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Edited Transcript of TS.B.TO earnings conference call or presentation 30-Oct-19 12:15pm GMT

Q3 2019 Torstar Corp Earnings Call

TORONTO Nov 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Torstar Corp earnings conference call or presentation Wednesday, October 30, 2019 at 12:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Glenda Wheeler

Torstar Corporation - Executive Administrator to CFO

* Ian Oliver

Torstar Corporation - Executive VP & President of Community Brands & Operations

* John Boynton

Torstar Corporation - CEO, President & Director

* Lorenzo DeMarchi

Torstar Corporation - Executive VP & CFO

* Neil Simon Oliver

Torstar Corporation - Executive VP & President of Daily News Brands

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Conference Call Participants

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* Bentley Cross

TD Securities Equity Research - Associate

* David John McFadgen

Cormark Securities Inc., Research Division - Director of Institutional Equity Research

* Tim Casey

BMO Capital Markets Equity Research - Equity Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Torstar Corporation Third Quarter 2019 Results Conference Call. Please be advised that today's call is being recorded. Your speakers for today are Mr. John Boynton, President and CEO of Torstar Corporation and Publisher, Toronto Star; and Mr. Lorenzo DeMarchi, Executive Vice President and CFO of Torstar Corporation. I would now like to turn the meeting over to Mr. Boynton. Please go ahead, sir.

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Glenda Wheeler, Torstar Corporation - Executive Administrator to CFO [2]

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Good morning. Before John begins, I'll just take a minute to read the forward-looking statement. Certain statements in the remarks that follow may contain forward-looking information and can generally be identified by the use of words such as anticipate, believe, plan, forecast, expect, estimate, assume, predict, intend, would, could, if, may, will and other similar expressions. These statements reflect current expectations of management regarding future events and performance and speak only as of today's date. By its very nature, forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties. Actual results could differ materially from the predictions, conclusions, forecasts, projections or similar statements in the forward-looking information. Additional information regarding the material factors, assumptions, risks and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and regarding the material factors and assumptions that may have been applied in making statements is described in more detail in the Corporation's 2018 annual report beginning on Page 9 and in our annual and interim MD&A, which can be found on our website and at www.sedar.com.

I'll now turn the meeting over to John.

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John Boynton, Torstar Corporation - CEO, President & Director [3]

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Thanks, Glenda. Good morning, everybody. I'm pleased to be joined on the call today by Neil Oliver, Executive Vice President, Torstar, and President of Daily News Brands; Ian Oliver, Executive Vice President of Torstar, and President of Community Brands and Operations; and Lorenzo DeMarchi, Executive Vice President and Chief Financial Officer of Torstar.

I'd like to make some opening comments, and then I'll turn it over to Neil and Ian, who will comment on their operations. And Lorenzo will close things off with financial commentary and a view on our outlook. And at that point, any of us will be happy to take your questions.

We continue to be pleased with the results of our focus on total subscriber revenue, which represents now a significant and continued growing portion of our revenue base with print subscription revenue now complemented by a growing digital-only subscription revenue stream.

We ended Q3 with approximately 70,000 subscribers with digital access, including more than 23,400 digital-only subscribers to our Daily News sites. We are now experiencing subscriber growth for the first time in many years, underpinned by our investment in data and our commitment to journalism. In addition, we now have more than 220,000 registration of our community news sites and more than 2.5 million subscribers to various e-mails and newsletters. We're also very pleased to receive notice last Friday that the Financial Services Regulatory Authority of Ontario intends to approve the merger of defined benefit pension plans with the CAAT Pension Plan subject to a standard 30-day waiting period.

Adjusted EBITDA, including our joint ventures and VerticalScope, was $1.5 million in Q3, up slightly from the same quarter a year ago, which includes the benefit of a $3 million digital media and journalism tax credit. Underlying results in the quarter, however, continue to reflect the ongoing challenges in the print advertising market with lower print advertising revenues, only partially offset by cost reductions. We continue to advance those areas important to our future while maintaining a strong focus on cash. And we acted on the number -- a sale of a number of small nonstrategic assets in the quarter and a further to increase focus on identifying additional cost reductions.

