05 Aug The New York Times Company Reports 2020 Second-Quarter Results
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.”
Unless 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
Total 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.
Total 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.
Interest Income and Other, net
Interest 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.
The 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.
As 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 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.
Total 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 Information
The Company’s second-quarter 2020 earnings conference call will be held on Wednesday, August 5, at 8:00 a.m. E.T.
Participants can pre-register for the telephone conference at dpregister.com/10145259, which will generate dial-in instructions allowing participants to bypass an operator at the time of the call. Alternatively, to access the call without pre-registration, dial 844-413-3940 (in the U.S.) or 412-858-5208 (international callers). Online listeners can link to the live webcast at investors.nytco.com.
An archive of the webcast will be available beginning about two hours after the call at investors.nytco.com. The archive will be available for approximately three months. An audio replay will be available at 877-344-7529 (in the U.S.) and 412-317-0088 (international callers) beginning approximately two hours after the call until 11:59 p.m. E.T. on Wednesday, August 19. The replay access code is 10145259.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those predicted by such forward-looking statements. These risks and uncertainties include the impact of the COVID-19 pandemic, changes in the business and competitive environment in which the Company operates, the impact of national and local economic and other conditions and developments in technology, each of which could influence the levels (rate and volume) of the Company’s subscriptions and advertising, the growth of its businesses and the implementation of its strategic initiatives. They also include other risks detailed from time to time in the Company’s publicly filed documents, including the Company’s Annual Report on Form 10-K for the year ended December 29, 2019, as updated in subsequent Quarterly Reports on form 10-Q. The impact of the COVID-19 pandemic, which has already affected the Company, may also exacerbate these risks, any of which could have a material effect on the Company. This situation is changing rapidly and additional impacts may arise that the Company is not aware of currently. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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.
Condensed Consolidated Statements of Operations
Reconciliation of Non-GAAP Information
This press release can be downloaded from www.nytco.com
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share data)
Cost of revenue (excluding depreciation and amortization)(d)
Sales and marketing(d)
General and administrative(d)
Depreciation and amortization
Total operating costs
Other components of net periodic benefit costs
Interest income/(expense) and other, net(e)
Income from continuing operations before income taxes
Income tax expense
Net income attributable to The New York Times Company common stockholders
Average number of common shares outstanding:
Basic earnings per share attributable to The New York Times Company common stockholders
Diluted earnings per share attributable to The New York Times Company common stockholders
Dividends declared per share
* Represents a change equal to or in excess of 100% or not meaningful.
See footnotes pages for additional information.
THE NEW YORK TIMES COMPANY
(Amounts in thousands)
The following table summarizes print and digital subscription revenues for the second quarters and first six months of 2020 and 2019:
Print subscription revenues:
Domestic home delivery subscription revenues(1)
Single copy, NYT International and other subscription revenues(2)
Subtotal print subscription revenues
Digital-only subscription revenues:
News product subscription revenues(3)
Other product subscription revenues(4)
Subtotal digital-only subscription revenues
Total subscription revenues
Includes free access to some or all of the Company’s digital products.
NYT International is the international edition of our print newspaper.
Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Crossword and Cooking products are also included in this category.
Includes revenues from standalone subscriptions to the Company’s Crossword, Cooking and audio products.
The following table summarizes print and digital subscriptions for the second quarters of 2020 and 2019:
News product subscriptions(1)
Other product subscriptions(2)
Subtotal digital-only subscriptions
Includes subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Crossword and Cooking products are also included in this category.
Includes standalone subscriptions to the Company’s Crossword, Cooking and audio products. During the first quarter, the Company acquired a subscription-based audio product. Approximately 20,000 of the audio product’s subscriptions were included in the Company’s digital-only other product subscriptions at the time of acquisition.
THE NEW YORK TIMES COMPANY
(Amounts in thousands)
The following table summarizes advertising revenues by category for the second quarters and first six months of 2020 and 2019:
Second Quarter 2020
Second Quarter 2019
Six Months 2020
Six Months 2019
Other revenues primarily consist of revenues from licensing, affiliate referrals from Wirecutter, the leasing of floors in the Company headquarters, commercial printing, television and film, retail commerce and NYT Live (our live events business).
The Company changed the expense captions on its Condensed Consolidated Statement of Operations effective for the quarter ended March 29, 2020 and reclassified expenses for the prior period in order to present comparable financial results. There is no change to consolidated operating income, operating expense, net income or cash flows as a result of this change in classification. Refer to reconciliation information in the exhibits for a discussion of management’s reasons for the presentation change and reconciliations from the previously disclosed amounts to the recast amounts.
In the first quarter of 2020, the Company recorded a $10.1 million gain ($7.4 million or $.04 per share after tax) related to a non-marketable equity investment transaction. The gain is comprised of a $2.5 million realized gain due to the partial sale of the investment and an $7.6 million unrealized gain due to the mark to market of the remaining investment.
THE NEW YORK TIMES COMPANY
RECONCILIATION OF NON-GAAP INFORMATION
In this release, the Company has referred to non-GAAP financial information with respect to 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 withdrawal costs (or adjusted operating costs). The Company has included these non-GAAP financial measures because management reviews them on a regular basis and uses them to evaluate and manage the performance of the Company’s operations. Management believes that, for the reasons outlined below, these non-GAAP financial measures provide useful information to investors as a supplement to reported diluted earnings/(loss) per share from continuing operations, operating profit/(loss) and operating costs. However, these measures should be evaluated only in conjunction with the comparable GAAP financial measures and should not be viewed as alternative or superior measures of GAAP results.
Adjusted diluted earnings per share provides useful information in evaluating the Company’s period-to-period performance because it eliminates items that the Company does not consider to be indicative of earnings from ongoing operating activities. Adjusted operating profit is useful in evaluating the ongoing performance of the Company’s business as it excludes the significant non-cash impact of depreciation and amortization as well as items not indicative of ongoing operating activities. Total operating costs include depreciation, amortization, severance and multiemployer pension plan withdrawal costs. Total operating costs excluding these items provide investors with helpful supplemental information on the Company’s underlying operating costs that is used by management in its financial and operational decision-making.Contacts
For Media: Danielle Rhoades Ha, 212-556-8719; [email protected] Investors: Harlan Toplitzky, 212-556-7775; [email protected]
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