tronc's (TRNC) CEO Justin Dearborn on Q4 2017 Results - Earnings Call Transcript

tronc, Inc. (TRNC) Q4 2017 Earnings Conference Call March 9, 2018 5:00 PM ET

Executives

Aaron Miles - VP, IR

Justin Dearborn - CEO

Terry Jimenez - EVP & CFO

Tim Knight - troncX President

Analysts

Michael Kupinski - Noble Financial

Lance Vitanza - Cowen

Dan Jacome - Sidoti & Company

Doug Arthur - Huber Research

Operator

Good afternoon and welcome to the tronc Inc. Fourth Quarter and Full Year 2017 Earnings Conference Call. All participants will be in a listen-only-mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Aaron Miles, Vice President of Investor Relations. Please go ahead.

Aaron Miles

Thank you and welcome to our fourth quarter and full year 2017 earnings conference call. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call and our actual results could differ materially. Statements containing words such as may, belief, anticipate, expect, intend, plan, will, continue, estimate, outlook or other similar expressions are forward-looking statements.

Differences in our actual results from those described in these forward-looking statements may result from actions taken by the company as well as from risk and uncertainties beyond the company's control.

Some of the risks and uncertainties that could impact our businesses are included in documents publicly filed with the Securities and Exchange Commission including our Annual Report on Form 10-K and quarterly report on Form 10-Q. I should also mention that our remarks today will include references to non-GAAP financial measures including adjusted EBITDA, adjusted total operating expenses, adjusted net income, and adjusted diluted earnings per share, adjusted EBITDA margins and net debt. And we have provided definitions and reconciliations to the most comparable GAAP measures in our earnings press release which is available on our website at investor.tronc.com.

Joining me on today's call is Chief Executive Officer, Justin Dearborn; Executive Vice President and Chief Financial Officer, Terry Jimenez; and tronc President, Tim Knight.

I'll now turn the call over to our CEO, Justin Dearborn.

Justin Dearborn

Thank you, Aaron, and thanks to everyone for joining us today. And I'm going to start the call by commenting on our progress during 2017 including our pending sales of LA Times and our start to 2018. I'll then turn the call over to Terry to review our financial results in greater detail.

Overall, I am pleased the steps we took in 2017 and so far in 2018 to further position our company to benefit from the dynamic shifts occurring in the media industry. In September of 2017, we announced the acquisition of New York Daily News, one of the country's most iconic brands serving the largest media market in the US. The New York Daily News brings a long history of strong journalism with 11 Pulitzers and 25 million unique monthly visitors to its website.

On the digital side, we made solid progress and accomplished a significant amount in 2017. Our digital only subscribers displayed continued growth throughout the year and finished 2017 at 320,000, up 100% from 2016. In the fourth quarter, we acquired more digital only subscribers than in any previous quarter and realized an ever improving retention rate. This momentum led to solid year-over-year growth in digital subscription revenue of 86% in the fourth quarter of 2017 and 73% in the full year of 2017. We also experienced strong double digit national digital revenue in 2017 versus 2016. In addition, local digital advertising growth showed steady growth throughout the year and was up 10% year-over-year in 2017 and 24% in the fourth quarter of 2017 compared to the same period of the prior year.

We also grow our local advertising clients by 16%. For the full year 2017, we are just under 0.5 million video views which is up 234% from the prior year. In 2017, revenue generated from video rose 109% over 2016. Our total fourth quarter 2017 average monthly unique visitors were 79.3 million, up 40% from the prior year quarter. And lastly, during the first quarter of 2018 we began to deploy a companywide digital solutions portfolio across each of our markets, as well as branding content and events and services to our top regional customers and prospects. Overall, I am pleased with what we have been able to accomplish digitally and we work hard to maintain the momentum.

