The New York Times Company Reports 2020 Third-Quarter Results

11/5/20

NEW YORK--(BUSINESS WIRE)--The New York Times Company (NYSE: NYT) announced today third-quarter 2020 diluted earnings per share from continuing operations of $.20 compared with $.10 in the same period of 2019. Adjusted diluted earnings per share from continuing operations (defined below) was $.22 in the third quarter of 2020 compared with $.12 in the third quarter of 2019.

Operating profit increased to $39.6 million in the third quarter of 2020 from $25.1 million in the same period of 2019 and adjusted operating profit (defined below) increased to $56.5 million from $44.1 million in the prior year, as higher digital-only subscription revenues and lower costs more than offset lower advertising revenues.

Meredith Kopit Levien, president and chief executive officer, The New York Times Company, said, “In this unprecedented moment in the country and the world, our strategy of making journalism worth paying for continues to prove itself out, and our newsroom’s extraordinary work across a range of subjects and formats continues to drive more people to engage with The Times, form a habit, pay and stay.

“For the second quarter running, total digital revenue exceeded print revenue. And for the first time, total digital-only subscription revenue exceeded print subscription revenue, making digital-only subscriptions not just the central engine of the Company’s growth, but on its way to being our largest revenue stream.

“We ended the quarter with approximately 6.9 million total subscriptions, and crossed the 7 million mark in the month of October, an increase of two million digital-only subscriptions over the last year and 393,000 over the last quarter. The news cycle certainly played a role, but as we are increasingly seeing with each passing quarter, so too did the breadth of our coverage and our improving ability to mean more to more people. The continued demand for quality, original, independent journalism across a range of topics makes us even more optimistic about the size of the total market for digital journalism subscriptions and our position in it.”

Comparisons

Unless otherwise noted, all comparisons are for the third quarter of 2020 to the third 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 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 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 third quarter of 2020.

Third-quarter 2019 results included the following special items:

  • A $4.0 million charge ($3.0 million after tax or $.02 per share) from restructuring charges, including impairment and severance charges related to the closure of our digital marketing agency HelloSociety, LLC.
  • A $2.0 million gain ($1.5 million after tax or $.01 per share) from a multiemployer pension plan liability adjustment.
  • Results from Continuing Operations

    Revenues

    Total revenues for the third quarter of 2020 decreased 0.4 percent to $426.9 million from $428.5 million in the third quarter of 2019. Subscription revenues increased 12.6 percent to $301.0 million, advertising revenues decreased 30.2 percent to $79.3 million and other revenues decreased 2.0 percent to $46.7 million.

    Subscription revenues in the third 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, Games (previously Crossword) and audio products. Revenue from digital-only products increased 34.0 percent, to $155.3 million. Print subscription revenues decreased 3.8 percent to $145.7 million largely due to lower retail newsstand revenue, while revenue from our domestic home delivery subscription products grew 2.5 percent.

    The Company ended the third quarter of 2020 with approximately 6,894,000 subscriptions across its print and digital products. Paid digital-only subscriptions totaled approximately 6,063,000, a net increase of 393,000 subscriptions compared with the end of the second quarter of 2020 and a net increase of 2,010,000 subscriptions compared with the end of the third quarter of 2019. Of the 393,000 total net additions, 275,000 came from the Company’s digital news product, while 118,000 came from the Company’s Cooking, Games and audio products.

    Third-quarter digital advertising revenue decreased 12.6 percent, while print advertising revenue decreased 46.5 percent. Digital advertising revenue was $47.8 million, or 60.3 percent of total Company advertising revenues, compared with $54.7 million, or 48.1 percent, in the third quarter of 2019. Digital advertising revenue decreased primarily as a result of lower creative services revenues. Print advertising revenue decreased as the COVID-19 pandemic further accelerated secular trends, largely impacting the luxury, entertainment, media and home furnishings categories.

    Other revenues decreased 2.0 percent in the third quarter primarily as a result of fewer television episodes as well as lower revenues from commercial printing and live events. These declines were partially offset by higher revenues from licensing revenue related to Facebook News and affiliate referrals from Wirecutter.

    Operating Costs

    Total operating costs decreased 3.5 percent in the third quarter of 2020 to $387.3 million compared with $401.5 million in the third quarter of 2019, while adjusted operating costs decreased 3.7 percent to $370.4 million from $384.4 million in the third quarter of 2019 as a result of the factors discussed below.

    Cost of revenue decreased 3.8 percent to $235.9 million compared with $245.1 million in the third 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 21.2 percent to $50.6 million compared with $64.2 million in the third 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 that represents the cost to promote our subscription business, decreased to $27.3 million in the third quarter of 2020 from $35.9 million in 2019. The Company expects media expenses to return to pre-pandemic levels in subsequent quarters.

    Product development costs increased 27.9 percent to $34.1 million compared with $26.7 million in the third 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 2.2 percent to $51.1 million compared with $50.0 million in the third quarter of 2019.

    Other Data

    Interest Income and Other, net

    Interest income/(expense) and other, net increased in the third quarter of 2020 to $3.5 million income compared with an expense of $0.8 million in the third 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 Taxes

    The Company had income tax expense of $7.3 million in the third quarter of 2020 compared with $6.1 million in the third quarter of 2019. The effective income tax rate was 17.8 percent in the third quarter of 2020 and 27.0 percent in the third quarter of 2019. The effective income tax rate for the third quarter of 2020 was lower than the statutory tax rate primarily due to a tax benefit from stock price appreciation on stock-based awards that settled in the quarter.

    Liquidity

    As of September 27, 2020, the Company had cash and marketable securities of $800.1 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 September 27, 2020, there were no outstanding borrowings under the credit facility, and the Company did not have other outstanding debt obligations.

    Capital Expenditures

    Capital expenditures totaled approximately $8 million in the third quarter of 2020 compared with approximately $9 million in the third quarter of 2019. The decrease in capital expenditures in the third quarter of 2020 was primarily driven by lower expenditures related to the build out of additional office space in Long Island City, NY.

    Outlook

    Total subscription revenues in the fourth quarter of 2020 are expected to increase approximately 14 percent compared with the fourth quarter of 2019, with digital-only subscription revenue expected to increase approximately 35 percent.

    Total advertising revenues in the fourth quarter of 2020 are expected to decline approximately 30 percent compared with the fourth quarter of 2019, with digital advertising revenue expected to decrease in the mid-teens, largely due to the impact from the COVID-19 pandemic.

    Other revenues in the fourth quarter of 2020 are expected to decrease approximately 15 percent compared with the fourth quarter of 2019 as a result of fewer television episodes and lower revenues from live events.

    Operating costs and adjusted operating costs in the fourth quarter of 2020 are expected to be flat or to decrease in the low single digits compared with the fourth 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 $61 million,
    • Interest income and other, net: $20 million to $22 million, and
    • Capital expenditures: approximately $40 million.

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

    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.

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