New York Times Company (The)

Hello, and welcome to the New York Time Company's first quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please send to 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. To answer your question, please press star, then two. Please note, today's event is being recorded. I would now like to turn the conference over to Harlan Toplitsky, Vice President of Investor Relations. Mr. Toplitsky, please go ahead.

Thank you and welcome to the New York Times Company's first quarter 2021 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. These statements are based on our current expectations and assumptions, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties that are described in the company's 2020 10K and subsequent SEC filings. In addition, our presentation will include non-GAAP financial measures, and we have provided reconciliations to the most comparable GAAP measures in our earnings press releases. which is available on our website at investors.nytco.com. With that, I will turn the call over to Meredith Kopit-Levion.

Thanks, Harlan, and good morning. The Times finished the first quarter with more than 7.8 million paid subscriptions across our digital and print products, more than 100 million registered users, and an average weekly audience of 76 million readers. That foundation, plus our unmatched journalistic breadth and a market of at least 100 million people who are expected to pay for English language journalism, grounds our conviction that we can substantially and profitably scale paid subscriptions over time. Our strong financial results in the first quarter demonstrate the success of our strategy and the promise of our large and growing digital subscription business. We recorded adjusted operating profits of $68 million, an improvement of more than 50% compared to the first quarter of 2020. Digital subscription revenue increased 38% in the quarter, and we added 301,000 net new digital subscriptions across news, cooking, games, and autos. Our first quarter results also reflect a real improvement in digital advertising. That improvement was driven by a brisk market and our work last year on refining the competitiveness of our offering and the margin profile of our business. Digital advertising growth over Q1 in both 2020 and 2019 demonstrates the advantage of our subscription-first strategy to our advertising business. In our last earnings call, I noted that fluctuations in the news cycle can lead to considerable variability in net digital subscription additions from quarter to quarter. In February and March, our audiences declined from their historic highs last year, and we saw fewer net subscription additions in the latter part of the quarter. We expect moderated growth to continue through the second quarter, traditionally our softest of the year. With lower forecasted second quarter performance, we now expect annual total net subscription additions to be in the range of our 2019 performance, which prior to 2020 was our best year for net additions. There is no doubt that the news cycles of the last five years, tapped by last year's tumultuous presidential elections, Racial reckoning and the COVID-19 pandemic created unprecedented demand for Times journalism and therefore accelerated subscription growth. At the same time, with each passing quarter, we've improved many aspects of our underlying model. While we don't know which storylines will drive the next big news cycle, we do know that the size of our newsroom, its range of expertise, and our continued investments in meeting more needs, position us to capture that demand, whatever its source. In the last few months, the breadth and reach of our journalism was on full display. While a group of data journalists in one part of our newsroom continued to update the world's most comprehensive COVID case tracker, our parenting team captured the ethos of what it feels like to be a mother right now, with their breakout multimedia feature, The Primal Scream. Our Metro reporters led the coverage of the multiple scandals rocking Albany, while our longtime beat reporter covering Premier League football broke the news of the Super League that wasn't. And our feature-length documentary, Framing Britney Spears, which aired on FX and Hulu, had a huge cultural impact. The world is getting no less complex, and the need for understanding will only grow. Outstanding journalism that helps people understand the world is central to our model, and it will continue to be the primary draw for the majority of our audiences and paying customers. But it won't be the only draw. Ten million people a week now come to the Times for needs beyond news, seeking recipes, puzzles, and shopping advice. Taken individually, NYT Games and NYT Cooking are among the largest journalism-backed subscription services in America, and our plans for expanding our subscription portfolio through Wirecutter and Autumn reflect our deeply held belief that the Times can play an even bigger role in the lives of tens of millions of people. Combined with the differential value and demand advantages of our core news product, We believe these offerings should enable the Times to become a larger and more profitable business as we scale. I'll turn now to our underlying subscription drivers in the quarter and some specifics about our work ahead. While total audience, registered readers on site, and subscriber engagement are somewhat lower this year than last, these