At VerticalScope, revenue and adjusted EBITDA were down versus prior year. As they continue to lap search-related traffic declines and roll out a new technology platform, but we're encouraged by the early user engagement feedback and the continued strong EBITDA and free cash flow characteristics of the business.

Lastly, the Board of Directors made the decision to suspend the dividend and review the policy again in the fourth quarter of 2020. This decision is consistent with our ongoing objective to preserve cash and strengthen our financial position, as we continue our transition towards a more digital, mobile and data future.

Now I'll turn it over to Neil.

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Neil Simon Oliver, Torstar Corporation - Executive VP & President of Daily News Brands [4]

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Thank you, John. Within the Daily Brands segment, adjusted EBITDA loss was $2.2 million in the third quarter, included the benefit of $1.8 million of tax credits. Excluding the tax credits and the change in accounting for leases, adjusted EBITDA was down $0.2 million from a year ago, as revenue declines were mostly offset by the benefit of cost reductions, which included $1.8 million in savings from restructuring and $0.9 million of lower pension expenses. Daily Brands revenues were down $6 million or 10% in Q3. Subscriber revenues, which represented more than half of the Daily Brands total revenue in the quarter, grew 2% relative to the same period a year ago, reflecting growing incremental revenue from paid digital subscriptions for thestar.com, partially offset by slight declines in print subscriber revenues.

We continue to focus on creating a more stable mix of revenue, as we transition from a significant reliance on print advertising, which continued to decline in the quarter. Local print advertising revenues, which represented 18% of the Daily Brands total revenues, were down 26% relative to the third quarter last year, while national print advertising revenues, which represented only 7% of the Daily Brands total revenues, continues to be more challenging and were down 37% compared to the same quarter a year ago.

Digital revenues from the Daily Brands were down slightly in Q3 compared to the prior year. We were very pleased with the continued progress we made in digital subscriptions. Finishing the quarter with approximately 70,000 subscribers with digital access, including over 23,400 paid digital-only subscribers in the dailies. During the quarter, we also completed the closure of the Hamilton printing and mailroom operations, and we have initiated a sales process for the Hamilton property. Ian will now discuss the Community Brands results.

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [5]

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Thank you, Neil. The Community Brands adjusted EBITDA in the third quarter was $2.1 million and included the benefit of $1.2 million of tax credits as well as $800,000 benefit related to the change in accounting policies. Excluding these factors, adjusted EBITDA was down $2.1 million from the third quarter a year ago, primarily reflecting low revenues, which were partially offset by the benefit of $3.3 million of savings related to restructuring initiatives, lower pension expense and other cost savings.

Community Brands revenues in the third quarter were $52.9 million, down $7.5 million or 12% from prior year. Local print advertising revenues, which represented 27% of the Community Brands total revenues were down 20% in the quarter with declines accelerating relative to earlier in the year, which included fewer additions as well as the sale of several small community papers in the quarter. National print advertising revenues, which represent only a very small portion of the Community Brands' overall revenue were down 28%. Flyer distribution revenues, which represented 38% of the Community Brands total revenue in the third quarter of 2019, were down 10% versus the third quarter of 2018, reflecting a modest improvement relative to the Q2 experience.

Digital revenues overall were up 2% in the quarter, reflecting continued double-digit growth in local digital advertising revenue at the community sites, offset by declines in properties and other digital verticals. We continue to make progress in growing our core community sites, digital audience of more than 220,000 registered users since launching across the community news sites with registrations. These registrations represent almost 10% of households in the markets we serve. This increases our secure first-party data that will help us build a stronger foundation by creating deeper digital relationships with visitors for future subscription launches and making our ads perform better for advertisers for all of our combined digital and print media across our footprint.