One of the key factors behind our progress this year was our portfolio of excellence in journalism. Our newsroom covered everything from wildfires to hurricanes, property taxes to institutional investigations, all which was the most compelling pieces of reporting this year. Our reporting of the California wildfires and the Florida hurricanes provided their communities and the world with exceptional coverage of these tragic events. Our readers engaged with us at an all-time high rate. Some other highlights of the quality of journalism and how our audiences engage with include the following. The Daily News Investigating Reporting online for the series, how safe is your child? New York City's Daycare nightmare was one of the top stories of the year. The Chicago Tribute launched unprecedented data based investigative series on Cook County property taxes which was a journalistic win.

In Los Angeles, cover of coverage of the devastating fires and mudslides was one of the most read stories in LA Times history. In Florida, Hurricane Irma slammed the coast of Florida on Labor Day weekend in 2017 before cutting across the state and through Central Florida, both the South Florida Sun Sentinel and the Orlando Sentinel provided round-the-clock coverage in words, photos and video. Also the Orlando Sentinel published a special online and print section commemorating the one-year anniversary of the Pulse nightclub massacre. The Baltimore Sun was named News Organization of the Year for the ninth time in the past 10 years by the Maryland Delaware DC Press Association.

Additionally, the cartoonists for the Sun and the Economist have won the National Press Foundation's 2017 Clifford K and James T Berryman award for editorial cartoons making him the first cartoonist to win the award twice. In Allentown, Riley Yates was recognized for journalistic excellence and coverage of the legal system. And this year marked the five-year anniversary of the tragic shooting at Sandy Hook and The Hartford Courant continued its excellent coverage of this tragic event. And utility ratepayers across Southern California are receiving a $775 million break on their electric bills, thanks to the investigative coverage of the San - on free nuclear plant failure by the United by - the San Diego Union-Tribune.

This past year, the Los Angeles Times had a huge success with its series Dirty John, a terrific podcast and print series reported by Christopher Golfer, which garnered more than 21 million listens. It is one the most popular and critically acclaimed podcasts of 2017. These are just a few of the editorial highlights that exemplify the company's ongoing commitment to award winning journalism. On the commercial side, we have been recognized for the work we deliver on behalf of our clients. Just this week, we have been nominated for four global media awards from the International News Media Association for the following. Los Angeles Times High School insider nominated for the best public relations or community service campaign. Los Angeles Times Dirty Jon nominated for the best launch of a brand or product to create an audience segments. Chicago Tribune Dunning Awards nominated for the best idea to grow digital leadership or engagement. Los Angeles Times through a correct lens sponsored by Snowfall nominated for the best execution of native advertising.

Also in 2018, we entered into a definitive agreement to sell Los Angeles Times to the San Diego Union-Tribune in various titles in the California News Group to net capital for $500 million in cash plus the assumption of $90 million in pension liabilities. This transaction allows us to greatly strengthen our balance sheet, including significantly lowering our pension liabilities. We also announced that we acquired a majority ownership position Best Reviews, a high-growth online product review company based in San Francisco, California. Best Reviews' mission is to simplify the way consumers buy their products and services they need across thousands of categories. Its dedication to independent and high quality content aligns with our ongoing mission to provide valuable information experiences for our readers. We are very optimistic about the potential impact of combining Best Reviews deep product research, and optimized commerce engine with tronc's digital properties.

The company now attracts more than 5 million unique visitors monthly. This past week Best Reviews launched a branding and promotion issue across our newspapers and websites, which we expect will help build awareness and accelerate growth. In addition to M&A activity, we also continue to evaluate our partnerships to identify the best path for both parties. In early 2018, we announced an agreement with cars.com to convert our eight affiliate markets into its direct retail channel, which was effective February 1st of 2018. The transaction is EBITDA positive to the company's remainder of the original terms of agreement and follows cars.com strategic shift to a direct sales model.

Looking ahead to the remainder of 2018, given the pending material divestiture I note above, we are going to deviate from our normal practice of providing a financial outlook for 2018. We anticipate providing it on our first quarter 2018 earnings conference call as we have a better understanding of the impact of our recent actions on full-year performance.

I would now like to turn the call over to Terry.

