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Annual Report ANNUAL REPORT 1345 Avenue of the Americas, 45th Floor New York, NY 10105 (212) 479-3160 www.newmediainv.com CORPORATE INFORMATION NEW MEDIA BUSINESS OVERVIEW* BOARD OF DIRECTORS PORTFOLIO OVERVIEW NEW MEDIA REACH Wesley R. Edens Chairman of the Board OF OUR DAILY OPERATE IN OVER 485 MARKETS NEWSPAPERS HAVE ACROSS 31 STATES Theodore P. Janulis BEEN PUBLISHED FOR (1) 100% Board Member MORE THAN 50 YEARS Kevin Sheehan Board Member (1) 560+ Laurence Tarica COMMUNITY (1) Board Member PUBLICATIONS Michael E. Reed REACH OVER 19 MILLION Board Member PEOPLE ON A WEEKLY BASIS (1) Member of Audit Committee, Nominating and 124 Corporate Governance Committee and Compensation Committee DAILY NEWSPAPERS CORPORATE OFFICERS Michael E. Reed 1,450+ Chief Executive Officer & President IN MARKET 485+ SERVE OVER RELATED Gregory W. Freiberg WEBSITES SALES 190K Chief Financial Officer & Chief Accounting Officer REPRESENTATIVES SMALL & MEDIUM BUSINESSES Kirk Davis DIGITAL MARKETING Chief Operating Officer SERVICES BUSINESS Cameron MacDougall Secretary CORPORATE HEADQUARTERS CUMULATIVE COMMON DIVIDENDS SINCE SPIN-OFF* New Media Investment Group Inc. 1345 Avenue of the Americas, 45th Floor New York, NY 10105 www.newmediainv.com $2.16 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM $1.83 Ernst & Young LLP Five Times Square New York, NY 10036-6530 $1.50 SHAREHOLDER SERVICES, TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company $1.17 6201 15th Avenue Brooklyn, NY 11219 $0.84 (800) 937-5449 STOCK EXCHANGE LISTING $0.54 New Media Investment Group Inc. is listed on the New York Stock Exchange (NYSE:NEWM) $0.27 INVESTOR INFORMATION SERVICES New Media Investment Group Inc. 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Tel: (212) 479-3160 Email: [email protected] *As of December 27, 2015. DEAR FELLOW SHAREHOLDERS: 2015 was another successful year for New Media Investment Group Inc. (“New Media”, “we”, or the “Company”) as we continue to execute on all aspects of our strategy. Since becoming a public company nearly two years ago, New Media’s business model has been consistent, and very productive with a total return to shareholders of over 65% as of year-end 2015. As the Company continues to mature, we remain focused on generating value for our shareholders by focusing on the following: 1) Grow our revenue and cash flows organically through new businesses, digital initiatives, and improved content and consumer subscription products 2) Acquire dominant sources of local media that are accretive and strategic additions to drive inorganic growth 3) Return a substantial portion of cash to shareholders in the form of a dividend supported by our strong cash flows and healthy margins ORGANIC REVENUE AND CASH FLOW GROWTH Today, New Media is a leader in the large and fragmented local newspaper industry, and in fact, is the largest owner of daily newspapers in the country, as measured by the number of daily publications. Our portfolio of local media assets are the long standing, dominant sources of comprehensive, high quality, news in the towns they serve. Our focus on hyper-local news keeps our products relevant and valuable to both the consumers and businesses in our markets. With over 560 community publications, including 124 daily newspapers across 31 states, our portfolio provides great diversification as we are not overly exposed to any one customer, product, or market. In addition to our core newspaper business, which continues to generate significant recurring cash flows, we are also seeing tremendous growth from Propel Marketing (“Propel”), our digital marketing services platform. Propel helps small and medium sized businesses (“SMBs”) navigate the complex digital sector by building them a presence, getting them found online, and helping them engage with current and new customers. In 2015, Propel generated $31.3 million of revenue, an increase of $12.8 million, or 69.2%, from the prior year, highlighting the tremendous growth we’re achieving in this business. We believe our ability to leverage our established, trusted local brands and our in-market salesforce uniquely positions New Media to partner with local businesses and gives us a very important strategic advantage in our markets. INORGANIC GROWTH THROUGH STRATEGIC AND ACCRETIVE ACQUISITIONS Newspapers continue to be viewed as an out of favor sector, and the fragmented nature of the market creates a compelling acquisition strategy for New Media which