We also continue to make progress testing potential subscription models, and in the 1 test market, where we have fully rolled out paid subscriptions, subscribers represent 17% of the households where we deliver. Lorenzo?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [6]

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Thanks, Ian, and good morning, everyone. Before I call it on results in the quarter, I would draw your attention to a change in the basis of presentation of our MD&A, which is intended to give greater prominence to IFRS measures. We now discuss results in the MD&A excluding our proportionate share of joint ventures and VerticalScope. Details of VerticalScope results are dealt with in the associated businesses section, and results of our joint ventures are discussed in the joint venture section. There were no changes to the financial statements.

Turning to results. Net income in the quarter reflected underlying results in our businesses, but was also impacted by a noncash impairment charge and year-over-year differences in digital media and journalism-related tax credits. Overall, we reported a net loss of $40.9 million in the third quarter compared to a net loss of $18.8 million a year ago with $19.9 million of the decline attributable to the impairment charge. On an adjusted earnings per share basis, a loss of $0.21 in the quarter was down $0.01 from prior year.

Operating revenue of $111.8 million in the quarter was down $14.6 million or 12%. Subscriber revenues across Torstar continued to be a bright spot in the quarter, growing 2% over prior year, with new digital owner -- digital-only subscriber revenue more than offsetting modest declines in print subscriber revenue. Flyer distribution revenues overall were down 10%, with the trend improving slightly over the second quarter.

Print advertising revenue trends, however, worsened in the quarter and were down 22%. Digital advertising revenue across Torstar was down 8% in the quarter with continued strength in local digital advertising at the communities, being offset by a decline in other areas, including eyeReturn. Digital advertising revenue represented 12% of total operating revenues. Adjusted EBITDA was a loss of $3.4 million, up from a loss of $4.5 million a year ago. Adjusted EBITDA, including joint ventures and VerticalScope, which is a measure comparable to segmented adjusted EBITDA in our prior presentation, was $1.5 million in the third quarter and was up slightly from a year ago. Results in the quarter benefited from $3 million in tax credits. Excluding the tax credits as well as a favorable impact of a change in accounting-related lease expense, adjusted EBITDA, including joint ventures and VerticalScope, was down $4.2 million from third quarter last year with the Daily down $0.2 million, Communities down $2.1 million and VerticalScope down $0.7 million.

The loss from associated businesses was $6.6 million in the quarter compared to a loss of $5.6 million reported a year ago, reflecting a $1.7 million improvement at VerticalScope, offset by a $2.6 million decline in Blue Ant Media. At VerticalScope, a net loss of $3.7 million included $7.8 million of noncash amortization. Revenue at VerticalScope declined 17% due primarily to lower search-related traffic and the transition of user forum sites onto a new technology platform.

Organic traffic declines moderated in the quarter, but gains were offset by anticipated revenue declines in sites that were migrated onto the new platform. Our proportionate share of adjusted EBITDA VerticalScope was $4.9 million, down $0.7 million from last year as cost reductions only partially offset revenue declines. Even with the increased technology-related spending, the business generated very strong EBITDA margin of 49% and also generated strong operating cash flow.

With respect to our closing cash and debt positions, we finished the quarter with over $52 million of unrestricted cash, $8.9 million in restricted cash and no bank debt. This was up from an unrestricted cash balance of $48.4 million and $7.7 million of restricted cash a year ago. Our cash position benefited from the receipt of $20.9 -- $21.9 million in digital media tax credit and $4.9 million from the sale of 2 non-strategic assets. It's worth noting that our reported cash and debt amounts do not include our share of cash and debt held within joint ventures and at VerticalScope.

And lastly, a few comments on our outlook. We continue to face a very challenging print advertising market through the first 9 months of the year, resulting from ongoing shifts in spending by advertisers. These trends have continued early into the fourth quarter. It's difficult to predict if these trends will improve or worsen in the balance of the year.

