On Wednesday, Torstar, publisher of the Toronto Star, announced the newspaper’s first quarter 2017 financials for the period ended March 31, 2017, and it wasn’t pretty. The company reported a net loss of $24.4 million, or $0.30 per share, compared to a net loss of $53.5 million, or $0.66 per share, for the same period last year. Adjusted loss per share was $0.22, compared to $0.40 for the same period in 2016.

Torstar is broken into three reportable operating segments: Metroland Media Group (The Hamilton Spectator, the Waterloo Region Record daily papers and 100+ weekly community newspapers, digital properties, regional online sites, flyer distribution operations, specialty publications and more), Star Media Group (daily Toronto Star, Toronto Star Touch, TheStar.com, Free Daily News Group Inc., Wheels.ca, Toronto.com and other specialty publications, magazines and distribution services) and Digital Ventures (VerticalScope, eyeReturn Marketing and Workopolis).

Segmented revenue was $156.7 million, a decrease of $18.1 million, or 10 percent, over the first quarter of 2016. This decrease reflects declines of 19 percent in print advertising revenue, a 9.5 percent decrease in subscriber revenue and a slight increase in distribution revenue which were offset by revenue growth of $1.5 million from VerticalScope. Digital revenue, which accounts for 18 percent of total revenue, was down 4 percent due to lower revenues from Workopolis, WagJag and Save.ca.

Also, in the first quarter, Torstar installed a new president and CEO – John Boynton – who came on board on March 31, 2017. Boynton, called a “turnaround specialist,” was hired because of his “deep expertise in marketing, technology and business transformation.

“The highlight of the quarter was the continued strong performance of VerticalScope business with the Digital Ventures segment. VerticalScope followed its strong fourth quarter performance, contributing an adjusted EBITDA of $5.2 million, reflecting revenue growth of 22 percent and adjusted EBIDTA growth of 25 percent,” Boynton said in the May 3 earnings call. “VerticalScope, with its position in desirable verticals such as automotive, power sports, outdoor, is benefiting from both increasing its higher yield direct sales and continuing to build their programmatic revenue base.”

“Both Star Media Group and Metroland Media continue to confront print advertising revenue headwinds, particularly in the national advertising category,” Boynton added.

Highlights of the quarterly report include:

• Segmented salaries and benefits were down $12.8 million, or 15 percent, due to restructuring including the closure of the Vaughan Printing Facility and reduced staff from Toronto Star Touch, the newspaper’s tablet edition.
• Segmented other operation costs (e.g., newspaper circulation and flyer distribution costs, production costs and newsprint costs) were down $7.9 million, or 8.6 percent, due to lower print volumes and other cost reductions.
• Total segmented restructuring and other costs were $4.9 million. These restructuring charges will result in annualized savings of $5.3 million from the reduction of 110 staff positions.
• Metroland Media Group revenues were down $7.6 million, or 8.5 percent, during Q1. Local advertising revenue, both print and digital, were down 12 percent. National advertising revenue, both print and digital, were down 31 percent.
• Metroland Media Group’s salaries and benefits costs were down $3.4 million due to restructuring.
• Star Media Group revenue was down $10.4 million, or 15 percent, due to declining print ad revenue. Subscriber revenues at the Toronto Star were down 7.3 percent.
• Star Media Group salaries and benefits costs were down $8.9 million, or 29 percent, due to restructuring, lower staff costs from Toronto Star Touch and the closure of the Vaughan Printing Facility.

The Globe and Mail said Wednesday that ‘everything is on the table’ in terms of how Boynton will help Torstar transform itself and reverse the multi-million dollar losses.

“Bringing our content…and understanding customers and how to monetize that is really the big transformation that most companies I see in the industry are just now beginning to understand,” Boynton said in an interview.

“The believe that small incremental change is not what we’re after, that we need a complete transformation,” Boynton added in The Globe and Mail article. “I’ve talked internally about how there are no sacred cows. Everything will be looked at. We’ll deconstruct everything and put it back together.”

In its quarterly financial report, Torstar indicated the following for its outlook:

• Subscriber revenues are expected to continue to decline through 2017.
• Digital revenue for Metroland Media Group and Star Media Group are expected to be ‘relatively stable’ with continued growth at TheStar.com.
• The company expects growth at VerticalScope to continue through the year.
• Net savings from restructuring will be $13.0 million, with $6.3 million coming from Metroland Media Group and $6.7 million from Star Media Group.

Following the May 3 report, Torstar stock is down at its lowest point since August 25, 2016 when it was $1.43 per share. It closed at $1.50 on May 3.

Insider Take:

Torstar has sustained some huge losses in the last year, so it makes sense that a new president and CEO has been brought in to look beyond incremental change to reverse the downward trends. It will take some time to deconstruct the company and examine what changes need to be made, and Torstar has perhaps acted too slowly in making major changes, but it is moving in the right direction. It seems they’ve chosen a CEO who specializes in major transformations and who is already seeing opportunities for growth.