“We are about to complete our best year since we acquired the business in 2006,” said Richard Reiff, Advantage CEO. For its fiscal year ending June 30, the company's EBITDA (earnings before interest, taxes, depreciation and amortization) will beat budget by at least 30%, he said.
“We're giving a 3% across-the-board salary increase where performance is satisfactory since we did not give raises for the last two years,” Reiff said. Sales and sales management, as well as other staff whose contracts are already performance-based, are exempt from this program because their financial tie to the company's success is built in.
“Employees who are not otherwise incentivized will receive a $500 bonus,” Reiff added. Last year, this group received a $350 payout.
Advantage's largess stands out in a media environment characterized by downsizing and pay cuts. While the company did lay off some employees due to the recession, it did not implement across-the-board wage cuts, as many publishers did in 2009.
Advantage President George Fox credits digital media for the company's bottom-line success. “As digital continues to grow, we are seeing profit margins increase because our costs are lower,” he said.
“Our percentage of overall revenue in digital will come in at about 35% for the most recent fiscal year. That's a growth rate of 20%.” By comparison, only 13% of the RBI division's revenue came from digital media when it was purchased in 2006.
For Advantage's fiscal year beginning July 1, electronic media revenue growth is budgeted at about 20%, which would bring the company's percentage of revenue from digital to 42%. “In 2011-2012, we will surpass 50% of all revenue being digital,” Fox said.
Advantage is expecting revenue growth, but is budgeting for a flat profit in the upcoming fiscal year while it makes a significant investment in its digital platform, including a new content management system. The company has been investigating CMS options but has not yet chosen a new solution.
Even though management has been able to boost earnings at Advantage, it has not been able to counteract the inexorable industry trend of print revenue decline.
“Revenues are down for two main reasons: the decline in print and because we cut out a good bit of unprofitable revenue by shutting down properties and discontinuing products,” Reiff said. “We are much leaner and more efficient. EBITDA is 31% up from when we purchased the company.”
Advantage's print revenue is down 19% in the current fiscal year, significantly less than the 25% decline for which the company had budgeted. “In the coming year, we are budgeting print down 12%,” Reiff said. “We will manage to that number but expect it down 10% or less.”
In 2006, Reiff and Fox joined with Catalyst Investors to form privately held Advantage Business Media, which consists of more than 20 magazines and associated websites, as well as e-newsletters, directories, vertical search databases, conferences and ancillary media vehicles in the scientific, technical and medical fields.