Flyer distribution revenues declined 10% through the end of the third quarter, and we expect this trend to deteriorate slightly in the fourth quarter against a strong comparable period last year. Subscriber revenues grew in the third quarter, benefiting from new digital subscription revenues, offset by modest declines in print subscription revenue. We expect this trend to continue in the balance of the year, and that total subscriber revenue will continue to become a larger percentage of our overall revenue.

Digital advertising revenue at the Community Brands and Daily Brands segment was down 1% through the end of the first -- third quarter, and we expect this trend to continue in the balance of 2019, reflecting the benefit of continued growth in local digital advertising with the community new sites, offset by expected continued declines in other digital verticals. We expect the cost base in 2019 to benefit from $20.4 million of full year savings related to restructuring initiatives undertaken through the end of the third quarter with $13.7 million of this benefit realized in the first 9 months of the year. We expect to benefit from $6 million of refundable tax credits for qualifying journalism organizations in 2019, with $4.5 million recognized in the first 9 months.

We also expect to identify additional cost savings in the balance of the year that we would benefit from in 2020. The new lease accounting standard has a positive impact on adjusted EBITDA with lower rent expense, offset by increased depreciation expense and interest expense. The estimated full year impact on adjusted EBITDA for the removal of rent expense is approximately $4.9 million with approximately $3.7 million of this benefit having been recorded through the third quarter. This change has no impact on cash flow.

At VerticalScope, we expect organic revenue declines will continue to moderate towards the end of the year, as we lap various search algorithm changes introduced during 2018. However, the continued migration of forum sites on to a new technology platform, while expected to improve user experience, is expected to have a negative impact on revenue on converted sites during a transition period. The migration of sites will continue through the balance of 2019 and likely into the first half of 2020.

Adjusted EBITDA margins and cash generated by operations are expected to remain strong with savings related to the integration of prior year acquisitions, offset by incremental costs associated with the ongoing transition of sites to the new platform.

From a cash flow perspective, capital expenditures for 2019 are expected to be in the range of $16 million, including approximately $8 million of capital spending related to technology platforms in connection with our transformation activities. In addition, at the end of the quarter, we had net receivables related to digital media tax credits totaling $23.2 million. The amount and timing of any cash realized is dependent on the final review and approval by the Canadian Revenue Agency.

In September last year, we received approval from the members of our 8 registered defined benefit pension plans to proceed with the merger of our plans with the CAAT Pension Plan effective October 1, 2018. As John mentioned, last week, on October 25, the Financial Services Regulatory Authority of Ontario issued notices, which indicated their intention to consent to the merger following a standard 30-day period. After this waiting period and provided the final consent is obtained from FSRA, we expect that the transfer of assets from the Torstar Plans into the CAAT Plans will be completed before year-end, at which point the merger will be completed.

Since the beginning of the year, the majority of our employees were enrolled as members of the CAAT Plan, including those previously enrolled in defined contribution type benefit plans. Our pension expense is expected to be approximately $4 million lower in 2019 than our combined 2018 defined benefit and defined contribution pension expense. And under the CAAT Plan, contributions are expected to be the same as the related expense.

That concludes our opening comments. And at this stage, we'd be happy to take your questions.

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Questions and Answers

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Operator [1]

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And your first question comes from the line of David McFadgen from Cormark Securities.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [2]

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A couple of questions. So first of all, just on the Community Brands, you've -- you're testing subscriptions in that segment of your business, you say about 17% of the homes where you deliver are subscribers. Does that mean that they're actually paying subscribers? Or they're just subscribers? Because when I look at the Community Brands revenue, you don't talk about subscriber revenues. So just wondering if you could clarify that?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [3]

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David, that's in the -- in a test market in Midland, kind of the first market that we've fully rolled out. And yes, that's paid subscribers.

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [4]

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That's the bundle that they're paying monthly recurring revenue for.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [5]

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Okay. So 17% of those are actually paying. They're willing to pay.

