Despite reporting a first quarter loss of $14.8 million earlier this month, Tronc (NASDAQ: TRNC) went on a spending spree this week, purchasing The Virginian-Pilot Media Companies, LLC including The Virginian-Pilot, Virginia’s largest daily newspaper, for $34 million in cash from Landmark Media Enterprises. The newspaper was founded in 1865 and has Sunday circulation of about 132,000, at the end of 2017.

The acquisition also includes PilotOnline.com which had 1.9 monthly unique visitors in March 2018, Pilot Targeted Media and The Virginian-Pilot’s real estate portfolio which include its Norfolk headquarters, its printing and distribution facilities in Virginia Beach and satellite offices in Norfolk and North Carolina.

‘From its founding in 1865, The Virginian-Pilot has a long history of commitment to journalism. We are thrilled to welcome The Virginian-Pilot to the tronc portfolio. The inclusion of The Virginian-Pilot further strengthens our presence in the region and renews our commitment to our longstanding tradition of journalistic excellence,’ said Justin Dearborn, tronc chairman and CEO, in a news release.

Rusty Fridell, executive vice president and general counsel of Landmark Media Enterprises, said the newspaper would be able to effectively continue its work with the resources provided by Tronc.

News of the acquisition comes just weeks after Tronc released its first quarter 2018 results. Highlights from that financial report include:

• Total revenue was $355.6 million, compared to $366.1 for Q1 2017.
• Circulation revenue was $134.2 million, a 12.2 percent increase year-over-year.
• Total advertising revenue was $156.4 million. Digital advertising revenue was $30.9 million.
• Digital-only subscribers increased 90 percent to 342,000, compared to 180,000 at the end of Q1 2017.
• Content revenues for troncX, including digital-only subscriptions, grew 61.7 percent year-over-year.
• Average monthly unique visitors were 75.3 million, a 28 percent increase over Q1 2017.
• Total operating expenses were $374.4 million, a 5.7 percent increase.
• The company reported a $14.8 million, or $0.42 per share, net loss for the first quarter.

Unique circumstances that contributed to the first quarter’s results include:

• The company agreed to sell the Los Angeles Times, San Diego Union-Tribune and other California titles for $500 million.
• Tronc acquired majority ownership in BestReviews.
• The company continued to integrate the recently-acquired New York Daily News into its operations.
• Tronc signed a deal with Cars.com to create a digital advertising partnership.
• The company also implemented newsroom and sales reorganization plans.
• The company full expensed the $15.0 million payout to Michael W. Ferro, Jr. upon his retirement from the company.

The company estimates its 2018 total revenue will range between $1.00 billion and $1.03 billion. Adjusted EBITDA is expected to range between $100 million and $110 billion.

Tronc investors were not impressed. The day before the financials were reported – May 8, 2018 – Tronc stock was valued at $18.36 per share. Stock grew slightly on May 9 to $18.83 per share, but has since dropped to $16.29 per share as of 5:58 p.m. EDT on May 30.

Insider Take:

If it weren’t for the payout to Michael Ferro, Tronc would likely have turned a profit or at least broken even during the first quarter. That said, revenues are still down year-over-year, and while digital subscriptions are up, they are still not what they need to be to indicate any long-term sustainability. For the last several years, Tronc has been volatile in every way imaginable – from leadership and brand identity to assets and financials. It isn’t clear what direction Tronc is going or even if Dearborn knows what that direction is. It will be interesting to watch Tronc as it buys and sells throughout 2018 and to see where the company ends up.