The New York Times Co. reports $9 million profit in Q3, as print revenue falls less than 1%
Digital ad revenue falls 5 percent, likely caused by fewer political ads in the quarter versus the year before; paper adds 51,000 net digital subscribers to exceed 1 million
The New York Times Company reported strong Q3 earnings this morning, earning $9.4 million in net income, in comparison to a loss of $12.5 million in the same quarter a year ago.
Ultimately it was a 7.6 percent decrease in costs that turned the company from red to black. Severance costs, for instance, were only $1 million, far less than the move than $21 million incurred last year in the same quarter.
Revenue grew, but less than 1 percent (but at least it grew). Total advertising revenue decreased 2.2 percent which is never good, but it a very small decline compared to other newspaper companies.
Looking more closely, the NYT bucked just about every trend imaginable when it comes to advertising: its print ad revenue decrease less than one percent, remarkable when compared to reports from other newspaper companies. But digital ad revenue decreased 5.0 percent coming in at as $36.5 million, or 27.0 percent of the total. Although the NYT didn’t say it, this likely the result of a loss of political advertising (last year was a Congressional election year).
The Times added 51,000 net new digital subscribers, the NYT’s president and CEO said, bringing the total over 1 million – an achievement the paper recently celebrated.
The NYT’s earnings certainly look anemic compared to the recently released reports from tech companies, but compared to other print publishers, the NYT has much to cheer about in this report.
NEW YORK, NY – October 29, 2015 — The New York Times Company announced today adjusted diluted earnings per share from continuing operations (defined below) of $.09 in the third quarter of 2015 compared with $.03 in the third quarter of 2014. Diluted earnings per share from continuing operations was $.06 in the third quarter of 2015 compared with a loss of $.08 in the same period of 2014.
Adjusted operating profit (defined below) grew to $47.6 million in the third quarter of 2015 from $40.0 million in the third quarter of 2014. This increase was driven by revenue growth combined with cost reductions. Operating profit was $21.9 million in the third quarter of 2015 compared with a loss of $9.0 million in the same period of 2014.
“This was a strong quarter for The New York Times Company. We achieved significant growth in adjusted operating profit with strength across many areas of our business,” said Mark Thompson, president and chief executive officer.
“We added 51,000 net digital subscribers, bringing the total number of paid digital-only subscribers to 1,041,000 at the end of Q3. This is the largest number of net subscribers we have added in a quarter since Q4 2012, evidence of our ability to continue to grow our digital subscriber count more than four years after the launch of our pay model and of the high demand for our digital journalism.
This was a strong quarter for The New York Times Company – Mark Thompson, president and CEO
“Total revenues grew in the quarter and we maintained a tight rein on costs. It was our best advertising quarter of the year, year-over-year, despite a decline in digital advertising revenue, with better performance in print. We remain bullish about our digital advertising business and expect it to return to growth in the fourth quarter.
“Moving forward, our focus remains on rapidly growing our digital business and maintaining the long-term strength and viability of our print operation.”
Unless otherwise noted, all comparisons are for the third quarter of 2015 to the third quarter of 2014. Discontinued operations in 2014 include post-sale adjustments related to the New England Media Group (NEMG), which was sold in 2013.
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, non-operating retirement costs and special items (or adjusted operating profit); and operating costs before depreciation, amortization, severance and non-operating retirement costs (or adjusted operating costs). The exhibits include a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures, as well as an explanation of non-operating retirement costs.
There were no special items in the third quarter of 2015 or 2014.
The Company had severance costs of $1.0 million ($0.6 million after tax or $0.00 per share) and $21.4 million ($12.7 million after tax or $.08 per share) in the third quarters of 2015 and 2014, respectively.
Results from Continuing Operations
Total revenues for the third quarter of 2015 increased 0.7 percent to $367.4 million from $364.7 million. Circulation and other revenues increased 1.1 percent and 16.2 percent, respectively, while advertising revenues declined 2.1 percent.
Circulation revenues rose as revenues from the Company’s digital subscription initiatives and January’s increase in home-delivery prices for The New York Times more than offset a decline in print copies sold. Circulation revenue from the Company’s digital-only subscription products was $48.6 million in the third quarter, an increase of 13.8 percent from the third quarter of 2014.
Paid subscribers to the Company’s digital-only subscription products totaled approximately 1,041,000 as of the end of the third quarter of 2015, an increase of 19 percent compared to the end of the third quarter of 2014.
Third-quarter print advertising revenue decreased 0.9 percent while digital advertising revenue decreased 5.0 percent. Digital advertising revenue was $36.5 million, or 27.0 percent of total Company advertising revenues, compared with $38.4 million, or 27.8 percent, in the 2014 third quarter.
Other revenues rose 16.2 percent in the third quarter primarily due to increases in revenues from the Company’s NYT Live business (which includes conferences and live events), Crossword product and rental income.
Operating costs decreased 7.6 percent in the third quarter to $345.5 million from $373.8 million. This decrease mainly resulted from declines in severance, depreciation and amortization, print distribution efficiencies, and lower raw materials and outside printing costs. Adjusted operating costs decreased 1.5 percent in the third quarter to $319.8 million from $324.7 million.
Non-operating retirement costs increased in the third quarter to $9.4 million from $8.3 million in the third quarter due to higher multiemployer pension plan withdrawal obligations.
Raw materials costs decreased 11.9% in the third quarter to $18.4 million from $20.9 million due to paper price and volume declines.
Interest Expense, net
Interest expense, net decreased in the third quarter to $9.1 million from $15.3 million due to a lower level of debt outstanding as a result of the repayment, at maturity, of the Company’s 5.0 percent senior notes in the first quarter of 2015 and debt repurchases made in 2014.
The Company had income tax expense of $3.6 million and an effective tax rate of 27.8 percent in the third quarter of 2015. The Company had an income tax benefit of $10.2 million in the third quarter of 2014 on a $22.7 million pre-tax loss from continuing operations.
As of September 27, 2015, the Company had cash and marketable securities of $872.7 million (excluding restricted cash of $29.0 million primarily to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were $430.0 million.
Share repurchases totaled $36.6 million in the third quarter and $45.9 million in the first nine months of 2015. As of October 27, 2015, repurchases totaled $61.1 million and $40.0 million remained under the Company’s current repurchase authorization.
Capital expenditures totaled approximately $9 million in the third quarter of 2015 and approximately $20 million in the first nine months of 2015.
Total circulation revenues in the fourth quarter of 2015 are expected to increase at a rate similar to that of the third quarter of 2015.
Total advertising revenues in the fourth quarter of 2015 are expected to decrease in the mid-single digits compared with the fourth quarter of 2014, while digital advertising is expected to increase in the mid-single digits.
Operating costs are expected to decrease in the low to mid-single digits in the fourth quarter of 2015 compared with the fourth quarter of 2014, while adjusted operating costs are expected to decline in the low-single digits.
The Company expects the following on a pre-tax basis in 2015:
- Results from joint ventures: breakeven,
- Depreciation and amortization: $60 million to $65 million,
- Interest expense, net: $40 million to $45 million, and
- Capital expenditures: approximately $35 million.