NEW YORK--(BUSINESS WIRE)--The New York Times Company (NYSE: NYT) announced today second-quarter 2020 diluted earnings per share from continuing operations of $.14 compared with $.15 in the same period of 2019. Adjusted diluted earnings per share from continuing operations (defined below) was $.18 in the second quarter of 2020 compared with $.17 in the second quarter of 2019.

Operating profit decreased to $28.8 million in the second quarter of 2020 from $37.9 million in the same period of 2019 and adjusted operating profit (defined below) decreased to $52.1 million from $55.6 million in the prior year, as higher digital-only subscription revenues and lower costs were more than offset by lower advertising revenues.

Mark Thompson, president and chief executive officer, The New York Times Company, said, “The last full quarter of my stint as CEO of The Times was also one of the most significant. We posted our best ever results for new digital subscriptions, and for the first time in our history total digital revenue exceeded print revenue - a key milestone in the transformation of The New York Times and a testament to how much we've achieved over the past eight years.

“In the second quarter, we added 493,000 net new subscriptions to our core news product and 176,000 additions to other digital products, for a total of 669,000 net new digital subscription additions. At the end of Q2, the Company had 5.7 million total digital-only subscriptions and 6.5 million total subscriptions, well on the way to that goal of 10 million subscriptions I set for the Company last year.

“We’ve proven that it’s possible to create a virtuous circle in which whole-hearted investment in high quality journalism drives deep audience engagement which in turn drives revenue growth and further investment capacity. This is why our newsroom is growing when so many others are being reduced. America and the world need access to great journalism now more than ever and I’m proud that, in these momentous and troubled times, our newsroom has the commitment, the talent and the resources to rise fully to the occasion.

“As I turn over the reins on September 8th to Meredith Kopit Levien, I do so with every confidence that The Times will continue to lead the way in showing that people will pay for accurate, trustworthy news, and that there is a sustainable future for deeply-reported, mission-driven journalism.”

ComparisonsUnless otherwise noted, all comparisons are for the second quarter of 2020 to the second quarter of 2019.

This release presents certain non-GAAP financial measures, including diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations); operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit); and operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs). Refer to Reconciliation of Non-GAAP Information in the exhibits for a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.

The Company has changed the expense captions on its Condensed Consolidated Statement of Operations effective for the first quarter of 2020. These changes were made in order to reflect how the Company manages its business and to communicate where the Company is investing resources and how this aligns with the Company’s strategy. The Company has reclassified expenses for the prior period in order to present comparable financial results. Refer to Reconciliation of GAAP Information in the exhibits for more details.

There were no special items in the second quarters of 2020 and 2019.

The Company had severance costs of $6.3 million ($4.6 million after tax or $.03 per share) and $0.7 million ($0.5 million after tax or less than $.01 per share) in the second quarters of 2020 and 2019.

Results from Continuing Operations

RevenuesTotal revenues for the second quarter of 2020 decreased 7.5 percent to $403.8 million from $436.3 million in the second quarter of 2019. Subscription revenues increased 8.4 percent, advertising revenues decreased 43.9 percent and other revenues decreased 5.0 percent.

Subscription revenues in the second quarter of 2020 rose due to growth in the number of subscriptions to the Company’s digital-only products, which include our news product, as well as our Cooking, Crossword and audio products. Revenue from digital-only products increased 29.6 percent, to $146.0 million, from the second quarter of 2019. Print subscription revenues decreased 6.7 percent to $147.2 million largely due to lower retail newsstand revenue, while revenue from our domestic home delivery subscription products was flat.

The Company ended the second quarter of 2020 with approximately 6,510,000 subscriptions across its print and digital products. Paid digital-only subscriptions totaled approximately 5,670,000, a net increase of 669,000 subscriptions compared with the end of the first quarter of 2020 and a net increase of 1,890,000 subscriptions compared with the end of the second quarter of 2019. Of the 669,000 total net additions, 493,000 came from the Company’s digital news product, while 176,000 came from the Company’s Cooking, Crossword and audio products.

Second-quarter digital advertising revenue decreased 31.9 percent, while print advertising revenue decreased 55.0 percent. Digital advertising revenue was $39.5 million, or 58.3 percent of total Company advertising revenues, compared with $58.0 million, or 48.1 percent, in the second quarter of 2019. Digital advertising revenue decreased primarily as a result of lower demand for direct-sold advertising as a result of the COVID-19 pandemic. Print advertising revenue decreased as the COVID-19 pandemic further accelerated secular trends, largely impacting the entertainment, luxury, and technology categories.