Terry Jimenez

Thank you, Justin, and thank you for joining us today. I will review the results for the fourth quarter and the full year for 2017. Please note that our fiscal fourth quarter included 14 weeks of operations in 2017 versus 13 weeks in 2016. For the full year, there were 53 operating weeks in 2017 versus 52 weeks in 2016. The extra week added approximately $24 million of revenue and approximately $6 million of adjusted EBITDA excluding the New York Daily News.

Total revenues for the fourth quarter of 2017 were $435 million which was up 2.3% or $9.5 million from the same quarter in 2016, primarily due to the New York Daily News operation and the extra week of revenue. Excluding the impact from the New York Daily News business in the 14th week, total revenue would have declined 11.1%. For the full year, total revenue was down 5.1% on a year-over-year basis. Our consolidated fourth quarter 2017 operating expenses were $406 million, up from $384 million versus 2016. Adjusted operating expenses were $370 million in Q4 of 2017 versus $359 in 2016. Excluding the New York Daily News operating expenses in the 14th week of Q4 of 2017, adjusted operating expenses would have been down $42 million compared to Q4 of 2016.

For the full year including both the New York Daily News and the extra week, adjusted operating expenses were down $81 million on a full year-over-year basis. Excluding both the New York Daily News and the extra week, adjusted operating expenses would have been down $142 million on a full year-over-year basis. In the fourth quarter of 2017, we had a net loss of $373,000 or $0.01 per share. That's compared to net income of $19.4 million or $0.53 per share for the fourth quarter of 2016. The quarter and the full year were impacted by one-time reduction in deferred tax assets resulting in a non-cash charge of $11 million. This stems from the introduction of the Tax Cuts and Jobs Act of 2017 as a direct result of the federal statutory tax rate declining from 35% to21%.

Adjusted EBITDA for the fourth quarter of 2017 was $65.4 million, compared to $66.8 million in the fourth quarter of 2016. We had a number of adjustments at year end that we do not foresee impacting the future results. This included a significant AR reserved for digital advertising partner that had filed for bankruptcy, workers comp true up adjustments and timing of expense actions delayed in a number of our markets. Actions have since been taken in those markets. There was also revenue softness for unique events in the movies and entertainment category that impacted the quarter. Our balance sheet is in very solid shape. We exited the quarter with $190 million of cash which grew $5million from the end of Q3, 2017. Our debt declined $8.5 million compared to the third quarter of 2017, as we continue to reduce debt through amortization. Pension liabilities were down $1.8 million to $140 million in the fourth quarter of 2017.

Now I will touch on the performance of each of our reporting segments. Total revenues for troncM for the quarter were $366 million which were down 0.4% compared to the fourth quarter of the prior year. We continue to experience pressure in print advertising with total advertising revenue for the segment down 11.2% and down 19.7% adjusting out the New York Daily News business and the extra week in the period. troncM circulation revenue experienced a 15.5 % increase compared to the same period of the prior year where we continue to see price increases offsetting volume declines along with the New York Daily News circulation and another week of revenue. Excluding the New York Daily News and the extra week, circulation revenue would have been down3.5%.

troncX had $69.8 million of total revenue in the fourth quarter of 2017, up 15.8% compared to the prior year quarter. The growth resulted from the New York Daily News, the extra week in the quarter and improvements in national advertising. Excluding the New York Daily News and the14 week, troncX revenue would have been up1.4%. We continue to see significant sequential improvements each quarter from a year-over-year trend perspective.

Let's now turn to a number of changes since the end of the year. As previously reported and as Justin touchdown, we're in the middle of the sale for our Los Angeles Times and San Diego Union-Tribune businesses and related assets. Closing is imminent, and after several - after satisfying normal closing conditions which we have great confidence in meeting shortly. We're also excited about our majority investment in Best Reviews. We believe we've stepped into a great asset but also a great and terrific team. We've invested heavily focused on enhancing our infrastructure. We've invested in a new ERP system which launched in Q1 with additional phases to follow. We also began to rollout of our new CMS system, which will be launched in each market this year, which we believe will enhance our both our reader and advertiser experiences. We've relocated our Lehigh Valley's Morning Call print production to the New York Daily News printing facility in Jersey City, and have announced that we were moving the packaging production from Lehigh Valley to the Baltimore Sun's property.

