODWILL AND OTHER INTANGIBLE ASSETS, net 104,979 53,605
INVESTMENT IN EQUITY INTEREST, net 3,867 -
OTHER NONCURRENT ASSETS 21,995 18,417
Total assets $280,143 $255,267
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $30,746 $27,425
Accrued payroll and related costs 15,404 13,863
Income taxes payable 428 1,246
Current portion of deferred
subscription income 21,549 25,578
Current portion of other
deferred revenue 8,679 5,598
Current portion loan payable 1,500 -
Total current liabilities 78,306 73,710
DEFERRED SUBSCRIPTION REVENUE 7,155 9,577
OTHER DEFERRED REVENUE 13,809 14,482
LOAN PAYABLE 21,000 -
OTHER NONCURRENT LIABILITIES 2,881 1,969
Total liabilities 123,151 99,738
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized:
27,714 and 26,738 shares issued in
2008 and 2007, respectively 277 267
Class B common stock, $0.01 par value,
150,000 shares authorized:
26,690 and 26,722 shares outstanding in
2008 and 2007, respectively 267 267
Capital in excess of par value 281,895 272,132
Accumulated deficit (124,015) (116,362)
Accumulated other comprehensive loss (657) -
157,767 156,304
Less class A treasury stock --
59 shares at cost (775) (775)
Total shareholders' equity 156,992 155,529
Total liabilities and
shareholders' equity $280,143 $255,267
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended September 30,
(unaudited, in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income/(loss), a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income, depreciation and amortization and
non-cash equity compensation are added back to operating income/(loss).
2008 2007
ADJUSTED EBITDA
Publishing $2,972 $7,736
Merchandising 8,765 4,047
Internet (1,054) (1,720)
Broadcasting 2,979 (1,009)
Corporate Expenses (13,084) (9,772)
Adjusted EBITDA 578 (718)
NON-CASH EQUITY COMPENSATION
Publishing 791 1,192
Merchandising 161 377
Internet 22 85
Broadcasting 143 (407)
Corporate Expenses 1,451 1,323
Total Non-Cash Equity Compensation 2,568 2,570
DEPRECIATION AND AMORTIZATION
Publishing 93 298
Merchandising 23 92
Internet 433 342
Broadcasting 290 248
Corporate Expenses 703 643
Total Depreciation and Amortization 1,542 1,623
OPERATING INCOME / (LOSS)
Publishing 2,088 6,246
Merchandising 8,581 3,578
Internet (1,509) (2,147)
Broadcasting 2,546 (850)
Corporate Expenses (15,238) (11,738)
Total Operating Loss (3,532) (4,911)
OTHER INCOME / (EXPENSE)
Interest income, net - 774
Other income 366 -
Loss in equity interest (272) -
Total Other Income 94 774
LOSS BEFORE INCOME TAXES (3,438) (4,137)
Income tax provision (309) (277)
NET LOSS $(3,747) $(4,414)
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Nine Months Ended September 30,
(unaudited, in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income/(loss), a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income, depreciation and amortization and
non-cash equity compensation are added back to operating income/(loss).
2008 2007
ADJUSTED EBITDA
Publishing $13,422 $16,893
Merchandising 24,565 15,180
Internet (4,250) (5,698)
Broadcasting 4,878 768
Corporate Expenses (33,989) (31,091)
Adjusted EBITDA 4,626 (3,948)
NON-CASH EQUITY COMPENSATION
Publishing 2,214 3,410
Merchandising 897 1,090
Internet 173 249
Broadcasting 603 6,640
Corporate Expenses 2,662 4,052
Total Non-Cash Equity Compensation 6,549 15,441
DEPRECIATION AND AMORTIZATION
Publishing 286 886
Merchandising 73 285
Internet 1,302 847
Broadcasting 700 1,947
Corporate Expenses 2,061 1,898
Total Depreciation and Amortization 4,422 5,863
OPERATING INCOME / (LOSS)
Publishing 10,922 12,597
Merchandising 23,595 13,805
Internet (5,725) (6,794)
Broadcasting 3,575 (7,819)
Corporate Expenses (38,712) (37,041)
Total Operating Loss (6,345) (25,252)
OTHER (EXPENSE) / INCOME
Interest income, net 540 2,321
Other (expense)/income (765) 432
Loss in equity interest (486) -
Total Other (Expense)/Income (711) 2,753
LOSS BEFORE INCOME TAXES (7,056) (22,499)
Income tax provision (597) (520)
NET LOSS $(7,653) $(23,019)
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Guidance Reconciliation
(in millions)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income, a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income, depreciation and amortization and
non-cash equity compensation are added back to operating income.
Fourth Quarter Guidance Reconciliation
Guidance
Adjusted EBITDA $15.0
Depreciation and Amortization (2.5)
Non-Cash Equity Compensation (2.0)
Operating Income 10.5
Interest and Other Income / (Expense) -
Pre-tax Income 10.5
Income Taxes -
Net Income $10.5
Earnings Per Share $0.20
Avg. Diluted Shares Outstanding 53.6
Full Year 2008 Guidance Reconciliation
Guidance
Adjusted EBITDA (a) $20.0
Depreciation and Amortization (7.0)
Non-Cash Equity Compensation (9.0)
Operating Income (a) 4.0
Interest and Other Expense (1.0)
Pre-tax Income 3.0
Income Taxes -
Net Income (a) $3.0
Earnings Per Share $0.06
Avg. Diluted Shares Outstanding 53.9
(a) Full-year 2008 forecasted Adjusted EBITDA includes the $3.2 million
one-time cash charge incurred in the third quarter. Excluding the one-
time charge, full-year 2008 Adjusted EBITDA, Operating Income and Net
Income are expected to be approximately $23.0 million, $7.5 million and
$6.5 million, respectively.
SOURCE Martha Stewart Living Omnimedia, Inc.
CONTACT: Elizabeth Estroff, SVP, Corporate Communications of Martha
Stewart Living Omnimedia, Inc., +1-212-827-8281, eestroff@marthastewart.com/
Web Site: http://phx.corporate-ir.net/phoenix.zhtml?c=96022&p=irol-IRHome
http://www.marthastewart.com
http://www.marthastewart.com/ir /
(MSO)
