Last week, McClatchy (NYSE: MNI) reported growth in digital-only subscribers for the 11^th consecutive quarter. The 162-year-old company now has 155,000 digital-only subscribers, a 51.1 percent increase year-over-year. The company also saw a 10.1 percent increase in digital-only advertising revenue compared to Q4 2017, but the news wasn’t all good. Perhaps the most significant item to come out of the company’s fourth quarter financial report was a fourth quarter net loss of $27.5 million, or $3.52 per share. In Q4 2017, the company had net income of $61.1 million, or $7.91 per share.

“In the context of a business environment that continues to be challenging for the local media industry, we made significant progress in our digital transformation while delivering on our mission of producing strong, independent local journalism in the public interest that is essential to the communities we serve,” said Craig Froman, McClatchy president and CEO, in a March 7 news release.

“We achieved key proof points of our digital transformation and accelerated pace. We grew digital-only subscribers by 51 percent year-over-year in the fourth quarter, and they were up 13.5 percent sequentially from the third quarter of 2018. This is the eleventh consecutive quarter of digital subscription growth and indicates that the digital subscription platform we have built is delivering value, keener insight and benefit to our business,” Froman added.

Other highlights from the fourth quarter financials include the following:

• Total revenues for Q4 were $213.0 million, a 13 percent decrease year-over-year.
• McClatchy estimates that the extra week* contributed about $14.0 million in revenue and $2.7 million additional adjusted earnings before interest, taxes and depreciation and amortization.
• Total advertising revenues were $114.8 million, a 16.9 percent decrease year-over-year.
• The rates of decline in Q4 for total revenue and advertising were the lowest for all of 2018.
• Digital-only advertising revenue grew 5.2 percent and total digital advertising revenue was flat year-over-year.
• Direct marketing advertising revenue was down 17.7 percent.
• Audience revenue was down $84.4 million, or 11.2 percent year-over-year.
• Digital audience revenue increased 2.8 percent.
• Digital-only audience revenue from digital subscriptions was up 47.6 percent.
• At the end of the quarter, McClatchy’s properties in 30 markets in 14 states (e.g., Miami Herald, The Kansas City Star, Sacramento Bee) had 155,500 subscribers.
• Average monthly total unique visitors to online properties were 61.4 million for the year.
• Adjusted EBITDA was $48.0 million, a decrease of 26.5 percent year-over-year.

[*The company’s fiscal 2018 reported 52 weeks of results, compared to 53 weeks in 2017, accounting for some of the differences.]

Financial highlights from the full year 2018 include:

• Total revenues were $807.2 million, a decrease of 10.7 percent over 2017.
• Total advertising revenues were $416.7 million, a 16.4 percent decrease over 2017.
• Total digital advertising revenues increased 4.1 percent, and digital-only advertising was up 13.5 percent.
• Audience revenues were $339.5 million, a 6.6 percent decrease over 2017.
• Total digital audience revenues increased 2.6 percent over 2017.
• Digital-only audience revenue from subscriptions increased 63.6 percent year over year.
• For the year, McClatchy reported a net loss of $79.8 million, or $10.27 per share, compared to a net loss of $332.4 million, or $43.55 per share, for 2017.

The company offered the following outlook for 2019:

• The company expects to see growth in digital revenue, including advertising and subscriptions.
• McClatchy believes its new SportsPass subscriptions will contribute to the increase in subscription revenue.
• Print newspaper advertising will decline, and digital-only advertising revenue will surpass it.
• Digital subscriptions will offset print subscriptions.
• McClatchy expects to realize $12 million to $13 million in savings from the 220+ employees who opted into a voluntary retirement buyout offered in February.
• Capital expenditures will be between $6 million and $9 million, real estate sales will be used to pay down debt, and the company will make a $3 million pension contribution this year.

Investors didn’t have a strong reaction to the earnings report. On March 7, McClatchy stock was valued at $5.24 per share. It got a slight bump to $5.37 per share on March 8, but it has since dropped to $5.10 per share, as of 4 p.m. Eastern yesterday.

Insider Take:

McClatchy may still own some key properties, and it may have grown digital traffic and posted lower losses than last year, but this legacy media organization is in trouble. While 155,000 digital-only subscribers represents 51.1 percent growth, that’s a pretty low number for digital subscribers for a company with a presence in 30 different markets. If McClatchy had pivoted away from print and toward digital years ago, they would be in a much better position now. Strategically, they are way behind. Their SportsPass subscription has the potential to help McClatchy continue growth, but will it be too little too late?