NEW YORK TIMES CO Q3 FY2024 earnings call

• Subscribers: Added 260,000 net new digital subscribers in the quarter, total subscribers passed 11 million. Bundle and multi-product subscribers on track to be over half of base by end of next year.
• Content and products: World-class news coverage, App redesign, innovation in audio, video, games, The Athletic, etc. Games and The Athletic driving growth.
• Advertising and other revenues: Digital advertising revenue up nearly 9% in line with guidance, other revenues met expectations due to Wirecutter and Licensing.
• Cost discipline: Prioritizing investments in world-class journalism and premium product experiences, disciplined in growing the business.

Digital subscription revenue grew over 14% year-on-year in the third quarter, reaching approximately $322 million. Digital advertising revenue was up nearly 9% to $82 million. Other revenues increased approximately 9% to $69 million. Print revenue continued to decline. Bundle and multi-product subscribers were on track to account for over half of the base by the end of next year, with higher expected lifetime value than individual product subscribers.

• Q4 digital-only subscription revenues expected to increase 14% to 17% vs Q4 2023, total subscription revenues 7% to 9%.
• Digital advertising revenues expected to increase high single digits to low double digits, total advertising revenues low single digits.
• Other revenues expected to increase 11% to 13% due to Wirecutter and licensing timing.
• Adjusted operating costs expected to increase 5% to 6% while strategically investing in growth areas.

• Union representing certain technology employees went on strike on the day of the call, effects on operations and results depend on further developments, but Q4 guidance incorporates current best estimates.
• Platforms sending less traffic to publishers impacting audience growth, AI playing a role in these headwinds.

Q: Hey, good morning everyone. Thanks for taking the question. I first wanted to ask about the strength in digital advertising. It sounds like some of that growth came from bringing on new supply, so I was wondering, can you talk about where that new supply is showing up in your portfolio and how it's performing relative to your base? And maybe as part of that, can you talk about where we are with the rollout on the games with advertising?

A: I'm happy to take that one, good morning. So I would say, broadly, the digital advertising number came from two places. One, I think as we put more ad products into our lifestyle products, we're just more valuable and more marketers. So we have more demand that we can tap into. And two, as you suggest, we are sort of steadily rolling out supply in each of those products. And actually, it's the case that we have new supply that's come online at one point or another this year in all four of our lifestyle products in Games specifically. You saw the rollout of more ads in the Games app, which is early but we're excited about it. And I would say more to come there and also more to come on The Athletic, which continues to grow audience and continues to grow ad opportunities. But Games and The Athletic are certainly the biggest within the lifestyle portfolio in terms of where we can go from here, biggest in terms of the opportunity, but all four products really have the opportunity.

Q: One more if you have time. You saw a pretty nice step-up in bundle ARPU, both on a sequential basis and then the year-over-year decline moderated. Can you talk about what you're seeing with promo step-ups and how you see the path to getting back to bundle ARPU growth on a year-over-year basis? Thanks.

A: Sure, I can take that. I mean I think the most important thing to say any time we're talking about ARPU is making sure we kind of reiterate the overall focus is on our long-term revenue growth, not ARPU per se. And specifically, what we really focus on ourselves and what you focused on is that total digital-only ARPU line and our target is driving year-over-year modest increases in that. We have a lot of levers to do that and the disclosure allows you to sort of see that strategy playing out. To your question on sort of what we're seeing, as we've been sort of saying throughout the year and looking towards the rest of the year, certainly there are multiple factors that are giving us real confidence in our ARPU trajectory. The first is the bundle and the encouraging results we continue to see as bundle subscribers are transitioning to those higher prices. So still feeling really good about what we're seeing there. And then the second, our single product subscription price increases for tenured, certain groups of tenured subscribers there. As we just keep adding value into the products, we're confident in our ability to use the lever of continually raising prices. And when you add all that up, we feel really good about the ARPU trajectory over time.

Q: Thank you. Meredith, you commented on these calls, including today, a lot about how prior changes of social media search impacted not only the Times, but the whole news complex in terms of website traffic. I'm interested, we're a couple of quarters in now in search results that include a healthy amount of content delivered with AI. Are you seeing any impact to traffic as a result, not just on news, but for other verticals, like for Wirecutter? And then one for Will, you mentioned the strike, I know it's just like literally started within the past hour so. But can you just clarify what you built in for your Q4 cost forecast in terms of cost or any disruptions which could impact the top line? Thanks.

A: Thanks, David. I'll go first. On your question about AI, I'll just say sort of stepping back, we've been talking for, I think, close to two years now about audience headwinds generally, including the fact that platforms are sending less and less traffic to publishers. This is not new and it certainly makes aspects of the business harder. I'll say we do believe that products like ChatGPT and AI overviews are playing a role in those headwinds. But having said that, our whole strategy is intended to build resilience to those dynamics by making products that are so good that people seek them out and ask for them by name and build direct relationships and daily habits with them.

