The New York Times Company (NYT, Financial) reported better-than-expected earnings for the first quarter of fiscal 2015. The company logged 57.1% year-over-year growth in non-GAAP earnings to $0.11 a share, beating the consensus estimate of $0.08 a share, on the back of strong revenue growth from digital advertising as well as effective cost-management strategies. However, including one-time items, New York Times posted an EPS loss of $0.09 a share during the quarter, down from the prior-year quarter’s earnings of $0.01 a share. Following the results, the New York Times shares climbed to an intra-day high of $13.74 before slipping to $13.39 at closing bell.
Print Advertising Drags Revenues
New York Times reported a 1.6% year-over-year decline in revenues to $384.2 million during Q1 2015. While the company’s capital expenditure during the quarter stood at $5 million, New York Times also logged a drop of 2.6% in adjusted operating expenses for the quarter. Further, the company’s adjusted operating margin also expanded 90 basis points to 15.4% resulting in a 4.5% year-over-year climb in operating profit to $59.2 million.
Segment wise, the company’s total circulation revenues came in at $211.5 million, up 0.8% year-over-year while overall advertising revenues stood at $149.9 million, down 5.8% compared to the year-ago quarter. With the company witnessing growth in paid digital subscriptions to 957,000 at the end of the quarter, representing a 20% year-over-year growth, revenues from digital advertising grew 10.7% year-over-year to $42.3 million while revenues from digital circulation climbed 14.4% to $46.1 million. Although The New York Times’ classified advertising revenues grew by 1.9% during the quarter, revenues from print advertising and display advertising dropped 11.1% and 7% year-over-year respectively.
The Road Ahead
With advertising revenues largely dependent on the global economic health, the slowdown in demand for advertising is a key concern for the company going ahead. While New York Times has divested assets unrelated to its core operations to focus on its newspapers and online activities, the company has also been putting effort into diversifying its revenue stream via pay-and-read and other such models. The company has also introduced reader and mobile application products to its range in order to adapt to the paradigm shift in the multi-platform media industry. The company is not alone in planning such strategies though. Rivals Gannett Co. Inc. (GCI, Financial) and Tribune Publishing Co. (TPUB, Financial) are also focusing their efforts on carving out different avenues for revenue generation.
For the second quarter of fiscal 2015, New York Times expects to maintain its overall circulation revenues at the current level, while overall advertising revenue is expected to slide in the mid single-digit range. Concurrently, total capital expenditure is projected in the $35-$45 million range, while adjusted operating expense is likely to drop in the low-single digits during the quarter. Experts are looking at earnings of $0.12 a share on revenues of $383.4 million for the second quarter and $0.52 for the full fiscal 2015.
Final Thoughts
The New York Times reported better-than-expected earnings for Q1 2015, while revenues were in line with the consensus estimate. While the company saw strong growth in digital subscriptions and hence digital advertising and circulation revenues, the going has been tough for its print advertising segment. The company has also projected a decline in advertising revenue for the second quarter on the back of an enduring slowdown in advertising demand, which is not expected to go down well with investors. Experts are also looking at negative to zero percentage growth rate for the company’s average annual earnings over the next five years. Consequently, the New York Times stock currently carries a ‘hold’ guidance.
