A surge in subscription revenue - mostly digital - let The New York Times Co (NYT.N) easily surpass expectations last quarter giving a positive start to the company's new chief executive officer, Mark Thompson.
Shares rallied as much as 15 percent to highs not seen since October though the volatile stock gave up most of those gains by the end of the day.
The earnings results marked the public debut of Thompson.
On his first call with analysts, Thompson spotlighted the company's progress on the digital front and how circulation revenue has surpassed advertising revenue for the first time for 2012.
"I took this job not just because I have been a devoted user of The New York Times for many years, but because I believe it is one of a handful of global news brands which cannot just survive but can thrive in this digital era," he said in his opening remarks.
Indeed, the company, which also publishes The Boston Globe, is reaping the benefits of charging readers for full access to its digital newspapers, a program it introduced almost two years ago.
Benchmark Co analyst Edward Atorino called the circulation revenue "phenomenal."
"It looks better than I thought," he said about the overall results.
Circulation revenue rose 16.1 percent to $257.8 million mainly because of growth in digital subscriptions.
Paid digital subscribers to the Times and The International Herald Tribune, which it also owns, totaled 640,000 at the end of the fourth quarter, an increase of 13 percent from the third period.
"What is notable is for the first time circulation revenue did exceed that of advertising revenue, which helps allay my concern that print media will drag down The New York Times," said Morningstar analyst Joscelyn MacKay.
However, the Times has been promoting its digital subscriptions heavily and MacKay wonders how long it can keep circulation revenue up. "I'm still skeptical on the sustainability of that number," she said.
A CASH PILE BUT NO DIVIDEND
Amid the good news, however, there were some troubling signs. Revenue rose because of an extra week in the quarter. Even factoring that in, advertising revenue in the fourth quarter was still down 3 percent to $279.9 million. Stripping out the additional week, ad revenue tumbled 8.3 percent on declines in both print and digital.
New York Times executives said they expect advertising revenue to perform similarly this quarter.
The drop off in digital advertising had to do with excess inventory which in turn causes lower prices.
Chief Financial Officer James Follo said during the call the Times plans to focus on video and advertising on its tablet editions.
The New York Times is not alone in trying to ease its dependence on advertising and reap more money from readers. Gannett Co (GCI.N), the largest newspaper chain in the United States and publisher of USA Today, reported similar advertising trends on Monday.
"I don't expect advertising revenue to grow anytime soon," MacKay said.
Thompson said the company was unlikely to reinstate its dividend at least in the near-term, a subject that has been on the lips of analysts and investors since the company eliminated it in 2009.
"We believe that for the present it is in the best interest of the company to maintain a conservative balance sheet," Thompson said. "We do not believe, therefore, that this is the appropriate time to restore a dividend."
Pension obligations as well as a decline in advertising revenue and investing in digital products were the reasons Thompson said the company wants to be prudent with its nearly $1 billion pile of cash.
"I do foresee the need to invest in the digital growth of The New York Times digital products and services at home and abroad," Thompson said. "Our priority is to define and rollout that growth strategy."
Thompson spent nearly his entire career at the BBC, and the Times Co job represents his first in both the United States and the newspaper industry.
He mentioned that he is currently conducting a strategic review, but offered only that the company plans to expand in video, mobile, and conferences. The company is also experimenting with new product lines including an ad-free digital version of the paper and something called NYT Junior, Ad Age reported.
Thompson said that he would reveal more strategic details in the coming months, while signaling more cost cuts. Dozens of business and newsroom executives departed the company over the last few weeks as the company cut staff.
The New York Times said fourth-quarter revenue totaled $575.8 million, a 5.2 percent rise from the same quarter a year ago. Analysts were expecting $570.42 million, according to Thomson Reuters I/B/E/S.
The company reported net income of $176.9 million, or $1.14 per share, compared with $58.9 million, or 39 cents per share in the same quarter last year.
Adjusted for special items including severance costs and a gain on the sale of Indeed.com, the company reported earnings of 32 cents a share versus 39 cents for the same period last year. Analysts were expecting 31 cents.
Shares of the New York Times closed up 3.3 percent at $8.51 on Thursday.
(Reporting by Jennifer Saba in New York; Editing by Peter Lauria, Jeffrey Benkoe, Martin Golan and Leslie Gevirtz)