Postmedia records slight profit in second quarter despite decline in revenue

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Postmedia Network Canada Corp. posted a slim profit for its fiscal second quarter despite a 21 per cent decline in overall revenue, according to results released on Thursday.

Revenue fell to $106 million in the three-month period ended Feb. 28, 2021, down from $134.2 million in the same period a year ago. The company, which owns numerous publications and digital properties including the National Post, saw a decline in print advertising of 29 per cent and a nearly 21-per-cent decline in digital revenue.

Postmedia ended the quarter with net earnings of $700,000, compared to a net loss of $12.8 million for the same period last year.

“We can’t control revenue right now, because we’re in a pandemic,” Postmedia CEO and president Andrew MacLeod said in an interview following the release of the results. “We’re very focused on managing costs and being efficient as an organization and trying to lift liquidity.”

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MacLeod said the ongoing threat that dominant tech platforms such as Google and Facebook pose to the bottom line of the news industry as a whole needs to be addressed by government.

“These companies that utilize the content we produce, to help generate traffic on their networks, they should be remunerating the creators of that content,” he said.

However, he’s hopeful that the federal government will act on legislation to ensure tech giants pay for news.

At the same time, MacLeod said he’s focused on building out larger digital subscriber bases and making a fair return on digital advertising.

“We’re well on that journey,” he said. “We have transformed our networks, we have a digital-first footprint, we have huge amounts of traffic coming to our network every month, yet we have to find ways to monetize the audience.”

Postmedia’s overall operating expenses — which exclude depreciation, amortization, impairment and restructuring — decreased by 24 per cent to $31 million in the second quarter and the company said it had an unrestricted cash balance of $52.8 million as of the end of February.

It also indicated it would pay $17 million toward reducing its first-lien debt by the end of May, leaving $67 million outstanding from an initial $225 million following a recapitalization in October 2016.

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MacLeod said paying down the debt was critical to the company’s digital-first transformation. “Our ability to take first-lien down 70 per cent over the last three or four years has been a significant win for us and continues to be so,” he said.

Postmedia also continued to draw on the Canada Emergency Wage Subsidy program, a pandemic support that helps cover partial wage costs for eligible companies, recording a compensation expense recovery of $5.7 million related to CEWS in the second quarter.

Since the inception of CEWS, the company has recognized $52.4 million in connection to the subsidy.