New York Times Company (The)

Good morning and welcome to the New York Times second quarter 2021 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 telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to Harlan Toplitsky, Executive Director of Investor Relations and Financial Planning and Analysis. Please go ahead.

Thank you and welcome to the New York Times Company's second 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. Given the impact that the COVID-19 pandemic had on our business in 2020, we will also present certain comparisons of our operating results in 2021 to 2019. which we believe in many cases provides useful context for our current year results. 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 calls over to Meredith Kopitz-Levion.

Thanks, Harlan, and good morning, everyone. We now have more than 8 million paid subscriptions across our digital and print products, a testament to the success of our strategy, the strength of the market for paid digital journalism, and our unique opportunity to meet that demand. That milestone follows a second quarter with strong revenue and profit growth, modest net subscription additions, and progress on advancing our underlying model. Total subscription revenue grew 16% in the quarter, the largest year-on-year subscription revenue gain in more than a decade. Advertising revenues surged compared with the same period last year. The combined strength in these two revenue streams more than offset cost growth And as a result, we recorded $93 million in adjusted operating profit, a 78% improvement compared to the same quarter in 2020. We saw moderated growth in net subscription additions in the second quarter, which we expected given that Q2 is traditionally our softest of the year, and we were comparing against last year's historic results at the beginning of the COVID crisis. We added 142,000 net digital subscriptions with roughly half in news and the balance in cooking and games. We continue to expect that our total annual net subscription additions will be in the range of 2019, although that remains difficult to predict with precision. Our advertising performance was better than expected with total revenue up 66% year on year. As with subscriptions, the biggest factor in the gain in advertising nearly 80% year-on-year and more than 22% over the same period in 2019. It was also another strong quarter for demonstrating the breadth, reach, and impact of our journalism with unparalleled coverage of the devastating events in South Florida, the political crisis in Haiti, and the still-surging pandemic. Pulitzer Prizes were announced in June, and the Times was the only news organization to win more than one this year. Culture writer Wesley Morris won the Pulitzer for commentary for his urgent and moving essays exploring the intersection of race and culture. And for the seventh time in our history, the Times won the Pulitzer Prize for public service journalism's highest honor for our coronavirus coverage. This body of work is the quintessential example of the expansive journalism the Times can uniquely deliver. More than 1,000 journalists contributed to our coronavirus reporting, as did many others across the company, including engineers, data scientists, product designers, and product managers. The work of our data journalism team in particular is worth noting. The Times launched an around-the-clock effort to track every known coronavirus case in the U.S. and made that data publicly available. That coverage continues to fill a vacuum that has helped local governments, healthcare workers, businesses, and individuals better prepare through each stage of the pandemic. It has also brought us new audiences who rely on and return to our products repeatedly. Demonstrating the strength of our journalism across platforms and subject matters, in mid-July, the Times was nominated for the Primetime Emmy Award for Best Documentary for our film Framing Britney Spears. The film ignited intense scrutiny of court-ordered conservatorships and continues to resonate with audiences globally. We produced it as part of our New York Times Presents series, a partnership with FX, that was recently extended. I'll turn now to our underlying revenue drivers in the quarter and share some specifics about the work ahead. As we've said in prior calls, we expect to feel the effects of comparing our results against last year's heightened news cycle for the remainder of the year, and we believe that while the news cycle will continue to have significant effects on our subscription growth, we are increasing our control over the levers of the models. Our audience in the second quarter was below the historic highs of 2020, driven largely by declining engagement with the COVID story domestically. But as we saw last quarter, our average weekly audience was larger than in the same period in 2019 and every prior period. For the second quarter in a row, we were also pleased to see readers engage across a broader range of storylines than they did last year. We view this as a positive leading indicator of future net subscription additions, as we have seen that experiencing the breadth of our report correlates with paying and staying. We're leaning into that breadth, both within our core news experience and across our adjacent products, like cooking, games, and Wirecutter, by experimenting more aggressively with programming to expose more of our audience to the full value of the times. With sustained strength relative to 2019 and prior years and overall audience, and with more than 100 million registered users, we are also experimenting more aggressively and, we believe, more successfully on our customer journey and access model. And as our pace of new registrations continues to be healthy, we have now begun to focus even more on getting registered users to subscribe and to engage more deeply once they do. That experimentation with our access model has given us increasing insight into when our readers are ready to subscribe, which in turn is leading to higher conversion rates. As a result, our digital monthly net subscription additions have grown each month since Lowe's in March. We believe we have additional room to optimize conversion as we strengthen engagement in key areas like newsletters, and our growing body of live experiences. Last quarter, we noted that the newest cohort of news subscriptions appeared to be retaining slightly less well than in the past, which contributed to a small increase in overall churn. Q2 domestic news churn was unchanged from the first quarter and remains at a comfortable level. While we experienced an uptick internationally in non-core markets, we believe our churn overall is generally at a healthy level. We also believe that our increased focus on subscriber engagement and on making the subscriber experience clearly superior to registered and anonymous experiences will help maintain healthy churn levels. And we remain confident in our overarching approach to graduating subscribers from promotional prices to step-up and full prices. We continued in the last quarter to lay the groundwork for a more strategic bundled subscription offering that has the potential to be more widely appealing and uniquely valuable to millions of people in their daily lives. Throughout the quarter, we ran tests on our all-digital access bundle, which combines news, cooking, and games. These tests demonstrated that there is meaningful demand for the bundle and that those who choose it are better at retaining than those who subscribe to only one product. Building on these promising results, we plan to do more testing around pricing, positioning, and marketing of the all-digital access bundle in the second half of the year. And this fall, we plan to launch our paid subscription product for Wirecutter and experiment further with Autumn, both of which over time have the potential to widen the appeal and value of a Times bundle. Given the opportunity we see, an addressable market of at least 100 million people who are expected to pay for English language journalism, and a unique moment in which daily habits are up for grabs, we are continuing to invest in the value of our individual products and the broader bundle. That includes investing thoughtfully into our news operation to cover the most important stories of our time and to meet more news needs. It means investing into our adjacent products to meet a broader array of life needs, as we have done with cooking and games, each of which is now closing in on a million subscriptions. And it means investing to build the underlying tech, product experience, and company culture required for us to scale. We believe these investments will enable us to grow our market share and also to build a larger and more profitable company over time. I'll turn briefly now to the drivers of advertising growth. Our ad business is no doubt benefiting from an advertising market recovery, but we also believe we're seeing the effect of the groundwork we laid to build competitive advantages. Those advantages include our robust first-party data targeting capabilities, our large and growing suite of hit podcasts, and our ability to create unique multi-platform collaborations that help marketers launch new ideas and products into the world. Now, before I turn things over to Roland, let me share an update on the company's ongoing emphasis on and investment in building out a world-class digital product development team. As we focus on scaling our strategy of journalism worth paying for, our ability to attract, develop, and retain top talent in areas well beyond journalism is paramount. This is especially the case in engineering, which is now one of our largest business side functions. I'm happy to say that later this month, we'll officially welcome a new chief technology officer Jason Sobel, who joins us after five years at Airbnb and half a dozen years at Facebook during its early days of growth. Jason joins our other highly talented Times leaders who are steering our digital product development work to its next phase of growth. And with that, I'll turn it over to Roland.