July 27, 2017 Last Updated 8:41 am

NYT adds 93,000 net digital-only news subscriptions in Q2, total overall revenue increases 9.2%

The Gray Lady enjoys a tremendous second quarter, even able to stem advertising losses, growing ad revenue for the first time since the third quarter of 2014

The failing New York Times today reported its second quarter earnings before the markets opened and its appears that the failing newspaper is not actually failing. The paper of record increased subscription revenue by an impressive 13.9 percent, and even advertising ticked up a bit, in a sign that with utter chaos in the White House readers are turning to the Times to stay informed.

NYT“During the quarter, we surpassed two million digital-only news subscriptions, doubling our digital subscriber base over a two-year period,” Mark Thompson, president and chief executive officer, The New York Times Company, said. “The company added 93,000 net digital-only news subscriptions, a 69 percent increase in the number of subscription additions compared with the same quarter last year, and total advertising revenue grew for the first time since Q3 2014, driven by continued strength in digital advertising.”

“We believe that more and more people are prepared to pay for high quality in-depth journalism that helps them make sense of the world.”

One can assume that The Washington Post, too, is seeing a surge in digital subscriptions — or at least digital readership as there is a tie-in between subscriptions and Amazon Prime membership — but as the Post is privately held we will not be able to know for sure.

The Times results were impacted by two special charges, one associated with the company’s international print operations, and the other a partial withdrawal obligation under a multiemployer pension plan following an unfavorable arbitration decision. Those two items accounted for around $23 million in charges.

But in the end the publisher reported a net income of $15.599 million, versus a small loss in the same quarter a year ago.

A pretty impressive quarter for the NYT, much of it thanks to the antics of the current president (and it doesn’t look it will stop anytime soon). Here is the NYTCO’s Q2 earnings report:


NEW YORK, NY — July 27, 2017 — The New York Times Company (NYSE:NYT) announced today second-quarter 2017 diluted earnings per share from continuing operations of $.09 compared with $.00 in the same period of 2016. Adjusted diluted earnings per share from continuing operations (defined below) was $.18 in the second quarter of 2017 compared with $.11 in the second quarter of 2016.

Operating profit was $27.7 million in the second quarter of 2017 compared with $9.1 million in the same period of 2016, largely due to two special items recorded in the second quarter of 2016. Adjusted operating profit (defined below) was $67.1 million in the second quarter of 2017 compared with $54.5 million in the second quarter of 2016, principally driven by very strong digital revenues, partially offset by higher costs.

Mark Thompson, president and chief executive officer, The New York Times Company, said, “We had another strong quarter in which we grew revenue and profitability and made significant changes within the organization to ensure that the acceleration of our digital business continues in the long term.

“During the quarter, we surpassed two million digital-only news subscriptions, doubling our digital subscriber base over a two-year period. The company added 93,000 net digital-only news subscriptions, a 69 percent increase in the number of subscription additions compared with the same quarter last year, and total advertising revenue grew for the first time since Q3 2014, driven by continued strength in digital advertising.

“We believe that more and more people are prepared to pay for high quality in-depth journalism that helps them make sense of the world.”

Comparisons
Unless otherwise noted, all comparisons are for the second quarter of 2017 to the second quarter of 2016. 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.

Second-quarter 2017 results included the following special item:

  • $2.0 million of pre-tax expenses ($1.2 million after tax or $.01 per share) related to the planned redesign and consolidation of space in our headquarters building.

Second-quarter 2016 results included the following special items:

  • An $11.9 million ($7.1 million after tax or $.04 per share) charge in connection with the streamlining of the Company’s international print operations (primarily consisting of severance costs).
  • An $11.7 million ($7.0 million after tax or $.04 per share) charge for a partial withdrawal obligation under a multiemployer pension plan following an unfavorable arbitration decision.

The Company had severance costs of $19.3 million ($11.6 million after tax or $.07 per share) and $1.7 million($1.0 million after tax or $.01 per share) in the second quarters of 2017 and 2016, respectively. Second-quarter 2017 severance costs primarily related to a previously disclosed workforce reduction.