This will provide operational cost savings, a high-quality image on newsprint and will allow our Morning Call resources to focus on content readers and sales.

We are in the process of moving our corporate office along with the Chicago Tribune newsroom and sales teams in Chicago. This move will occur in the second quarter of 2018 and provides us the opportunity to create an advanced newsroom to deliver an award winning journalism, and even more innovative formats and across digital platforms. We are committed to honoring the legacy of the Chicago Tribune in our new home and I'm confident it will be a great wonderful experience for furthering our journalistic mission for decades to come.

We are also centralizing the production and design of our print papers for all of our newsrooms. In connection with this, each of our local newsrooms is rolling out a revised organization structure to focus on better connecting our content with the digital audience opportunity. We've also made changes to our sales organization, as well as better focus on digital sales and premium accounts, all these are going in effects starting in Q2. We have made a lot of progress solidifying our infrastructure in enabling our transformation in the digital.

With that we will now be opening - we will now open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions]

Our first question comes from Michael Kupinski from Noble Financial. Your line is now open.

Michael Kupinski

Thank you and thanks for taking the questions. On the first question is on New York Daily News, you said that it added $32.6 million in revenues in the quarter. Was any of that related to digital? How much was that digital versus print? And the paper actually gave a little bit more in revenue than I expected and so from factoring that and the base print advertising business looked like it was a little softer, and I was wondering if you can talk a little bit about whether you're seeing some moderation in print advertising as you go ahead into the first quarter or what are you seeing on that part?

Justin Dearborn

Yes. We won't get into specifics on the Daily News breakout of the revenue; I would say the digital proportion of that business is higher than some of our other products. And your second question Michael again.

Michael Kupinski

Was in terms of the print advertising trends, what are you're seeing heading into the first quarter.

Terry Jimenez

So as Justin mentioned we're going to provide more guidance in Q1 and so will address that at that time.

Michael Kupinski

Got you. And then in terms of, obviously President Trump appears willing to impose tariffs which isn't a good sign for the prospect of Canadian newsprint tariffs and was wondering if you can give us your thoughts about newsprint prices in 2018.

Terry Jimenez

Yes, I think absent the tariffs, there's definitely some supply reductions taking place which put a little pressure on price near-term. We think over the long term that should stabilize, certainly the tariffs will enter a new component to the mix that we're looking at and watching closely as it evolves. There's some tariffs that have been levied and there's some additional proposed tariffs that we're just keeping our eye on at the moment.

Michael Kupinski

Got you. And the largest delta in my expense estimates were in outside services and other and I was wondering can you talk about those two line items and particularly noteworthy was the other category, if you look at other I guess in the third as percent of revenues it was pretty much in line with the fourth quarter, but materially higher than last year. I was just wondering if you can give us what would put in those two categories.

Terry Jimenez

Sure. We had as I'd mentioned in my talking points, we had a digital partner that filed for bankruptcy that drove a little bit of a hit in the quarter, and that falls into the other category, that's really the biggest driver for that category. I think the rest of the line items are relatively in line. Outside services, as you know, we had outsourced our IT group which we fully transitioned the beginning of this year. So we're still cycling against run rate there, where that number becomes a little bit higher but compensation is lower.

Michael Kupinski

And Terry what was the reserve in other --what was the number --the dollar amount?

Terry Jimenez

Yes. The total exposure we had was north of $8 million of which we had partially reserved given that we were getting some indications about their ability to pay. So for the other fourth quarter it was a portion of that, a large portion that $8 9 million.

Michael Kupinski

And then in terms of - have you guys given any thought in terms of the tax rate for this year?

Terry Jimenez

Yes. We're still really looking through, obviously with the new legislation that will certainly be a benefit. I think post sale as well in California that also helped our global tax rate given the state taxes in California are a little bit higher than other markets. So we're in the process of looking at that and will look to provide some guidance on that as well in the next call.

