New York Times Company (The)

Good morning and welcome to the New York Times Company's second quarter 2023 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 would now like to turn the conference over to Mike Brown, Vice President, Assistant General Counsel, and Corporate Secretary. Please go ahead.

Thank you, and welcome to the New York Times Company's second quarter 2023 earnings conference call. On the call today, we have Meredith Kopet-Levian, President and Chief Executive Officer, and Will Bardeen, Executive Vice President and Chief Financial Officer. Before we begin, I'd 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 2022 10-K 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 release, which is available on our website at investors.nytco.com. And finally, please note that a copy of the prepared remarks from this morning's call will be posted to our investor website shortly after we conclude. With that, I'll turn the call over to Mariette Kopit-Levian.

Thanks, Mike, and good morning, everyone. For more than a year, we've been executing on our strategy to become the essential subscription for every curious English-speaking person seeking to understand and engage with the world. Our strong results this quarter demonstrate that the strategy is working as designed. Let me share the highlights. Digital subscription revenue is growing thanks to gains in both subscriber volume and ARPU. Subscriber engagement remains high and is fueling growth in all of our major revenue streams, including digital subscriptions, digital advertising, and affiliates. And we've continued to exercise cost discipline, even while investing into and enhancing the value of our products and bundles. We owe these results in large part to getting more people to experience the full and unmatched breadth of the time, which they are increasingly buying as a bundle. As we've said, uptake of the bundle is an essential part of our ability to drive sustainable value creation. including AOP growth, free cash flow growth, and margin expansion. On that note, we are on track to deliver all three this year, despite ongoing market challenges. I'll turn now to the major contributors to our second quarter results. We added 180,000 net new digital subscribers, with more than half of our digital starts taking the bundle for the second quarter in a row. More than a third of our nearly 10 million subscribers are now bundle or multi-product subscribers, which supports our belief that over the next few years, we can get to 50% or more of our total subscribers on the bundle. We also grew digital ARPU for the fourth consecutive quarter, and for the first time since our acquisition of The Athletic, we grew digital ARPU year on year. That growth is a direct result of our value-based pricing strategy, which combines attractive promotional pricing, multiple subscription options, and a proven ability to step up subscribers to higher prices and more products over time as they come to experience how valuable our products are in their lives. We saw all of those elements of our pricing strategy on display in the second quarter, and I'll note particularly that our ongoing deployment of price increases for tenured subscribers to news and games is going well as we continue to enrich both of these products. We view the quarter's subscriber results as a testament to our broad and valuable product portfolio. which continues to attract a large, engaged audience despite the ongoing reality of less traffic from the platform and a news cycle less dominated by singular stories that capture unprecedented attention. Consistent with the pattern we saw last quarter, subscriber engagement was strong across products and subscriber text. We were especially encouraged to see engagement for early 10-year subscribers, many of whom bought the bundle even higher than last quarter or last year. As we've said before, this strong subscriber engagement is a leading indicator for healthy retention and long-term pricing power. It's also an outcome of the inherent appeal of our offering and our ability to regularly deliver compelling new product features. Let me give you a few examples. In news, we added a new data journalism feature that tracks extreme weather across the U.S. in a personalized way and includes a tool to monitor the places you care about most in near real time. We also expanded our newest daily morning audio show called the Headlines, which can be found in our subscriber-only audio app, which we made available widely in the second quarter. New features like these supplement the strong engagement we continue to have for our unparalleled coverage of big important stories like the war in Ukraine, the global economy, and the forthcoming presidential election. In games, we launched a new word matching puzzle in beta called Connections, which is already attracting millions of users. We also added two more popular puzzles to the Games app, Letterboxd and Tiles, and we introduced Spelling Bee Past Puzzles as a new subscriber-only benefit. We made these enhancements even as tens of millions of people continue to play Wordle every week, which gives us a huge audience to whom we can introduce other games, news, sports, recipes, and shopping advice. I'll note that while Wordle is a hit like no other, our audience of people playing games other than Wordle has experienced record growth over the last year, and the giant audience we now have for games continues to power start for both our game subscription and the bundles. We expect the athletic to play a similar role in our funnel over time, and we made a number of technical and journalistic enhancements to its product in the quarter to drive engagement. Those enhancements helped propel its audience to substantial growth for the second quarter in a row, and we continue to make good progress for our goal of athletic profitability. Advertising performed better than we expected in the corner, with digital advertising up 6.5%. We attribute our strength to growth in our core offering, a combination of proprietary premium ad canvases and first-party data. We also saw the benefit in the quarter of our effort to extend our ad products across the bundle and, in particular, into games and the athletic. Advertising revenue for the athletic more than doubled year on year for the second quarter in a row, and the athletic is driving new advertisers not just on its own destination but across the times. print advertising declined in line with our expectations. I'll close on advertising by noting that while visibility from quarter to quarter remains limited, we continue to believe the fundamentals of our business position us well for long-term growth in digital advertising. Our other revenue category was up 16% in the quarter, anchored by Wirecutter, which had its best non-holiday quarter ever. This momentum continues in the current quarter with Wirecutter having its best ever sales around Amazon Prime Day. I'll turn briefly now to costs. In Q2, we continued to exercise cost discipline with moderation of cost growth coming earlier in the year than planned. We feel really good about where we are in costs and plan to maintain our active management of cost growth, even while continuing to invest strategically to build our moat. I'll wrap up by noting that these results showcase the resiliency of our model and the multiple levers we have for growth. This is particularly important given the context in which we're operating, which includes an uncertain economy, audience headwinds, and an information ecosystem that continues to evolve. We're confident that our clear strategy and continued strong execution position us well against this backdrop. We view our essential subscription strategy as a real success story thus far, driving subscriber volume in ARPU increases, building engagement that fuels growth across multiple revenue streams, and creating leverage that allows us to control our costs. All of that enables us to build a larger and more profitable company. which in turn allows us to continue to do the most ambitious, high-quality journalism across an ever-broadening range of topics and formats. And before I close, I would like to officially welcome Will Bardeen on his first earnings call as CFO. I'll turn it over to Will now to walk through our financials in more detail. including an update about changes we've made to our disclosures to more clearly communicate our progress to investors. Over to you, Will.