Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- New York Times Co (NYT, Financial) added 210,000 net new digital subscribers in Q1, demonstrating strong growth in its digital subscription business.
- The company's diverse product portfolio, including games, sports, cooking, and shopping advice, is attracting large audiences and driving engagement.
- New York Times Co (NYT) reported steady revenue growth and significant AOP growth, with a focus on disciplined cost management and strategic investments.
- The company's essential subscription strategy is effectively positioning it for improving profitability, margin expansion, and strong free cash flow generation.
- New York Times Co (NYT) continues to innovate in product offerings, such as expanding its games section and enhancing audio content with AI-powered features.
Negative Points
- Despite overall growth, total advertising revenue declined by 2.4% in Q1, with some marketers avoiding hard news topics.
- Print advertising continues to decline, although the decrease was less than expected for the quarter.
- The company faces challenges in fully leveraging its digital advertising potential amidst a changing media landscape.
- Costs related to journalism and product development are increasing, reflecting ongoing investments that may impact short-term profitability.
- While digital subscription growth is strong, there is a need to continuously innovate and add value to retain subscribers and justify price increases.
Q & A Highlights
Q: Meredith, you spoke to very high engagement around your Games product. How do you think about translating this to registrations and ultimately to subscriptions or bundle sign-ups? Can you also speak to the opportunity around building more advertising into games?
A: Meredith A. Kopit Levien, CEO, President & Director of The New York Times Company, highlighted the strong engagement with the Games product, noting its potential as an effective entry point for new relationships with The Times. This engagement can lead to registrations, bundled subscriptions, or direct game subscriptions. Levien also mentioned the potential for introducing more ad products within games, emphasizing the opportunity to experiment with ad formats due to the unique nature of the games.
Q: On the adjusted cost in the quarter, growth was nicely below your outlook. What came in lower? Are there any shifts to remaining quarters to be aware of? You noted some timing benefit? And given the results in Q1, do you have any updated view on margin for the year?
A: William Bardeen, Executive VP & CFO of The New York Times Company, explained that the lower-than-expected cost growth in Q1 reflected disciplined resource allocation, particularly in journalism and product technology. He noted some unexpectedly low compensation and benefit items that helped in Q1 but are not expected to extend beyond the quarter. Bardeen emphasized that the company's disciplined growth approach is reflected in their Q2 guidance of 4% to 5% cost increase, which aligns with their strategy of investing for growth.
Q: Can you summarize some of the promotions you've done on the digital side, how those promotions have changed, and what you're looking for as those promotions roll off? What are some of the key metrics you guys are going to be looking for to measure success?
A: William Bardeen discussed the company's promotional strategy, which aims to maximize the lifetime value of subscribers by bringing most bundled subscribers in at a promotional rate and then stepping them up to higher prices over time. The company closely monitors retention and monetization at these step-up points, and Bardeen expressed satisfaction with the results so far, indicating that these metrics will continue to guide their promotional strategies.
Q: Meredith, could you talk in more detail about the underlying trends in digital advertising? Could you break down the growth by volume versus price for both display and digital, and explain the variance in quarterly performance?
A: Meredith A. Kopit Levien responded by emphasizing the pickup in ad demand seen in Q2 and the rollout of more ad supply throughout the year. She highlighted the introduction of high-performing ad products in areas with growing marketer demand, such as the games app and sports. Levien noted that these premium canvases and first-party data are key to the company's advertising strategy, offering high CPMs and effective performance.
Q: Just following up on the bundle graduation question. Can you help us think through the cadence of the wave of eligible cohorts that are coming up with graduation? Is it right to interpret your comment as the year-over-year growth on subscriber ARPU should pick up in speed in the second half?
A: William Bardeen clarified that the cohorts eligible for bundle graduation are increasing in size throughout the year, which contributes to the company's confidence in the ARPU trajectory. He reiterated the company's target for modest year-over-year growth in total digital-only ARPU, driven by encouraging retention and monetization rates at bundle step-ups.
Q: Will, I was struck by the sales and marketing being down in the quarter. Is the funnel, the organic traffic driving more of the growth something you think will benefit NYT for the rest of 2024?
A: William Bardeen explained that while the majority of subscribers come in organically, the amount of marketing spend can fluctuate quarterly based on ROI analysis. He emphasized that the company expects to continue experiencing leverage on sales and marketing costs over time, aligning with their strategy of organic growth driven by their product offerings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