Operator

Thank you. And our next question comes from Lance Vitanza with Cowen. Your line is now open.

Lance Vitanza

Hi, thanks for taking my questions. I guess I wanted to start with Best Reviews. I mean that acquisition seems to be a bit of a pivot for you, a welcome pivot into more of a new media type of an angle. Could you talk about and I think I understand why it's attractive, but could you talk about how it fits with the remaining print titles? Or do you envision further sales of newspaper assets over time and the cash kind of war chest that you've built, if I'm right I think it's about $240 million - $245 million after you pay taxes on the asset sales. Could you discuss the pipeline? Any prospects that you might be seeing obviously not specific companies but just how you would describe the opportunity to find additional attractive acquisition candidates?

Justin Dearborn

Sure. So thank you Lance. So I'll try to unpack all those. So I'll start with Best Reviews. So really it hit on everything we look for in an acquisition. It helps us diversify revenue a bit, it's all digital, it does leverage the scale we have. And really if you think about a review sites where someone's going to rely on a reviewer critique of a product. we think we add credibility to it. They already had a great, great product and a great start. And we think we do nothing but help the credibility, help the scale generates revenue often an affiliate fee model. So it's a really, really unique business model that you've heard us talk about for a number of years. The attempt to diversify the revenue but leverage the great things we do here which is credibility, scale and trustworthiness. So it hit on all the factors for us as we look at acquisitions. We're not actively looking to divest any titles. We weren't actively looking with the one we mentioned earlier, but as a public company we'll be good stewards and if we have a credible offer will do our due diligence and perform our fiduciary duties. In this case, we felt that the financials were such that we needed to take advantage of the opportunity we had, but we're not actively looking at divesting any titles. And then we will continue as we have been active in the M&A market. A little heavier on the digital-only assets and now we have a stronger balance sheet post close to can effectuate some of those.

Lance Vitanza

Any comment on the recent rumors that you are considering a bid for the Street?

Justin Dearborn

I cannot comment on that.

Operator

Thank you. And our next question comes from Dan Jacome from Sidoti & Company. Your line is now open,

Dan Jacome

Hi. How's everyone doing? All right, just five or six questions here. Can you just talk for the LA Times? It looks like compelling transaction. Do you still expect it to close in a worst-case scenario at the end of 2Q, 2018? Has that changed at all in the last couple weeks since you announced it? And then just please give us as much flavor as possible of what you're going plan to do with this nice chunk of cash you could receive.

Terry Jimenez

Yes. This is a Terry. I'll take a stab at it. We're still - there's a small number of closing conditions that are pretty normal, and we're really focused on just closing those out, and our hope is that closes in days and weeks versus months, but we're moving as fast as we can to drive that change. And then in terms of the cash, we're in the middle of having conversations with our board on the best utilization of that cash, and making sure we're going to do the right thing for our shareholders with that net cash proceeds.

Dan Jacome

Right, well that doesn't really help with much from a modeling perspective. I think in the press release you said you are interested in paying down some debt. Your debt is at7 % coupon I feel a little bit above that if I just take the interest expense. Recently reported I mean theoretically if you were to pay down debt, can you give us some at least an idea of how much debt you'd be looking to possibly retire?

Terry Jimenez

Yes. So the net proceeds of the transaction we'd be in a position to, given our existing cash balance as well as the net proceeds, we'd be in a position to certainly retire all the debt if that's the way that our board decides, but again we're still working through the best capital allocation for those proceeds.

Dan Jacome

Okay has the company ever paid a special dividend in the past?

Justin Dearborn

I don't believe since the spin a few years ago. So I can't speak for it.

Dan Jacome

Okay, well let's talk about acquisitions then because that might be a likely area of shareholder value extraction. Just not what is your pipeline look at and then I think in the past you guys have said the focus should be boosting the digital content and especially niche digital content. Is there still post Best Reviews? Is still you would say compelling opportunities in the M&A landscape?

