The New York Times (NYSE: NYT) reported a solid second quarter for the period ended June 30, 2017, including big gains in digital subscriptions and advertising revenue. Total revenue for the second quarter was $407.1 million, a 9.2 percent increase year-over-year. Subscription revenues grew 13.9 percent, other revenue increased 12.8 percent, and advertising revenues grew slightly at 0.8 percent.

The Times’ paid digital-only subscriptions exceeded the two-million mark during the second quarter at approximately 2.33 million subscribers at the end of Q2, representing a net increase of 114,000 subscribers, compared to the first quarter of 2017, and a 63.4 percent increase compared to the same period last year.

The Times said subscription revenue increased primarily due to growth in the number of digital subscriptions and this year’s increase in home-delivery prices, offsetting declining revenue from print copies sold. The company’s digital-only subscriptions, including news and crossword subscriptions, grew 46.4 percent year-over-year to $82.5 million.

Other quarterly highlights include:

• Print advertising revenue declined 10.5 percent, due to declines in display advertising, mostly in the luxury, real estate, technology, telecommunications and travel categories.
• Digital advertising revenue increased 22.5 percent to $55.2 million, representing 41.7 percent of total advertising revenue. The Times’ attributes the increases to increases in ad revenue from smartphone advertising, programmatic and branded content.
• Other revenue grew 12.8 percent, primarily from affiliate revenue from The Wirecutter and The Sweethome which The Times acquired late last year for $30 million.
• Net income was $15.6 million compared to a net loss of $211,000 for the same period last year.
• Adjusted diluted earnings per share were $0.09, compared to $0.0 for the same period last year.
• Operating costs increased $377.4 million, compared to $339.9 million year-over-year, mostly due to severance costs, along with higher compensation, marketing costs and other costs from company acquisitions.
• Adjusted operating costs were $340.0 million, compared to $318.2 million year-over-year.
• Raw materials costs dropped to $15.8 million from $17.0 million year-over-year.
• The company had significantly higher income tax expenses in the second quarter of 2017. Income tax expenses were $6.7 million, compared to $0.1 million year-over-year, due to higher income from continuing operations.
• Capital expenditures for Q2 were $22 million.
• The Times’ reported severance costs of $19.3 million in Q2 2017 and $1.7 million in Q2 2016.

“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,” said Mark Thompson, president and CEO of The New York Times Company, in a statement.

“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,” Thompson said. “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.”

The New York Times’ offered the following guidance for the third quarter of 2017:

• Total subscription revenue is estimated to increase at a similar rate to Q2.
• Total advertising revenue are estimated to decrease in the mid- to high-single digits compared to the same period last year.
• Operating costs and adjusted operating costs are estimated to increase in the mid-single digits.
• The company anticipates capital expenditures between $85 million and $90 million on a pre-tax basis.

The Times released second quarter financials on Thursday, July 27. On that date, the company’s Class A stock closed at $19.95 per share, compared to $18.35 per share on Wednesday, July 26. Stock closed on Friday, July 28 at $19.30. As of 11:19 EDT yesterday, NYSE stock was valued at $19.00 per share. This time last year – August 1, 2016 – stock was valued at $13.02 per share, so its value has increased significantly since then.

Insider Take:

This was a strong quarter for The New York Times with solid digital subscription and advertising revenue growth. The company is also enjoying revenue from its acquisitions of The Wirecutter and The Sweethome. This affiliate revenue falls into the “other revenue” category which was reported at $24.8 million, compared to $22.0 million for the same period last year. It isn’t broken out to show how much of that is affiliate revenue though.

The New York Times still has some challenges, however. In June, the company offered buyouts to editorial staff to reduce extraneous layers of editing, and it eliminated the public editor’s position. These latest job cuts were not well received by staff. In fact, they inspired a protest and walkout of newsroom staff. While financially The Times is on the upswing, if it wants to maintain its reputation for quality journalism, it will have to find a balance between its 2020 vision and its newsroom staff.