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [6]

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Yes, sort of an indication of market acceptance.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [7]

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Okay. That's very bullish, I would imagine. I mean, when you look at the Community Brands revenue then, is it just so small right now that it's just not showing up right now because it's only 1 test market?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [8]

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That's correct.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [9]

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Yes. Okay, all right. And when do you think you might actually roll that out into other markets?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [10]

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I think we're just going through the process of analyzing that right now.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [11]

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Okay. And how long has it been operating in Midland?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [12]

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We think 3 quarters.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [13]

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3 quarters now?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [14]

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Started slow and then expanded it, yes.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [15]

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Yes? Okay. All right. I mean, can you tell us how much it costs per month or week or whatever to subscribe?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [16]

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Yes, $2.99. $2.99 a month...

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [17]

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$2.99 a month.

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [18]

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That's in digital subscription.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [19]

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That's it for a digital subscription. Okay.

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [20]

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Both print and digital.

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [21]

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Both print and digital.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [22]

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Print and digital, I'm sorry.

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [23]

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Yes. So we're still taking flyers to every home. (inaudible) newspaper and digital access (inaudible)

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [24]

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Okay. And then just moving on to the flyer revenue. I mean, obviously, it's down approximately 10%. I was just wondering when do you think that, that business can actually stabilize? I know it's -- there's been a couple of retailers that have pulled back or there's been some issues there. But I was just wondering if you have any outlook on when that might actually stabilize?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [25]

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Yes, we have a core group of retailers process that have (inaudible) which is a large percentage of that, that are stable, but then this kind of volatility base kind of on the industry that those -- the rest of the retailers are in. So there is continued testing and movement within those markets, but we do have a stable underlying group, but it's hard to predict what some of the non-grocery retailers are going to do.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [26]

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Okay. So you're not really sure when it might actually stabilize?

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [27]

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No, I can't predict or guarantee that.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [28]

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Okay. And then just moving on to VerticalScope. It looks like the transition for that business is going to be finalized, I guess, midway through 2020. It also looks like the revenue decline has accelerated a bit this quarter. But yet, in your comments, you think that the decline will actually moderate a bit in the fourth quarter. Is that correct? Did I understand that correctly?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [29]

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Yes, there's 2 things going -- it's Lorenzo, Dave. There's 2 things going on. One, as you know, last year, we had a series of search algorithms that we've been rolling over. And so that's what we've been experiencing, that's affected traffic. We're now getting -- the most significant of those was at the end of third quarter. So you still saw that in the third quarter results, but it improved in the month of the third quarter. So the total revenue decline in this quarter was around 17% in Canadian dollars. Roughly 2/3 of that would have been related to organic traffic and kind of search-related and that's the amount that we saw improving even through the months. And in the final month, it was kind of single digit. At the same time, what's happening now is we migrate all of the forums, there's 1,600 forums, the user forums. As they're getting migrated onto the new platform, there's a transition period where Google has to reindex the site. And the monetization around ad placements, et cetera, has changed on the site. So we see a revenue hit during the transition period that will certainly go on as we go through all the sites. We've got -- by the end of the year, we'll probably have 25% to 30% of the sites -- the revenue associated with sites' transition, but that won't be complete until, as I said, probably the end of the first half of the year or so. But there will still be an ongoing transition on the revenue side after that. And that's the piece that we're moving these in stages and learning from the sites that get converted as to how the traffic bounces back and how the revenue bounces back over time. So it's a bit hard to predict right now. The only thing I will say is that the physical transition will take at least the first half of the year and the impact on the business from the revenue perspective will continue to be felt, I'd say, through 2020.