Tim Knight

This is a Tim Knight. We continue to look at a variety of tuck-in acquisitions around our core properties. And obviously we're very active in looking at all digital opportunities because we think that's a tremendous growth opportunity. And then finally is the Best Reviews acquisition and our investment illustrates we continue to look at businesses with different revenue streams other than advertising and consumers. So those would be the three areas where we are focused on.

Dan Jacome

That does help to some degree in consumer focus. Do you still have the same appetite for celebrity news as you may have expressed in past years? If you can comment on that, I understand you can't comment on everything but -

Justin Dearborn

Sure. This is Justin. So there was no special attraction. It was I think the property - it was a great financial acquisition would've been nice accretive deal; it fit in well with obviously the LA Times does very well in entertainment. So it was there was nothing unique about the category necessarily. It was you can set up the asset and what we thought we could transact it.

Dan Jacome

Okay that helps and then so on the tax just remind us again I'm just a little surprised that no guidance and then they're not even tax guidance. If I strip out this $11 million one-time hit you took on the re-measure deferred tax assets, you may have come in at a reported low 50s tax rate, just whatever you can provide to help us from a modeling perspective again I think about directionally what could be happening to the tax rate for the P&L in the next couple quarters that was my first question on that end.

Terry Jimenez

Yes. So again I think we'll give you a more specific guidance shortly. I think just directionally obviously the corporate rate going from 35%, 21% that will directionally happen for us. There also is slight benefit that we'll get out of the post California assets that we currently have, but we will provide a little more clarity.

Dan Jacome

Okay. Is it - could there be room for some offsets on the tax benefit?

Terry Jimenez

Yes.

Dan Jacome

That you see.

Dan Jacome

Yes. There could be offsets.

Terry Jimenez

Yes, potentially.

Dan Jacome

Okay, all right, let me ask you about this digital solutions portfolio that you mentioned briefly. I sounded like you might be seeing some early bullish color on regional prospects. Can you just maybe illuminate that a little more and just give us an understanding? Does the sales cycle differ at all from your legacy business and anything you can comment there might help us?

Tim Knight

Sure. It's Tim Knight again. On the premium which is we call premium accounts, we're focused on essentially the larger regional businesses in each of our eight markets. If you go forward where our brand, our reputation and the context we have with decision makers allow us to provide a more robust set of solutions and in a lot of ways act as their agency in helping them achieve their marketing objectives. So that's a pivot for us from how we've typically been mainly focused on taking print advertising and some digital advertising, and that's hiring different people, it's getting our leadership, making more sales calls and using their relationships to develop business contacts. On the marketing, digital marketing solutions, we are leveraging essentially a business that we developed through our San Diego property in the last 18 months have expanded it to a certain couple of our markets already, and we'll finish that up by the end of this quarter, and hiring digital specialists to help us drive that revenue stream even further.

Dan Jacome

Okay, that's encouraging, so still early there so much promising. I want to talk about Best Reviews. Did you say you picked up five million monthly unique or did I get that wrong? Yes, I know five million, right.

Terry Jimenez

Right.

Dan Jacome

I mean some idea of financials I mean is this where does - is a company EBITDA positive?

Terry Jimenez

Yes.

Dan Jacome

It is EBITDA positive. Did I miss the financial somewhere else or you just chose not to disclose them?

Justin Dearborn

No, no, we're just at a point where we're not going to disclose those.

Dan Jacome

No, okay, no, I understand. So EBITDA positive and then lastly you said you're going to move corporate out of Chicago.

Justin Dearborn

That's right, within Chicago.

Dan Jacome

Okay, staying, okay, you're staying in the region just going to make something-- do some more efficient changes, okay, alright, I was just curious to see how far you're going to go from hometown but --you are staying - [Multiple Speakers] all right, well, that's something, all right, perfect just I was just curious. All right, well thanks a lot, good luck with the rest of the quarter.

Operator

Thank you. Our next question come Doug Arthur from Huber Research. Your line is now open.

