Time Inc. Targets More Than $400M in Cost Savings
The owner of Time magazine, Entertainment Weekly, People and Fortune, which reported lower second-quarter financials, in late April decided to go it alone despite being approached about a sale.
Time magazine, Entertainment Weekly, People and Fortune owner Time Inc. on Tuesday reported lower second-quarter financials and said it is targeting more than $400 million in cost savings via various initiatives, the majority of which is expected to be implemented over the next 18 months.
The company, led by CEO Rich Battista, said it plans to use a portion of the savings from the "Strategic Transformation Program" to "invest in our future in key growth areas, including native and branded content, video, data and targeting, paid products and services and brand extensions."
Time Inc. reported a second-quarter loss of $44 million, compared with year-ago earnings of $18 million. On an operating basis, the loss amounted to $38 million, compared with a year-ago profit of $50 million. But adjusted earnings hit $13 million, down from $22 million, and adjusted operating income before depreciation and amortization, another profitability metric, came in at $88 million, compared with $89 million in the second quarter of 2016.
Second-quarter revenue fell 10 percent to $694 million.
"The third quarter represents an important turning point for the company as we are seeing strong momentum and sequential improvement of year-over-year trends for total advertising revenues," said Battista. With the cost-cutting program, he said the company sees "a path to a minimum range of $500 million to $600 million of adjusted operating income before depreciation and amortization within the next three to four years."
The year 2018 will be a year of stabilization in that financial metric before an expected increase after that, management said on an earnings call.
"On our last earnings call, we outlined aggressive actions — building on what we had accomplished to date — to reduce costs, expand margins, rationalize our portfolio and extend our brands into new growth revenue streams," said Battista in a statement. "We’ve been moving with speed and, most significantly, we are announcing today, a strategic transformation program based on a thorough review of Time Inc.’s business. Through this review, we have greater confidence in our path to accelerate the optimization of costs and revenue growth drivers."
The media firm in late April decided to go it alone despite takeover offers. "Over the past several months, there has been considerable speculation and news coverage regarding interest by various parties in acquiring Time Inc.," the company said at the time. "While Time Inc. had not initiated a process, the board of directors, consistent with its duties, evaluated a number of expressions of interest with the assistance of external advisors."
But it said the board determined that the company should continue to pursue its own strategic plan. Reports had said that magazine publisher Meredith was a frontrunner to acquire Time Inc. A possible sale had been in Wall Street's focus since it emerged late last year that an investor group led by Edgar Bronfman Jr., which included Len Blavatnik’s Access Industries, had made a buyout offer.