DIGITAL GROWTH

Company ended 2018 with almost 10,000 online subscribers on its platforms

Torstar reports early success building a paid subscriber base for its online products,

Torstar Corp. reported some early success in its strategy of building its paid online subscriber base. The Toronto-based news company said that in the three months since launching paid subscriber offerings on its flagship thestar.com, the firm ended the year with almost 10,000 digital subscribers.

“After a year of hard work required to lay the foundation to support key advances in digital subscriptions and digital advertising capabilities, we are now beginning to see initiatives roll out in the market,” John Boynton, president and CEO of Torstar, said in an investor conference call Wednesday.

Those initiatives include paidsubscription offerings at Torstar’s flagship thestar.com digital publication, the introduction of user registration across Torstar’s more than 80 weekly community news sites in Ontario and a project begun in 2018 to test a subscription offering in three pilot markets in the firm’s community brands segment.

Boynton said that a significant portion of Torstar’s capital expenditures in 2019, amounting to about $8 million, will be spent on the technological advances required to support those initiatives.

Torstar, which has no bank indebtedness, ended fiscal 2018 in a strong cash position, with $68.2 million in unrestricted cash, up $19.8 million in the fourth quarter from the previous quarter. Torstar has an additional $7.2 million in restricted cash.

In 2018, Torstar began a major national expansion of its Metro urban commuter newspapers, providing enhanced original news content to customers in Vancouver, Calgary, Edmonton and Halifax.

That content is among the offerings now available on thestar.com.

Content of thestar.com has been further strengthened with selected content from Torstar’s 2018 acquisition of iPolitics, an Ottawa-based specialized digital subscription provider of in-depth coverage of federal and provincial politics and pol- icy developments.

Torstar has partnered with the Wall Street Journal to carry its business coverage in its publications, offered as a premium subscription. It is the only Canadian media outlet to offer WSJ stories.

The paper has also increased its Canadian business content through a deal with Bloomberg Canada.

In the fourth quarter, Torstar’s net loss from continuing operations was $3.3 million, or $0.04 per share, compared with net income of $7.8 million, or $0.10 per share, in the fourth quarter of 2017.

Earnings in the quarter included $7.2 million from Torstar’s investment in VerticalScope, a leading host of specialized websites, where the revenue growth trend showed some improvement.

Segmented revenue in the fourth quarter of 2018 was $163.8 million, down $25.7 million, or 14 per cent, from the fourth quarter of 2017.

“Print advertising trends continued to be more difficult in the quarter compared to our ex- perience earlier in the year,” said Boynton.

“On a positive note, our subscriber revenue, which is a large and more resilient part of our business, continued to be stable and flyer distribution declines were comparatively modest,” Boynton said.

Subscriber revenue increased 1.0 per cent in the fourth quarter of 2018, Boynton noted in the investor call. That is a sign of stabilization in a key measure of the company’s performance, he said.

The North American newspaper industry has contended with several years of decline in traditional revenue sources, most notably print advertising revenue. By contrast, digital revenues at Torstar are increasing, though not yet enough to offset the continued decline in print advertising revenue at this early stage of Torstar’s transformation plan, Boynton said.

For the year, Torstar reported a 2018 net loss from continuing operations of $38.0 million, or $0.47 per share, compared to $30.6 million, or $0.38 per share, in 2017.

The 2018 net loss included $66.7 million of non-cash amortization and depreciation, $38.9 million of which related to Torstar’s investment in VerticalScope.

Torstar’s segmented adjusted EBITDA was $60.8 million in 2018, down $13.4 million relative to the prior year, and included the benefit of $23.9 million of digital media tax credits. Excluding the tax credits, adjusted EBITDA was $36.9 in 2018, down $23.9 million relative to 2017. Segmented 2018 revenue was $615.0 million, down $76.6 million, or 11 per cent, from 2017.

“In 2019, we expect earnings to benefit from moderate growth at VerticalScope, continued relative stability in subscriber revenues and ongoing efforts to reduce costs,” Boynton said.

“We also expect that progress in our transformation efforts will help to drive stronger digital advertising revenue growth and a new modest but growing digital subscription revenue stream.”