Annual Letter

Welcome to our Company’s first annual letter—yes this is my attempt to copy something that Warren Buffett does each year at Berkshire Hathaway.  He’s been an inspiration to me for some time now.   Let’s start off with results…

2021 Highlights & Results 

  • Total company revenue was +55% in 2021 vs. 2020.  This is inclusive of acquisitions and any publication changes and additions.  
  • EBITDA operating margin finished the year at 14%; this is lower than expected largely as a result of using cash flow for investments in technology partnerships and people.  We see a clear path to a margin of 20%-25% depending on the market.  
  • We completed three acquisitions in 2021, expanding our local footprint in Minnesota and Wisconsin while adding a totally new market in New Mexico.  Each of these acquisitions came with excellent groups of people.   
  • Our digital revenue monthly run rate tripled from Jan 2021 to Dec 2021 and is now 27% of total advertising revenue.  Our Sales team amazes me with these results and the deal sizes they’re closing with small, medium and large businesses.  
  • To-date, we’ve launched new websites in every one of our markets.  We’ve partnered with Town News on all the them except in Queen Creek, where we license the Village Media platform through a partnership with them and Google.  
  • Page views have more than tripled since this time last year and the number of users has doubled!   We now have a digital audience that contributes to growing revenue and profit.  It’s important to note that both digital revenue and audience were practically at ground zero at each business that we acquired in the past three years with the exception of the digital agency in Kiel, WI.
  • Reader revenue is 15% of total company revenue.  The December run rate is +20% vs last January.  These numbers are driven primarily by print subscriptions and no price increases.   

Our Strategy

We’re only three years in, but I’m happy to report that our strategy is indeed working.  We’ve completed 10 acquisitions and now operate in five states with 23 publications and hyper-local websites, including several new markets where we’ve launched just hyper-local websites.  It’s not about print or digital.  Content and our established, trusted newspaper brands are in the center of our strategy.  We’re focused on revenue diversification but Advertising is our primary revenue source without debate; all other revenue that we generate is complimentary.  The single biggest factor to executing on our strategy is putting forth a TOP PERFORMING SALES COMPANY.  This positions us to fund resources needed in News and each functional area, to rapidly grow our digital agency while continuing to maximize the value of our print publications and other products, to grow our digital audience and 1st party data, to service and payoff our debt, and to invest in more acquisitions and other non-traditional media businesses to diversify our portfolio.  Bottom-line though, if we can’t grow advertising revenue, we have no strategy.         

All of our digital content is free with the exception of the e-edition.  I don’t believe readers are ever going to pay for digital access to local news.  If they do, those dollars will not support a viable, growing revenue business over the next five to 10 years.  We have not increased print subscription pricing in any market over the past three years, even as we’ve significantly improved our products.  We recently reduced our store price in half in the Vermont market.  

We’ll continue to publish print newspapers and niche publications as long as they contribute positively to net income; we’re not going to expedite print decline to force digital.  

Our revenue growth over the next five years will be organic and through additional acquisitions.  We plan to expand to 100 markets then we’ll take it from there.  Digital agency revenue will grow exponentially in current markets and as we expand into new markets.  One of our key short-term and long-term metrics is to deliver a 70-75% gross profit margin (costs excluding people) on total digital revenue generated.    

Our People 

I’d like to acknowledge every one of our employees, their dedication and all of the hard work being put forth in each market across the Company.  Over the past month or so, I’ve been able to meet with so many of them individually and in small groups, and it’s an impressive team—person by person, maybe the best team I’ve worked with in 20+ years.    

Employee retention in each functional area has been exceptional while we’ve recruited and onboarded a steady flow of new employees into the company.  We have competitive compensation plans, decent medical benefits, paid time off, and most recently, a new 401 (k) retirement savings plan with a respectable company match. 

I believe we have two of the best in the business running our Sales and Digital divisions.  Caleb Anderson is our VP of Sales that joined the Company in January 2021 shortly after we acquired several publications from Forum Communications.  Joe Mathes is our GM in Wisconsin and VP of Digital Strategy for the Company.  Joe and I are partners on our WMG affiliate company.

