New York Times(NYT) - 2024 Q3 - Quarterly Results

The New York Times Company Q3 2024 Earnings Report Key Highlights The New York Times Company reported strong Q3 2024 results, characterized by significant growth in digital subscription revenue (+14.2% YoY) and a substantial increase in operating profit (+20.7% YoY). The company surpassed 11 million total subscribers, driven by the addition of 260,000 net new digital-only subscribers, while digital advertising also saw robust growth of 8.8% YoY - Added approximately 260,000 net digital-only subscribers in Q3 2024, bringing the total to 11.09 million subscribers[2] Q3 2024 Key Financial Metrics (YoY) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Total Digital-Only ARPU | $9.45 | +1.8% | | Digital Subscription Revenues | $322.2M | +14.2% | | Digital Advertising Revenues | $81.6M | +8.8% | | Operating Profit | $76.7M | +20.7% | | Adjusted Operating Profit | $104.2M | +16.1% | | Diluted EPS | $0.39 | +$0.07 | | Adjusted Diluted EPS | $0.45 | +$0.08 | - Operating costs and adjusted operating costs both increased by 5.4% year-over-year, driven by higher costs in revenue, sales and marketing, and product development[2] Management Commentary CEO Meredith Kopit Levien highlighted the quarter's strong performance, attributing it to progress in becoming an essential subscription for curious individuals. The company surpassed 11 million total subscribers, with over five million now using the bundle or multiple products. This portfolio of news and lifestyle products is seen as key to driving resilient revenue growth across subscriptions, advertising, and licensing - The company's strategy focuses on creating an 'essential subscription' by combining world-class news with premium lifestyle products (e.g., Cooking, Games, The Athletic)[3] - Management believes the diverse product portfolio makes The Times resilient in a changing media landscape and positions it for future growth and profitability[3] Consolidated Financial Performance Subscriber and ARPU Growth The company ended Q3 2024 with 11.09 million total subscribers, including 10.47 million digital-only subscribers, a net increase of 260,000 from the previous quarter. Total digital-only ARPU grew 1.8% YoY to $9.45, primarily due to subscribers rolling off promotional pricing and targeted price increases Subscriber Breakdown (as of Q3 2024) | Subscriber Category | Count (millions) | | :--- | :--- | | Total Subscribers | 11.09 | | Total Digital-Only Subscribers | 10.47 | | - Bundle and Multiproduct | 5.12 | | Print Subscribers | 0.62 | - Total digital-only ARPU increased to $9.45 in Q3 2024, up from $9.28 in Q3 2023. This growth was driven by subscribers transitioning from promotional to higher prices and price increases for tenured subscribers[4][11] Revenue Analysis Total revenues for Q3 2024 increased by 7.0% YoY to $640.2 million. This growth was led by a 14.2% increase in digital subscription revenues and an 8.8% rise in digital advertising revenues, which more than offset a 3.8% decline in print subscription and a 12.6% decline in print advertising revenues Q3 2024 Revenue Breakdown (YoY) | Revenue Stream | Amount (Millions) | YoY Change | | :--- | :--- | :--- | | Total Revenues | $640.2 | +7.0% | | Subscription Revenues | $453.3 | +8.3% | | - Digital-Only Subscription | $322.2 | +14.2% | | - Print Subscription | $131.1 | -3.8% | | Advertising Revenues | $118.4 | +1.1% | | - Digital Advertising | $81.6 | +8.8% | | - Print Advertising | $36.8 | -12.6% | | Other Revenues | $68.5 | +9.3% | - The increase in digital advertising was primarily due to higher revenues from open-market programmatic advertising and direct-sold display ads[14] - Other revenues grew mainly due to higher Wirecutter affiliate referral and licensing revenues[15] Operating Costs Total operating costs rose 5.4% YoY to $563.5 million, and adjusted operating costs also increased 5.4% to $536.0 million. The increase was primarily driven by higher journalism expenses, subscriber servicing costs, and a 33.8% jump in media expenses for promoting subscriptions Q3 2024 Operating Costs Breakdown (YoY) | Cost Category | Amount (Millions) | YoY Change | | :--- | :--- | :--- | | Total Operating Costs | $563.5 | +5.4% | | Adjusted Operating Costs | $536.0 | +5.4% | | Cost of Revenue | $331.8 | +6.7% | | Sales and Marketing | $69.1 | +10.4% | | Product Development | $61.0 | +6.3% | | General and Administrative | $76.2 | -6.9% | - Q3 2024 operating costs included $4.6 million in litigation costs related to the lawsuit against Microsoft and OpenAI, which are treated as a special item[6][16] - Media expenses, a component of sales and marketing, increased 33.8% to $35.0 million from $26.1 million in Q3 2023[18] Profitability and Earnings Per Share The company demonstrated strong profitability growth in Q3 2024, with operating profit increasing 20.7% YoY to $76.7 million and adjusted operating profit rising 16.1% to $104.2 million. Diluted EPS was $0.39, up from $0.32 in the prior year, while adjusted diluted EPS increased to $0.45 from $0.37 Q3 2024 Profitability Metrics (YoY) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Operating Profit | $76.7M | $63.6M | +20.7% | | Operating Profit Margin | 12.0% | 10.6% | +140 bps | | Adjusted Operating Profit | $104.2M | $89.8M | +16.1% | | Adjusted Operating Profit Margin | 16.3% | 15.0% | +130 bps | | Diluted EPS | $0.39 | $0.32 | +$0.07 | | Adjusted Diluted EPS | $0.45 | $0.37 | +$0.08 | - The increase in income tax expense to $20.9 million was