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David John McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [30]

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Okay. Okay. And then lastly, just on tax credits. Every quarter, you benefit from the tax credits. I kind of thought you had maximized that program, but is there still more potential going forward to get some benefits from the tax credits?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [31]

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Yes, there's 2 sides to that, David. One is the digital media tax credits, which we filed, are related to stuff we did prior to 2015. And we filed all our claims there. We collected some money in the third quarter. And as we sit here today, we've got a $23 million outstanding receivable related to the last of those credits. So that will come in. There's 3 or 4 claims related to that $23 million. We expect that to come in kind of the first half of next year. And then from on an ongoing basis, there's the new program that relates to the journalism tax credit. And on that program, we estimate our full year benefit to be about $6 million, of which we get about $1.5 million a quarter. And that's a program that the Liberal government introduced. It's got a 5-year time span on it. So our view is that there's about a $6 million benefit a year on that 5-year program.

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Operator [32]

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Your next question comes from the line of Bentley Cross from TD Securities.

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Bentley Cross, TD Securities Equity Research - Associate [33]

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I just wanted to follow on with some of the VerticalScope questions. Historically, you guys have disclosed acquisitions, but there hasn't been any mention, is that fair to assume that you're not doing any acquisitions for the time being?

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John Boynton, Torstar Corporation - CEO, President & Director [34]

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Yes. We're -- we haven't done any acquisitions for a little while. We're very focused on the platform migration. It's a lot of work to move, 1,400 sites to a new piece of technology. So I think the focus is appropriate, and I think the pause is appropriate.

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [35]

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Okay. And one of the benefits Bentley is the new platform certainly has a lot of user engagement and user benefits. But the other benefit is it will make it even easier to integrate future acquisitions onto the platform going forward.

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Bentley Cross, TD Securities Equity Research - Associate [36]

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Okay. And then another just point of clarification. When you guys pull out Digital Ventures segment, there's some reallocation going on amongst the Community and Daily segments. Can you just enlighten me as to what's going on there?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [37]

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It's not a reallocation, just what was in the -- there was a 1 joint venture in the dailies, and there was 1 joint venture in the communities. So when we exclude those, the dailies and the communities lose those joint ventures. And then in the Digital Ventures segment, the majority of that segment, as you knew, was VerticalScope. So it was left behind as basically eyeReturn, and that's been rolled into the corporate segment.

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Bentley Cross, TD Securities Equity Research - Associate [38]

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Okay. And then, I guess, a bigger question, bigger picture question and then realistically probably a better question for the Board, but hoping you guys can provide some context. On the dividend decision, why assess again in Q4 '20, is there some sort of a magic that will happen between now and then? Or what's our time line? Or any insight you can provide?

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John Boynton, Torstar Corporation - CEO, President & Director [39]

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I think we're suspending the dividend just to, again, try to preserve cash and see through some of the transformation to the new digital world. So it certainly helps us with the transition. Our ability to project how fast we're making that transition and how every number is going to line up in that transition. It doesn't give us exact visibility over the next 2 years. So it's just a temporary suspension until -- but we just -- I want to reiterate we're going to review it every single quarter. So while we made a decision that we think is prudent in terms of preserving cash and strengthening the financial position, we will review at every quarter's [report].

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Bentley Cross, TD Securities Equity Research - Associate [40]

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Okay. And maybe just to paraphrase what you said, is it fair to assume that Q4 '20 is kind of when you guys envision transition on transformation to more digital kind of bearing fruit?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [41]

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Look, we can't -- certainly, that 5-quarter time frame between now and then is going to be really helpful, Bentley, but I think what the Board is saying is, it's not a necessarily permanent suspension. We have in the past always, as John said, looked at it every quarter. What we're saying is, for the time being, at least through the fourth quarter of next year we shouldn't -- no one should anticipate a dividend. And then depending on where we are in the transformation at that point and the strength of our financial position, the Board will reevaluate again the merit of instituting a dividend at that point, but not between now and then.