Results from Continuing Operations

Revenues
Total revenues for the second quarter of 2017 increased 9.2 percent to $407.1 million from $372.6 million in the second quarter of 2016. Subscription revenues increased 13.9 percent, while advertising revenues increased 0.8 percent and other revenues increased 12.8 percent.

Subscription revenues in the second quarter of 2017 rose primarily due to significant growth in the number of subscriptions to the Company’s digital subscription products, as well as the 2017 increase in home-delivery prices for The New York Times newspaper, which more than offset a decline in print copies sold. Revenue from the Company’s digital-only subscriptions (which includes news product and Crossword product subscriptions) increased 46.4 percent compared with the second quarter of 2016, to $82.5 million.

Paid digital-only subscriptions totaled approximately 2,333,000 at the end of the second quarter of 2017, a net increase of 114,000 subscriptions compared to the end of the first quarter of 2017 and a 63.4 percent increase compared to the end of the second quarter of 2016. Of the 114,000 additions, 93,000 came from the Company’s digital news products, while the remainder came from the Company’s Crossword product.

Second-quarter print advertising revenue decreased 10.5 percent, while digital advertising revenue increased 22.5 percent. Digital advertising revenue was $55.2 million, or 41.7 percent of total Company advertising revenues, compared with $45.0 million, or 34.3 percent, in the second quarter of 2016. The decrease in print advertising revenues resulted from a decline in display advertising, primarily in the luxury, real estate, technology, telecommunications and travel categories. The increase in digital advertising revenues primarily reflected increases in revenue from smartphone, programmatic and branded content, partially offset by a decrease in traditional website display advertising.

Other revenues rose 12.8 percent in the second quarter largely due to affiliate referral revenue associated with the product review and recommendation websites, The Wirecutter and The Sweethome, which the Company acquired in October 2016, partially offset by lower revenue from fewer conferences in the quarter.

Operating Costs
Operating costs increased in the second quarter of 2017 to $377.4 million compared with $339.9 million in the second quarter of 2016, largely due to severance expense associated with workforce reductions as well as higher compensation, marketing costs and costs from acquired companies, which were partially offset by lower print production and distribution costs and savings in international operations. Adjusted operating costs increased to $340.0 million from $318.2 million in the second quarter of 2016, largely due to higher compensation, marketing costs, and costs from acquired companies, which were partially offset by lower print production and distribution and savings in international operations.

Non-operating retirement costs, which exclude special items, decreased to $3.0 million from $5.0 million in the second quarter of 2017, due to lower multiemployer pension plan withdrawal expense.

Raw materials costs decreased to $15.8 million compared with $17.0 million in the second quarter of 2016, largely due to volume declines.

Other Data

Interest Expense, net
Interest expense, net decreased in the second quarter of 2017 to $5.1 million compared with $9.1 million in the second quarter of 2016 as a result of the repayment, at maturity, of the Company’s 6.625 percent senior notes in the fourth quarter of 2016.

Income Taxes
The Company had income tax expense of $6.7 million in the second quarter of 2017 compared with income tax expense of $0.1 million in the second quarter of 2016. The increase in income tax expense was primarily due to higher income from continuing operations in the second quarter of 2017.

Liquidity
As of June 25, 2017, the Company had cash and marketable securities of approximately $807.4 million (excluding restricted cash of approximately $17.9 million, the majority of which is set aside to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were approximately $248.6 million.

Capital Expenditures
Capital expenditures totaled approximately $22 million in the second quarter of 2017.

Outlook
Total subscription revenues in the third quarter of 2017 are expected to increase at a rate similar to that of the second quarter of 2017.

Total advertising revenues in the third quarter of 2017 are expected to decrease in the mid- to high-single digits compared with the third quarter of 2016.

Operating costs and adjusted operating costs are expected to increase in the mid-single digits in the third quarter of 2017 compared with the third quarter of 2016.

The Company expects the following on a pre-tax basis in 2017:

  • Depreciation and amortization: $60 million to $65 million,
  • Interest expense, net: $18 million to $20 million, and
  • Capital expenditures: $85 million to $90 million.

NYT Q2

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