Other notable people additions or changes in 2021.   Sally Shepherd assumed responsibility for IT and Process Improvement for the Company.   Sally came to us via the Forum acquisition and provides strength and stability in these critical areas of the business.   Dave Pevonka also joined via the Forum acquisition.  He’s added stability and strength to Operations, Circulation and the Business Office in Cannon Falls.  Megan Ivey joined in a newly created position—Digital Marketing Fulfillment Manager, where she’s charged with the day-to-day management of the internal digital fulfillment operation.  Joe Paul joined the Company as a Digital Sales Manager in MN-WI.  Joe works with the team on closing new digital business and also develops his own book of business.   Jim Johnson came onboard as Managing Editor of the MN and WI businesses.  Jim brings great experience and renewed energy to the Newsroom in these markets.  Bridget Higdon was named Managing Editor for the Vermont business.   Bridget started with us as digital reporter in Chittenden County in July 2020 in the midst of the pandemic and was promoted several times in just 18 months.  Tara Jones was promoted to Managing Editor of the Madison market and continues to be responsible for the newsroom in Sheboygan.   Tara was originally hired as a digital reporter in Sheboygan in August 2020.  Pam Mathes was promoted to Director of Sales Operations in Wisconsin, where she manages sales activity to drive print and niche ad revenue.  Kelly Mixer came onboard as Reporter/Editor for the new business launched in Queen Creek, AZ.  She brings 25+ years of experience and has hit the ground running in helping to build a digital media presence in Queen Creek.  And, mostly recently, Kemmie Ryan joined as Editor-in-Chief of our City Sun Times publication and brand in Arizona.   Kemmie comes from the magazine business and is charged with breathing new energy into those products and digital audience.   

I did want to acknowledge another special partner of mine in the business, my wife Denise.   When we set out to build our own company late in 2018, I asked her if she could just handle payroll after our first acquisition in Vermont.  For the previous 19 years, she was busy with a more complex job than I could ever imagine—staying at home to raise our three kids.  As we sit here today, Denise handles payroll for our entire company.  She has expanded her role to also handle accounts payable for the entire company.  When invoices come in, she books them in the finance system real-time.  This is so valuable because we know where we stand with expenses every day of the week–I don’t need a month end process to know how we did in any given month.  She handles many of the behind-the scenes tasks associated to HR.  Lastly, and maybe most importantly, she’s a sounding board, a voice of reason and so much more when we’re having discussions about the Company, which is pretty much every day.  What she doesn’t know about the legacy newspaper business is a breath of fresh air!     

 A look ahead…

Our Company’s top priority in 2022 is to do even better with retaining and developing employees in each functional area.  We’re going to keep hiring and adding talent.  Combined, this will lead to taking care of our customers and readers while achieving our revenue and profit goals in 2022.  

From a revenue number perspective, we expect to grow in 2022 by minimally 50%.  This goal calls for doubling digital revenue, hitting prior year level with print advertising and completing a few acquisitions; we expect to close our biggest acquisition to-date in the next few months.  

Joe, Caleb and I will continue to work closely together in taking next steps to elevate the performance of our Sales company.   We have a really special Sales team in place that is only going to keep getting better.  The playbook is intense, but it’s fun because we have so many people that want to win and make money!     

Our talented Newsrooms will continue to improve when it comes to producing content and growing our digital audience.   We’re going to launch into four or five new markets with hyper-local websites but the majority of our focus will be on growing audience in each of our current markets.   I should also add that we’re pacing towards relaunching a few print publications in several markets to address what we think is an opportunity to better serve those communities (have to be quiet on where for competitive reasons).   

We’re open-minded about acquisitions in 2022.   We could do one or we could do five or six.   It’s pretty cool that we have the team and back-end infrastructure that can move quickly and intelligently with integrating additional businesses into the Company.  

The past few years have certainly come with challenges associated with the Covid-19 pandemic.  I feel very fortunate that we’ve been able to significantly grow and strengthen the Company during this time.  

Thank you to all of our employees and partners that play a role with building a fast-moving, adaptive and top-performing media company.  We’re just getting started and the best is yet to come!

Jim O’Rourke