Doug Arthur

Thanks and we're having power outages here periodically so if I go play go silent that's the reason Terry you gave a lot of good pro formas for the extra week, and the daily news, did you cover digital advertising revenue I think the press release talks about 19% growth in the fourth quarter. What's the adjusted number?

Terry Jimenez

Sure. So if you back out the Daily News and the extra week in the period, ad revenue was up 1.4% for tronc.

Doug Arthur

Okay, so that's actually a little bit of an improvement.

Terry Jimenez

Yes. We saw if you recall from moving really quarter-to-quarter Q3 looked a lot better than Q2 and Q4 looks a lot better than Q3. So certainly we're making the right traction there.

Doug Arthur

Okay. Secondly, I think and maybe you provide a color in this in the call. When you acquire the Daily News I believe your kind of general sense was that it would be sort of breakeven-ish in the fourth quarter. Obviously, it's had fairly significant losses and that seemed optimistic to me it was that the case? Or you are not commenting.

Terry Jimenez

We are not commenting specifically I would say that we're in the process of still going through the integration. I think we've done a lot of things that have made significant progress actually a little bit better than what we were initially anticipating. The example would be in Lehigh Valley, the Morning Call paper is now print in New Jersey I think we move faster than we had anticipated there, and so there's definitely savings not just within the New York asset but also our other properties are benefiting from the New York Daily News. So I'd say we're on track to having as a standalone to be a breakeven and then profitable in the short term.

Doug Arthur

Okay and then final question which you sort of answered but the I think the underlying print advertising was down 17% Q2, 18 % Q3, and now essentially 20% in Q4, you mentioned I think the entertainment category, any comments on sort of what you're seeing at the beginning of the year?

Terry Jimenez

Yes. We're not in a position to give you guidance just yet on in terms of the beginning of the year. I think Q4 was skewed by; there are really a couple of entertainment category pretty unique circumstances that took place. So that's all I'll say on that point.

Doug Arthur

So you would expect some of that to normalize a little bit going forward.

Terry Jimenez

If I were to give you guidance the answer would be yes but I'm not giving you guidance, Doug. Thank you.

Operator

Thank you and we have a follow up question from Michael Kupinski from Noble Financial. Your line is open.

Michael Kupinski

Thank you so much. I'm sorry just a couple quick one here I was just wondering just following up on Doug's question about the Daily News, now that you've had it under your belt, have you kind of modified your thoughts on the prospect of revenue opportunities more. I understand the cost side and there are some synergies there but we're just wondering under the revenue side, and also given the prospect that now you won't have the LA Times and kind of putting that into the bucket of national advertising for your digital side of the business. Have you given some thought on the prospect of the impact for national advertising both from the acquisition of New York Daily News and then from the prospect of selling your California newspapers?

Terry Jimenez

Yes, in terms of New York Daily News I think from a digital point of view they generate proportionately a greater amount digitally, and so I think we're going to take a lot of the learnings and the things that they were doing in New York and figure out how to really spread that out across the rest of our market. So I think that's kind of component one. I think component two is we're actually going to have a transition service arrangement with the sale for the California products and given it's a standalone owner and we have some confidence that there's a win-win situation here. We'll still be able to sell in to that asset or if they may have clients that they can sell our house as well but we think we'll still be able to leverage that scale at some level through that TSA arrangement. I think absent that TSA arrangement, we still feel really confident that we're in two really strong markets that drive value to advertisers. So we're not overly concerned about losing that footprint if in fact we do lose that through the TSA.

Operator

Thank you and I am showing no further questions in the queue at this time. I'd like to turn the call back over to Justin Dearborn, CEO for any closing remarks.

Justin Dearborn

Thank you and thanks everyone for your interest in our company. And overall 2017 was a productive year for us and we have carried that momentum forward to the first part of 2018. We have and will continue to strategically position our organization while we're meaning focused on the consistent execution of our strategy. And we look forward to updating on the progress next quarter and providing full-year guidance at that time. Thank you again.

Operator

Ladies and gentleman, this is the operator. Thank you for listening in your call. You may now disconnect. Everyone have a great day.