Other revenues decreased $2.2 million, or 5.0 percent, in the second quarter primarily as a result of the conclusion of the first season of “The Weekly” television series as well as lower revenues from live events and commercial printing. These declines were partially offset by higher revenues from licensing revenue related to Facebook News and affiliate referrals from Wirecutter.

Operating CostsTotal operating costs decreased in the second quarter of 2020 to $374.9 million compared with $398.3 million in the second quarter of 2019, while adjusted operating costs decreased to $351.6 million from $380.7 million in the second quarter of 2019 as a result of the changes in the components of operating costs discussed below.

Cost of revenue decreased 6.1 percent to $230.1 million compared with $245.2 million in the second quarter of 2019, largely due to lower print production and distribution and advertising servicing costs, which were partially offset by higher digital content delivery and journalism costs.

Sales and marketing costs decreased 36.4 percent to $39.6 million compared with $62.3 million in the second quarter of 2019, due primarily to lower media expenses, as well as lower advertising sales costs. Media expenses, a component of sales and marketing costs, which represents the cost to promote our subscription business, decreased to $16.5 million in the second quarter of 2020 from $33.9 million in 2019 as the Company reduced its marketing spend during the initial months of the coronavirus pandemic. The Company expects media expenses to return to pre-pandemic levels in subsequent quarters.

Product development costs increased 21.7 percent to $30.7 million compared with $25.3 million in the second quarter of 2019, largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives.

General and administrative costs increased 16.7 percent to $58.8 million compared with $50.4 million in the second quarter of 2019 largely due to higher severance costs largely related to workforce reductions primarily affecting our advertising department.

Other Data

Interest Income and Other, netInterest income/(expense) and other, net increased in the second quarter of 2020 to $2.8 million compared with an expense of $1.5 million in the second quarter of 2019 primarily as a result of the repurchase of the condo interest in our headquarters building in December 2019, which eliminated our outstanding debt.

Income TaxesThe Company had income tax expense of $5.8 million in the second quarter of 2020 compared with $9.4 million in the second quarter of 2019. The effective income tax rate was 19.6 percent in the second quarter of 2020 and 27.2 percent in the second quarter of 2019. The decrease in income tax expense and rate is primarily due to a reduction in the Company’s reserve for uncertain tax positions in the second quarter of 2020.

LiquidityAs of June 28, 2020, the Company had cash and marketable securities of $756.7 million, an increase from $683.9 million as of December 29, 2019.

The Company has a $250.0 million revolving line of credit through 2024. As of June 28, 2020, there were no outstanding borrowings under the credit facility, and the Company did not have other outstanding debt obligations.

Capital ExpendituresCapital expenditures totaled approximately $5 million in the second quarter of 2020 compared with approximately $13 million in the second quarter of 2019. The decrease in capital expenditures in the second quarter of 2020 was primarily driven by lower investments in technology and lower expenditures related to improvements at our College Point, N.Y. printing and distribution facility.

OutlookTotal subscription revenues in the third quarter of 2020 are expected to increase approximately 10 percent compared with the third quarter of 2019, with digital-only subscription revenue expected to increase approximately 30 percent.

Total advertising revenues in the third quarter of 2020 are expected to decline approximately 35 percent to 40 percent compared with the third quarter of 2019, with digital advertising revenue expected to decrease approximately 20 percent, largely due to the impact from the COVID-19 pandemic.

Other revenues in the third quarter of 2020 are expected to decrease approximately 10 percent compared with the third quarter of 2019.

Operating costs and adjusted operating costs in the third quarter of 2020 are expected to be flat or to decrease in the low-single digits compared with the third quarter of 2019 as the Company defers non-essential spending while continuing to invest in the drivers of digital subscription growth.

The Company expects the following on a pre-tax basis in 2020:

• Depreciation and amortization: approximately $60 million,
• Interest income and other, net: $18 million to $22 million, and
• Capital expenditures: approximately $45 million.

Our outlook is based on our current knowledge and assumptions and could be impacted by the evolving COVID-19 pandemic.

Conference Call InformationThe Company’s second-quarter 2020 earnings conference call will be held on Wednesday, August 5, at 8:00 a.m. E.T.

The New York Times Company is a global media organization dedicated to enhancing society by creating, collecting and distributing high-quality news and information. The Company includes The New York Times, NYTimes.com and related properties. It is known globally for excellence in its journalism, and innovation in its print and digital storytelling and its business model. Follow news about the company at @NYTimesPR.