is driving inorganic growth for the Company. Our primary source of funding for all of our acquisitions is internally generated cash from operations. However, larger acquisitions, for example, acquisitions that expand us into new markets, require capital from the debt or equity markets. During the first quarter of 2015, New Media closed its two largest acquisitions to date, Halifax Media and Stephens Media, for $280.0 and $102.5 million, respectively. The acquisitions were transformational for the Company as they added well-established, leading providers of local news in the communities they serve, and significantly expanded New Media’s geographic footprint. To fund these acquisitions in 2015, we completed an equity offering raising gross proceeds of $151.9 million, added a net balance of $102.0 million of incremental debt through our existing term loan, and assumed $18.0 million of debt from Halifax Media. Finally, we were also able to increase the revolver capacity in our credit facility by $15.0 million to $40.0 million, increasing our liquidity position and ability to execute on our acquisition strategy. Since inception, New Media has completed 12 acquisitions with a gross purchase price of nearly $640 million which have been funded primarily with cash on the balance sheet and incremental debt on our term loan. Our acquisitions have been completed at an average 3.9x the acquired company’s LTM As Adjusted EBITDA, and at unlevered and levered yields of 24% and 32%, respectively. Our track record highlights our ability to execute on our acquisition strategy well within our targeted range of 3.5x-4.5x LTM As Adjusted EBITDA. In addition to our exciting strategic and accretive acquisition strategy, in the fourth quarter of 2015, New Media announced that we completed the sale of the Las Vegas Review-Journal (“Las Vegas”) and its related publications for $140.0 million. The sale resulted in an approximate gain of 69% which further demonstrates our ability to create value for our shareholders as we execute on transactions. As our operations team continues to integrate our new acquisitions into our growing family of local media assets, our sourcing team continues to work to identify acquisition targets that fit our financial and operational criteria. With a strong and growing pipeline of potential acquisitions, and significant recurring cash flow from our core newspaper business, we continue to believe New Media is well positioned to continue to consolidate the fragmented newspaper industry. RETURN OF CAPITAL TO SHAREHOLDERS IN THE FORM OF A DIVIDEND From its 2015 operating cash flow, New Media declared a total of $1.32 of dividends per common share. Despite total revenues declining in the mid-single digit range today, we believe we can shield our cash flows from topline declines through measured expense reductions at our acquired properties. As New Media continues to grow free cash flow through organic and inorganic growth initiatives, we remain confident in our ability to continue to grow free cash flow, and subsequently our dividend. 2016 AND BEYOND New Media’s core business continues to produce strong cash flows and healthy profit margins. We believe New Media is well positioned to consolidate the fragmented local media market all while remaining a disciplined buyer. As we grow free cash flow through organic and inorganic initiatives, we see an opportunity to increase our dividend while simultaneously lowering our payout ratio. Given our increased liquidity, established track record of sourcing deals, success at growing digital revenue, and stable free cash flow, we believe New Media remains an attractive total return vehicle that will drive substantial returns for our shareholders. Sincerely, Michael E. Reed Chief Executive Officer and President February 25, 2016 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain items herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company’s future business strategy, expected revenue trends and our ability to continue to grow free cash flow and our dividend and deliver shareholder returns, growing our digital services business and revenues, pursuing and completing future acquisitions and strategic opportunities, and the availability of such acquisitions and opportunities and the expected benefits associated with acquisitions and strategic opportunities, including our ability to achieve synergies. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release.
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