metrics are all higher than 2019. We now have a significant base of people who read the Times every day, a base that is substantially larger than before the pandemic. This is a result of our continued strength in news, the shift we made almost two years ago to a registration-based model, and the fact that we acquired so many new registered users in 2020. Many of those registered users are now interacting with us in new ways which point to our opportunities for growth. For example, we saw a meaningful uptake in the range of storylines that drove user engagement in the first quarter, a positive development given the strong correlation we've described in the past between experiencing the breadth of our reports and subscribing. Our live coverage, with which we've been experimenting aggressively since late 2019, now plays a significant role in ensuring strength at the top of our funnel, as well as repeat engagement. Ten million readers came to the Times for coverage of Derek Chauvin's trial, with our live experience driving much of that readership. More than a third of our registered users and subscribers engage with this coverage on a weekly basis, with that number expected to increase thanks to a steady rollout of new innovations. The Times has always had a large number of regular newsletter readers, and our newsletter audience has grown significantly since we began asking users to register. Fifteen million people read a Times newsletter every week, including five million who start their day with our flagship newsletter, The Morning. More than 85% of our newsletter readers are not yet paying Times subscribers. So newsletters represent a promising opportunity in our subscription funnel, both to encourage registered users to subscribe and as a source of subscription value. At nearly 1.7 million subscriptions and counting, cooking and games are succeeding as products in their own right with a lot of runway ahead. What's particularly encouraging is their ability to enhance the time's value in users' daily lives. In the last few months, we've begun to experiment with how we sell our multi-product bundle in new ways. Early tests are promising, and we plan to introduce a more substantial overhaul to how we price and merchandise over time. We expect the bundle to benefit conversion, retention, and long-term monetization. I'll turn now to advertising. In the first quarter, We recorded $59 million of digital advertising revenue, a 16% increase over the first quarter of 2020, and, encouragingly, a 7% increase over the same period in 2019. This is the last quarter that we were comparing against revenues from the marketing services business we've now exited, and also from the removal of open market programmatic advertising in our apps. so the actual improvement in digital advertising versus last year is even stronger. Our growth in registered users has propelled the rapid expansion of our first-party data products, which are proving effective for marketers while affording readers privacy from third-party trackers. Demand for these products is strong, driving 20% of our digital advertising revenue in the first quarter compared with less than 10% in the same period last year. And as of the first quarter, we have fully eliminated our reliance on third-party data targeting in direct sold advertising. Audio advertising sales also continue to be strong as total audio listeners grew 30% in the quarter versus last year, driven by the addition of Serial and This American Life to our portfolio. Our production is beyond the daily, including Sway with Kara Swisher, the argument with Jane Koston, and the Ezra Klein Show are also performing well with both listeners and advertisers. Print advertising was still relatively weak in the quarter, and while we expect some categories to recover in the latter half of the year, we do believe that some of the pandemic losses should be regarded as structural. Based on all of this, plus low comparables in the second quarter and the fact that our digital advertising business is now larger than print, we expect a material acceleration in our ad business in the second quarter. Before I turn things over to Roland, I want to mention our continued focus on our people and our culture. I've described this next decade in the Times business as being about scaling our strategy of journalism worth paying for. To do that, we need a culture that attracts, develops, and retains top talent, not just in our newsrooms, but across all of our disciplines. Our culture has enabled the world's most admired and influential news reports, and it's also helped create an innovative and thriving digital business. Success from here will require that we nurture the best aspects of that culture and also evolve it. In both cases, we are making steady progress. In the last quarter, we launched a multi-year plan to build a more diverse, equitable, and inclusive New York Times that reflects the global audience we serve and supports our mission and business ambition. We also continued to advance our underlying tech strategy, which reflects the increasing importance of engineering excellence to our growth. And finally, we've begun to define the future of our workplace to offer more flexibility while preserving the kind of physical togetherness that enables much of our team-oriented creative work. I'm confident that all of this will propel our strategy and our growth for years to come. And with that, I'll turn it over to Roland.