A: And I'm happy to take the follow-up on the strike. I don't think I really have anything to add here beyond my prepared remarks. While it was just announced today, we're definitely not surprised. And we've known about this as a possibility. We're prepared for a range of scenarios. And I think in terms of the guide, it represents our best estimate of what we think Q4, how it will play out. Of course, the effects on operations results will depend a bit on further developments, but the guide is contemplating what we see today.

Q: Thank you. Maybe one on subscriber trends. I mean, typically, you guys tend to see some tailwind in Q3 sequentially versus Q2. And then, of course, this is also an election quarter. But it looks like net adds actually slowed a little bit. So could you just provide some context on the sequential trends and maybe why it slowed down a little bit? And then also the same thing for Q4, I guess, I mean well implicit in the guidance is obviously an acceleration in Q4, which you typically see in Q4. But when I look at the delta in terms of the degree of acceleration you normally see, it feels a little bit lower than usual and I'm just wondering if price increases and some degree of churn is embedded in that guidance? Thanks.

A: Why don't I start, Kannan and Will, you can add anything that you feel would be useful. Let me just start by saying we feel really good about the headline number of 260,000 net adds in the quarter and also to your point, the value that those subscribers are bringing to the portfolio. And I think, in general our results in the quarter and all year show that we're kind of firing on all cylinders across the portfolio. We've been very, very focused on two things, and I would say both are going well. One is getting our news product and the rest of the portfolio to drive very strong enterprise subscriber engagement that is such an important part of the model, and that's really working. And then secondly, and this is kind of a newer focus this year, we have been intently focused on getting the lifestyle products to begin to be more powerful funnels for the bundle. And we have a lot of confidence and optimism there. So I would just say we feel very good about where we are on both volume and revenue.

A: I think Kannan, I don't know what too much else to add. I mean, I think just translating that into the Q4 guide as Meredith said, we're really pleased with that guide, and it's fundamentally built on adding a lot of value into the product that we continue to see the high levels of engagement or whether it's single product subs or the bundle step-ups throughout this year, every time we've been asking people to pay more. We've been really pleased with what we see, and that's continuing to underpin what we see as attractive digital subscription revenue growth rates.

Q: Thank you. Good morning. Meredith, I wanted to follow up and ask you to elaborate on something you said in your prepared remarks, and I may misquote you here but you said something about audience headwinds and other platforms impacting your audience growth. So could you please tell us what exactly you meant there and did you feel that you needed to bring this up, is that trend getting worse for you and how you're planning on dealing with that? Thank you very much.

A: Thanks for the question. I'll just say it's more of a step-back point, and I think we've been making it consistently for two years or close to two years, THAT the platforms are sending less and less traffic to publishers, and I think I already answered a prior question about how AI plays a role not. I think the important takeaway is that our model is designed to build resilience to that and we feel really, really good about how we're doing that, both in terms of driving engagement from the subscribers we already have and the ability of this multiproduct portfolio to bring us new direct relationships and reasons to call to action the direct relationships we already have. You can regard us as keenly understanding the direction of travel from the platforms and also building our own ways to get people to come to us. And I think that's really working. And I'll just finish by saying we didn't mean to intend anything further than what we've been saying for probably seven quarters now maybe eight, I'll leave it there.

Q: Yeah, good morning. Actually, I've got two questions. One -- first question, there's been a fair amount of chaos and churn at the Washington Post and The LA Times. Are you seeing any benefit from that?

A: I'm happy to take that one, Doug. I want to say, first and most importantly we take no joy in watching any other quality independent journalism institution go through anything difficult. As you know, we are laser focused on our own strategy and our own growth trajectory. And we expect we'll continue to attract subscribers from all sorts of places for all sorts of reasons, and I'll leave it there.

Q: Got it, Okay. And Will, just on the cost breakdown, if you take The Athletic out and just look at the movement in cost expenses in sales and marketing, product development and G&A. There was a lot of unusual movement this quarter. I think sales and marketing was up 22% at the time, it was down a year ago. Is there anything driving these categories unusually in the quarter?

A: I think the way to think about our costs, as we've always said, in any given quarter, things can move around a bit. I think the most important thing is just stepping back to say we're really focused over the long term on sustaining healthy revenue growth, AOP growth and margin expansion kind of in simple terms, revenues growing faster than cost. And -- we're doing that for a long-term investment approach that both closely manages costs in places like G&A, while strategically investing in the areas that best position us for sustainable growth. We've identified repeatedly, the world-class news journalism and lifestyle products. So it's that disciplined approach. We have been executing. We intend to continue and that should enable us to continue to target year-over-year AOP growth and margin expansion going forward.