The New York Times Company (NYSE: NYT) reports solid performance in the second quarter as its digital subscription business continues to grow. Financial highlights for Q2 2018 include total revenue of $414.6 million, a 1.8 percent increase year-over-year. Subscription revenue of $260.6 million grew 4.2 percent, other revenue of $34.7 million grew 40.0 percent and advertising revenues of $119.2 million decreased 9.9 percent in comparison to the same period last year.

“In the second quarter, we saw increases in revenue and overall profitability and continued growth in our digital subscription business. We added 109,000 net new digital-only subscriptions, of which 68,000 were to our core news bundle. At the end of Q2, we had 3.8 million total subscriptions, 2.9 million of which were digital-only. Our subscribers who came to us around the 2016 Election and post-Election periods continue to retain better than previous cohorts,” said Mark Thompson, president and CEO, in an August 8 statement.

“Subscription revenues accounted for nearly two-thirds of the Company’s revenues, a trend we expect to continue. We continue to believe that there is significant runway to expand that base substantially,” added Thompson. “Turning to advertising, this was a subdued quarter for digital advertising as we predicted, but we remain confident that we will return to strong year-over-year growth in the third quarter.”

Other highlights for the quarter include:

• Operating costs were $373.3 million, a slight decrease over Q2 2017, due to lower severance costs.
• Raw materials increased from $15.8 million to $17.8 million, due to higher newsprint prices.
• Operating profit was $40.0 million, compared to $26.5 million in Q2 2017.
• Revenue from digital-only subscriptions including news, Crossword and NYT Cooking, grew 19.6 percent to $98.7 million.
• Paid digital-only subscriptions totaled 2.89 million at the end of Q2, an increase of 109,000 subscriptions. Of those 109,000, 68,000 came from digital news.
• The company reported net income of $23.6 million, or $0.14 diluted earnings per share.
• At the end of the second quarter, the company had cash and marketable securities of $779.2 million. Total debt and capital lease obligations were $251.9 million.
• Capital expenditures were $15 million, compared to $22 million for the same period last year.

The company offered the following outlook for the third quarter of 2018:

• Total subscription revenue is estimated to increase in the mid-single digits with digital-only subscription revenue rising to the high-teens.
• Total advertising revenue is expected to decrease in the low-single digits.
• Digital advertising revenue is estimated to increase approximately 10 percent.
• Other revenue is expected to increase about 50 percent, compared to Q3 2017.
• Operating costs and adjusted operating costs will increase about 10 percent as a result of higher marketing costs and growth in commercial printing operations.

On the day financials were reported – August 8, 2018 – New York Times Co. Class A stock was valued at $22.70 per share. As of 4:40 p.m. EDT yesterday, the same stock was valued at $22.85 per share.

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Insider Take:

The New York Times continues to grow its digital subscriptions by offering stand-alone subscriptions (news, crosswords, NYT Cooking and a new topic – parenting) as well as bundled deals. These niche products are attracting new and different audiences. The Times is also seeing revenue from its $30 million acquisition in Wirecutter in November 2016. While total ad revenue is down overall, digital advertising is increasing, which is a positive sign that The Times has figured out how to straddle the divide between print and digital advertising.