primarily due to higher pre-tax income in Q3 2024 compared to Q3 2023[30] Business Segment Performance The New York Times Group (NYTG) The NYTG segment, which includes the core news product, Cooking, and Games, saw revenues grow 5.7% YoY to $596.0 million. Adjusted operating profit increased 4.0% to $101.5 million, driven by strong digital subscription and advertising growth, which offset declines in print revenues and higher operating costs NYTG Q3 2024 Performance (YoY) | Metric | Amount (Millions) | YoY Change | | :--- | :--- | :--- | | Total Revenues | $596.0 | +5.7% | | - Subscription Revenues | $422.2 | +7.4% | | - Advertising Revenues | $109.3 | +0.6% | | Adjusted Operating Costs | $494.5 | +6.1% | | Adjusted Operating Profit | $101.5 | +4.0% | The Athletic The Athletic segment achieved a significant milestone, reporting an adjusted operating profit of $2.6 million, a $10.5 million improvement from a loss of $7.9 million in Q3 2023. This turnaround was driven by a 29.8% increase in revenues to $44.7 million, fueled by subscriber growth and new licensing deals, while adjusted operating costs slightly decreased by 0.6% The Athletic Q3 2024 Performance (YoY) | Metric | Amount (Millions) | YoY Change | | :--- | :--- | :--- | | Total Revenues | $44.7 | +29.8% | | - Subscription Revenues | $31.1 | +21.4% | | - Advertising Revenues | $9.0 | +7.2% | | Adjusted Operating Costs | $42.1 | -0.6% | | Adjusted Operating Profit/(Loss) | $2.6 | +$10.5M | - The decrease in The Athletic's adjusted operating costs was mainly due to lower sales and marketing costs as some media spend was shifted to NYTG for bundle marketing[26] Financial Position and Outlook Liquidity and Capital Resources The company maintained a strong liquidity position, ending Q3 2024 with $820.4 million in cash and marketable securities and no outstanding debt. Free cash flow for the first nine months of 2024 was $237.7 million, up from $207.6 million in the prior year. The company also repurchased $18.3 million of its Class A stock during the quarter - As of September 30, 2024, the Company had cash and marketable securities of $820.4 million, with no outstanding borrowings under its $350 million credit facility[32] - Net cash from operating activities for the first nine months of 2024 was $258.8 million, and free cash flow was $237.7 million[33][73] - The company repurchased 341,456 shares for approximately $18.3 million in Q3 2024, with $183.0 million remaining under the repurchase authorization[34] Company Outlook For the fourth quarter of 2024, the company projects continued strong growth in digital-only subscription revenues, expecting an increase of 14-17% YoY. Total subscription revenues are guided to grow 7-9%, while adjusted operating costs are expected to increase by 5-6% Q4 2024 Guidance (vs. Q4 2023) | Metric | Guidance (YoY Change) | | :--- | :--- | | Digital-only subscription revenues | +14% to +17% | | Total subscription revenues | +7% to +9% | | Digital advertising revenues | +High-single-digits to low-double-digits | | Total advertising revenues | +Low-single-digits | | Other revenue | +11% to +13% | | Adjusted operating costs | +5% to +6% | Full-Year 2024 Guidance | Metric | Guidance | | :--- | :--- | | Depreciation and amortization | approx. $80 million | | Interest income and other, net | approx. $35 million | | Capital expenditures | approx. $35 million | Supplementary Information Conference Call Information The company will host its third-quarter 2024 earnings conference call on Monday, November 4, 2024, at 8:00 a.m. E.T. A live webcast and subsequent archive will be available on the company's investor relations website - The earnings conference call is scheduled for November 4, 2024, at 8:00 a.m. E.T.[37] Non-GAAP Financial Measures and Reconciliations This report includes non-GAAP financial measures such as adjusted operating profit, adjusted operating costs, adjusted diluted EPS, and free cash flow. Management uses these to evaluate performance by excluding items like depreciation, amortization, severance, and certain special items (e.g., Generative AI Litigation Costs) to provide a clearer view of underlying business trends. Detailed reconciliations to the most comparable GAAP measures are provided in the exhibits - The company uses non-GAAP measures to supplement GAAP results, believing they provide useful information by excluding items not indicative of ongoing operating activities[42][63] - Beginning in Q1 2024, Generative AI Litigation Costs are treated as a special item and excluded from adjusted results because they are considered discrete, complex, and unusual[6][65] - Detailed reconciliations for adjusted diluted EPS, adjusted operating profit, adjusted operating costs, and free cash flow are available in the report's exhibits[68][70][71] Forward-Looking Statements The press release contains forward-looking statements regarding the company's future performance and strategy. These statements are based on current expectations and are subject to various risks and uncertainties, including competition, subscriber growth, advertising market dynamics, and economic conditions, which could cause actual results to differ materially. The company does not undertake to update these statements - Forward-looking statements are identified by words like 'guidance,' 'expect,' 'believe,' and 'strategy'[41] - Key risks include significant competition, ability to grow the subscriber base, advertising revenue fluctuations, and risks associated with generative AI technology[41]