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Bentley Cross, TD Securities Equity Research - Associate [42]

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Okay. And then lastly, 2 other little housekeeping things. One, any update on Hamilton timing? And two, on the CAAT merger, is it just hurry up and wait? Is it just a formality at this point? Or is there any other hurdles to cross?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [43]

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On the Hamilton, we've been really pleased with the process. We've had a lot of interest. It's, I would say, a competitive process, which is great. Timing-wise, I don't think anything will get done this year. But I would expect something to be concluded in the first half of 2020. And on CAAT, yes, it's hurry up and wait, although the wait is now 30 days. We know what the wait is. And it's a standard 30-day waiting period, I think of it more as a formality. And once that happens and FSRA provides the approval, the only step required to actually complete the merger is the transfer of the assets, that will take a little bit of time, but we think that will be completed prior to the end of the year.

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Operator [44]

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(Operator Instructions) Your next question comes from the line of Tim Casey from BMO.

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Tim Casey, BMO Capital Markets Equity Research - Equity Research Analyst [45]

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Two for me. One on VerticalScope and one on digital subs. On VerticalScope, are the migration to the new technology platform and the challenges from the Google algorithm shifts, are they unrelated? In other words, were you going to shift to -- was the shift to the new platform independent of sort of a transitionary challenge from Google? And then second one, on digital subscribers, how is the pace of onboarding subs going? Can you talk about how that is progressing? And I'm speaking specifically of digital-only, you're up to 23,000 and change, are you able to share any goals with us or the cadence of how you think that will progress going forward?

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [46]

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Tim, it's Lorenzo. I'll take the first. I'll let John take the second one. On VerticalScope, I think the -- that was always in the road map to upgrade the platform to improve the user experience. If you had been on any of those forums over time, they had a very dated look and feel to them. And technology was a little bit dated. Part of that was users were very comfortable and they like that. But I think the company always had in its road map to upgrade it and introduce a lot of a feature functionality you get on more modern social media. I think the Google algorithm change provided some incentive to accelerate that, both because there was a bit of disruption going on, and secondly, because they felt that they -- some of the changes they could engineer into the new technology platform would actually help address some of the things that Google rewards in search results as well.

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John Boynton, Torstar Corporation - CEO, President & Director [47]

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Yes. And I'll just add that the platform gets us an ability to scale much better, ability to acquire much better and at a lower cost too. So there's a good fundamental business reasons to do the platform regardless of Google. On the digital-only subscribers, we seem to be at a pretty good clip right now. As I think about the last couple of months, we're still running at a nice number, and it's pretty consistent, and we can project pretty well. And so we haven't given guidance or anything like that on the digital-only subscribers, but we kind of like our pace right now, it's good.

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Tim Casey, BMO Capital Markets Equity Research - Equity Research Analyst [48]

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Are you able to share how many you added in the quarter?

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John Boynton, Torstar Corporation - CEO, President & Director [49]

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Is it 23 -- probably backwards calculate that, I don't have it on handy.

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Tim Casey, BMO Capital Markets Equity Research - Equity Research Analyst [50]

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I mean, we can look at it, but it's...

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Lorenzo DeMarchi, Torstar Corporation - Executive VP & CFO [51]

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We were a little over 20,000 last quarter, Tim, and we're over 23 -- over 23,400 this quarter. So roughly 3,300, 3,400.

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Ian Oliver, Torstar Corporation - Executive VP & President of Community Brands & Operations [52]

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Yes, in a traditionally low season for digital new subscribers. And so now we're floating at an appropriately seasonal rate at this point.

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Tim Casey, BMO Capital Markets Equity Research - Equity Research Analyst [53]

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Did you get a bump from the election post quarter end?

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John Boynton, Torstar Corporation - CEO, President & Director [54]

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Elections always provide some bump, but I think this particular election was different than most.

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Operator [55]

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There are no further questions at this time. I turn the call back over to management for closing remarks.

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John Boynton, Torstar Corporation - CEO, President & Director [56]

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Okay. Thanks, everybody. I appreciate you all dialing in, and we'll talk to you next quarter. Thank you.

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Operator [57]

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Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.