The New York Times Reports Solid Growth in Digital Subscriptions in Q3

The New York Times Company (NYSE: NYT) credits growth in digital subscriptions, digital advertising, subscription revenue and overall profitability for a solid third quarter.

Subscription News: The New York Times Reports Solid Growth in Digital Subscriptions in Q3

Source: The New York Times

The New York Times Company (NYSE: NYT) credits growth in digital subscriptions, digital advertising, subscription revenue and overall profitability for a solid third quarter. These strong results made it possible for the company to declare diluted earnings per share of $0.20, compared to $0.00 for the same period last year. Total revenue for the third quarter of 2017 was $385.6 million, a 6.1 percent increase over Q3 2016 revenue of $363.5 million. Subscription revenue was $246.6 million, a 13.6 percent increase over subscription revenue of $217.1 million for the same period last year.

‘Total revenue for the company grew by 6 percent in the quarter, and we added 154,000 net digital-only subscriptions, a 14 percent increase in the number of net subscription additions compared with the same quarter last year, driven by strong growth across our products,’ said Mark Thompson, president and CEO of The New York Times Company, in a press release.

‘Of note, our digital news product added 105,000 subscriptions, and Cooking, which launched as a paid digital product early in the quarter, added 23,000 subscriptions. These results reflect the ongoing strength of our digital strategy and continued demand for quality, in-depth journalism,’ Thompson added.

Subscription News: The New York Times Reports Solid Growth in Digital Subscriptions in Q3

Source: The New York Times

Other financial and operational highlights for the quarter include:

  • Subscription revenue grew due to sizable growth in digital-only products, and an increase in 2017 in-home delivery prices, offsetting the decline in circulation.
  • Revenue from digital-only subscriptions, including subscriptions to the company’s Crossword and Cooking products, was $85.7 million, a 46.3 percent year-over-year, compared to $58.5 million in Q3 2016.
  • Paid digital-only subscriptions were approximately 2,487,000 at the end of Q3 2017, a net increase of 154,000 subscriptions over Q2 2017, representing a 59.1 percent increase over Q3 2016.
  • Print advertising decreased 20.1 percent, while digital ad revenue grew 11 percent.
  • Digital advertising was $49.2 million, or 43.3 percent of total ad revenue, compared to $44.4 million for the same period last year. The revenue increase was primarily due to increases in revenue from smartphone, programmatic and branded content.
  • Advertising revenue decreased 9.0 percent, due to declines in display advertising, mostly in the luxury, travel, real estate, media, technology and telecommunications industries.
  • Other revenue increased 17.7 percent, primarily from affiliate referral revenue from The Wirecutter, acquired by the company in October 2016. The company most recently combined The Wirecutter and Sweethome into one, new, redesigned site.
  • Operating costs decreased $350.1 million, compared to Q3 2016, primarily due to lower severance, print production and distribution costs, as well as savings in international operations. These efficiencies were offset by costs related to the acquisitions of The Wirecutter, Fake Love and marketing costs.
  • Operating profit was $33.0 million, compared to $9.0 million year-over-year, driven by higher digital subscription revenue and lower severance costs.
  • A $30.1 million gain for joint ventures related to the sale of the remaining assets of Madison Paper Industries, or $16.1 million after taxes.
  • A $2.5 million charge related to the ongoing redesign and consolidation of space in The New York Times Company headquarters.

The company provided the following outlook for Q4 2017 (Editor’s note: Q4 includes 14 weeks, where the same period last year only included 13 weeks.)

  • Total subscriptions in Q4 2017 are expected to increase to the high-teens.
  • Total advertising revenue is expected to decrease in the high single digits.
  • Operating costs and adjusted operating costs are expected to increase in the high single digits.

While not mentioned in the earnings report, in the earnings call, Thompson discussed The Daily, the company’s audio news report launched nine months ago. The new product has been downloaded more than 100 million times since its February launch.

‘The Daily is an audio program that we are uniquely positioned to deliver as it relies heavily on the breadth and depth of Times journalism and extraordinary level of expertise of Times reporters and editors,’ Thompson said. ‘It’s become a daily habit – setting the tone for the news day – for the more than three-quarters of a million people who download and stream it each day.’

In spite of a strong Q3, investors were not impressed, causing stock to dip following the earnings report. On November 1, the day financials were released, NYT stock was valued at $18.00 per share. As of 4:27 PM Eastern on Friday, November 3, NYT was had dipped to $17.45, a drop of just over 3 percent.

Subscription News: The New York Times Reports Solid Growth in Digital Subscriptions in Q3

Source: The New York Times

Insider Take:

Despite the lackluster response by investors, The New York Times enjoyed an excellent quarter, driven by its digital subscription and advertising products. Though print advertising is down, it represents a decreasingly smaller percentage of total revenue, so its impact is lessened each quarter. Also, the company has gotten innovative with its revenue streams – adding stand-alone subscriptions (Cooking and Crossword) to see how they do on their own, and they’ve reduced expenses which always helps the bottom line.

The company’s purchase of The Wirecutter also seems to have been beneficial to the company, diversifying the company’s assets so it is less reliant on subscription, circulation and advertising revenue. If the company continues at this pace, it is setting itself up for a successful fourth quarter and 2018. 

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