1st Quarter Revenue at Palm Coast Data Falls 13%, But CEO Paints Brighter Picture Ahead

Amrep Corporation, Palm Coast Data’s parent company, on Tuesday reported first quarter 2015 profits of $6.3 million and revenue of $17.9 million. But the income was the result of a one-time settlement agreement with Heinrich Bauer LLC, a German publisher. The settlement included a non-cash, pre-tax gain of $11.1 million, or $7 million after taxes, the company reported.

Revenues from the company’s Media Services businesses, which include Palm Coast Data’s Subscription Fulfillment Services—now the lion share of the company’s revenue–Newsstand Distribution Services and Product and Packaging Services and Staffing operations, decreased 14 percent, from $20.3 million for the first quarter of 2014 to $17.5 million, continuing a trend that has plagued the operation for the past six years. Amrep attributed the decline to “the continuation of an industry trend of reduced subscription and newsstand magazine sales.”

The division’s  operating expenses decreased from $17.7 million in the first quarter of 2014 to $14.5 million in the first quarter of the current fiscal year, “primarily from lower payroll and benefit costs and other variable cost reductions,” the company said in a news release.

The parent company posted a $2.9 million loss for the last, full fiscal year.

When he appeared before the Flagler County Economic Development Council last month, Rory Burke, Palm Coast Data’s new CEO (he was appointed in March), presented a brighter picture of the company.

“We’re not teetering on the brink of disaster. We’ve got battles to fight. We’re making money for our parent company,” Burke, a 30-year veteran of the industry who spent most of those years working for the competition, said.

“Since the start of this year, this fiscal year” Burke said, “for Palm Coast Data, we brought in close to $1 million in new revenue. Now we still continue to fight the battle. We’ll lose some clients from publishing, we’ll win some new business. That’s the game we’re in. But I think we’re building a good foundation to stabilize and to grow. No intention to leave Palm Coast, to shutter the facilities.”

Since the company’s subscription fulfillment operations consolidated from three other states into the operation at Palm Coast Data in late 2007, it was the first time that an executive of the company appeared at a public forum to discuss internal issues. More significantly, it was the first time an executive of the company so candidly addressed Palm Coast Data’s difficulties and errors, its frayed relations with the community and its own employees, and its ongoing plans to “repurpose” the company as it battles ahead. Burke’s candor contrasted sharply with the approach of his predecessor, Mike Duloc, who never appeared before a local government body and whose interactions with the press were a mixture of cagey and abrasive.

“We’re trying to be more visible in the community,” Burke said. “I’m here. I don’t think this has happened in a long time, to talk to you about where we’re going. We’re trying to get to the Rotary, different places, to talk about what Palm Coast is doing, because again I think we lost some credibility with the community and its employees over the last half dozen years. We’re trying to rebuild that and reestablish that credibility and provide a business plan that works.”

Burke was blunt. Palm Coast Data sustained three shocks after peaking in revenue more than six years ago. The first was the consolidation, about which Burke did not mince words. What the company and local governments had previously portrayed as a boon, he described as “a self-inflicted wound. That was a big one though.”

At the time, the company had close to, Burke guessed, 1,100 employees, and was projecting to add 700 more. That never happened. “Negative issues occurred, a high price was paid,” Burke said, “and that was significant client loss, fractured relationship with the community and with its employees. The culture was somewhat fractured as a result of all the activities that happened. And as a result the community was not happy with Palm Coast Data, employees, many employees left the organization.” Today, Burke said the company employees between 600 and 700 employees. He did not specify the proportion of part-time employees, though it is significant, based on figures published in the company’s annual reports. Meanwhile, Palm Coast Data “continued to get smaller and smaller.”

What was once the largest private employer in Flagler County was overtaken by Florida Hospital Flagler, which has about 1,000 employees, though the hospital’s payroll is significantly larger than Palm Coast Data’s was even at its zenith. Burke said Palm Coast Data employees earn from just above the minimum wage to six-figure salaries.

In addition to that shock, Burke said the Great Recession hit, and the print industry was waylaid by the surge in digital content and distribution. Palm Coast Data’s mainstay, providing subscription fulfillment for print magazines, was becoming outmoded as magazines shrank, went out of business or converted to digital only products.

“So where to go from here?” Burke asked.

Amrep, Palm Coast Data’s parent company, invested $3 million “the next generation of our digital tools,” he said, describing the company’s transformation to keep up with the digital age. “We’re not laggards there.” For example, the company is helping publishers develop and push digital content across new platforms and developing ways of using “intelligence” about readers’ habits to more profitably tailor products to specific readers, and in a more timely way than the old once-a-month model. “So we’re basically providing solutions for our customers to better understand the digital needs of their customers and to provide that solution,” Burke said.

Palm Coast Data also provides “digital metering,” which is another way of describing paywalls: many newspapers and magazines  now charge to be read online, but need mechanisms to make that possible. The company provides that mechanism. It’s also securing long-term contracts with clients and diversifying services. Those can be as varied as providing electronic town hall capabilities to providing the subway cards riders use to swipe onto the New York City subway.

Nevertheless, it’s been the nature of all things digital to employ fewer people than when paper reigned king. Burke acknowledged the shift. “Yeah,” he said, even the new jobs created through digital innovations are “only offsetting other losses at this point, but it’s a line in the sand for us, and again it’s an opportunity for us.” It’s a sign of the challenge ahead that Amazon is now among Palm Coast Data’s competitors. It’s “front and center” in the subscription world, Burke said.

He was just as candid about the company’s continued downsizing, but framed what may be one of the most visible shifts—at least to the community—in optimistic language. He described the company’s $3 million acquisition of the old Palm Coast City Hall in 2008 as part of the company’s heyday, increasing its buildings from two to three. But that was when the company had more than 1,000 employees.

“So now we have three buildings, and less than 700 employees, OK? We own two buildings, we lease one,” Burke said. “So that lease is coming up in about a year and a half, so we’re looking at that now. If we land some gigantic contracts, good for us, and we’ll keep that. If we don’t, we may exit that building. That’s not a message that Palm Coast Data is shuttering. We are managing efficiently, OK? Obviously you can’t burn money on brick and mortar that you don’t need. So I want to leave you with that because I don’t want you to get the wrong impression if we go down that path and we choose to opt out of that building. It’s not a sign that Palm Coast is exiting.”