New York Times Company (The)

Good morning and welcome to the New York Times Company's fourth quarter and full year 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. Please note, this event is being recorded. And I'd like to turn the conference over to Harlan Toplitsky, Vice President of Investor Relations. Please go ahead.

Thank you and welcome to the New York Times Company's fourth quarter and full year earnings, full year 2020 earnings conference call. On the call today, we have Meredith Kopit-Levian, President and Chief Executive Officer, and Roland Caputo, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call. and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2019 10-K, as updated in subsequent quarterly reports on Form 10-Q. In addition, our presentation will include non-GAAP financial measures, and we have provided reconciliation to the most comparable GAAP measures in our earnings press release, which is available on our website at investors.nytco.com. With that, I will turn the call over to Meredith Kopitz-Levien.

Thanks, Harlan, and good morning, everyone. 2020 was a year none of us could have imagined. The pandemic, its devastating human toll, and its many economic reverberations, a national reckoning over race and social justice, a bitterly contested U.S. presidential election, and an unending hunger for relief from it all. The need for quality independent journalism was as acute as ever, and my colleagues across the Times rose to meet that need. They did so with energy and rigor commensurate with our mission. Their work, which was consumed at historic levels, led to a year of strong business results. At the end of 2020, the Times now has seven and a half million total subscriptions across our digital and print products, and notably, News crossed the 5 million digital subscriptions mark. Thanks to acceleration of growth in our digital subscription business and, to a lesser degree, disciplined cost management, and despite the loss of $138 million in high-margin advertising revenue last year, we recorded a slight increase in annual adjusted operating profits. That increase was driven by 2.3 million net new digital subscriptions and a 30% increase in total digital subscription revenue, a 15 percentage point acceleration compared to last year. All three of our products, news, cooking, and games, broke all previous records for annual net ads. And we saw continued success with our two strategic pricing initiatives in news, stepping up promotional subscriptions to higher prices at the one-year mark, and nearly a full year of our first-ever price increase on tenured subscriptions. The strong news cycle has continued to mean record audiences, albeit with real fluctuations. During election week, 273 million global readers came to the Times, nearly doubling our previous weekly record. And reader tools like our expansive coronavirus database and COVID-19 vaccine information, still among the most comprehensive of their kind, continue to drive elevated traffic. Now, I can't tell you which storylines will drive outsized audience growth in the future, just like few could have predicted a devastating global pandemic or a violent assault at our nation's capitals. Indeed, the news cycle will change and audience will fluctuate, which could mean considerable variability in net subscription additions in any given quarter. And as I said in the last earnings call, we regard 2020 as an outlier year for net subscription additions. But whatever the news cycle, I believe we are well positioned to deliver continuous growth and in 2021, more growth than we drove in 2019. We're more than a year into our registration-based customer journey, and we're encouraged to see that while many readers convert immediately in moments of high news need, there are plenty of others who do so over time as they begin to understand and experience the time's breadth and value. And with each passing quarter, our understanding of audience signals and our ability to act on them grows, making it easier to drive conversion. Advertising also performed better than expected in the fourth quarter, The pandemic substantially impacted our ad business all year, and we experienced a hastening of declines in traditional print categories, at least some of which are unlikely to return. But we also saw some stabilization in our digital ad business by mid-year. In fact, if you control for the closure of our services businesses, Hello Society and Fake Love, and for our removal of open market programmatic advertising from our apps at the beginning of the year, full year digital advertising revenues would have declined much more modestly instead of the 12% we're reporting today. We credit that stabilization to the increasing potency of our ad products and to our ad team's continued ability to rapidly transform our value proposition. In advertising, First-party data-targeted media and audio remain our biggest growth drivers. In the second half of 2020, we introduced more unique first-party audience products which are performing well. We also recorded $36 million in podcast advertising revenue in 2020, up $7 million from the prior year, powered by our expanding portfolio of audio programs. We expect podcast revenue growth to be strong into 2021 as we continue to see steady demand for The Daily and our other shows, and as we benefit from our acquisition of Serial and the rights to sell advertising against This American Life.