The New York Times Company Reports 2018 Second-Quarter Results
NEW YORK--(BUSINESS WIRE)--Aug 8, 2018--The New York Times Company (NYSE:NYT) announced today second-quarter 2018 diluted earnings per share from continuing operations of $.14 compared with $.09 earnings per share in the same period of 2017. Adjusted diluted earnings per share from continuing operations (defined below) was $.17 in the second quarter of 2018 compared with $.17 in the second quarter of 2017.
Operating profit rose to $40.0 million in the second quarter of 2018 from $26.5 million in the same period of 2017, principally driven by strong digital subscription and other revenues as well as lower operating costs, which were partially offset by lower advertising revenues. Adjusted operating profit (defined below) decreased to $59.4 million in the second quarter of 2018 compared with $64.7 million in the second quarter of 2017 as lower advertising revenues and higher marketing costs more than offset growth in both digital subscription and other revenues.
Mark Thompson, president and chief executive officer, The New York Times Company, said, “In the second quarter, we saw increases in revenue and overall profitability and continued growth in our digital subscription business. We added 109,000 net new digital-only subscriptions, of which 68,000 were to our core news bundle. At the end of Q2, we had 3.8 million total subscriptions, 2.9 million of which were digital-only. Our subscribers who came to us around the 2016 Election and post-Election periods continue to retain better than previous cohorts.
“Subscription revenues accounted for nearly two-thirds of the Company’s revenues, a trend we expect to continue. We continue to believe that there is significant runway to expand that base substantially.
“Turning to advertising, this was a subdued quarter for digital advertising as we predicted, but we remain confident that we will return to strong year-over-year growth in the third quarter.”
Comparisons Unless otherwise noted, all comparisons are for the second quarter of 2018 to the second quarter of 2017.
In the first quarter of 2018, the Company adopted Accounting Standards Update 2017-07 Compensation— Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The Company has recast its second quarter and six months ended June 25, 2017 results to reflect the impact of the adoption of ASU 2017-07 for comparability purposes; there was no impact to net income as a result of the adoption. Refer to the Condensed Consolidated Statements of Operations for more details.
This release presents certain non-GAAP financial measures, including diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations); operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit); and operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs). Refer to Reconciliation of Non-GAAP Information in the exhibits for a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.
In connection with the adoption of ASU 2017-07 in the first quarter of 2018, the Company modified its definitions of adjusted operating profit, adjusted operating costs and non-operating retirement costs in response to changes in the GAAP presentation of single employer pension and postretirement benefit costs. For comparability purposes, the Company has also presented each of its non-GAAP financial measures for the second quarter and first six months ended June 25, 2017, reflecting the recast of its financial statements for such periods to account for the adoption of ASU 2017-07 and the revised definitions of the non-GAAP financial measures. Refer to Reconciliation of Non-GAAP Information in the exhibits for more details. As disclosed in the Company’s first quarter 2018 earnings release, in the revised full year 2017 presentation of non-GAAP financial measures, the Company’s adjusted diluted earnings per share from continuing operations decreased by $.04 from $.80 to $.76, its adjusted operating costs increased by $9.7 million, and its adjusted operating profit decreased by the same amount, in each case compared to the previously reported amounts.
Second-quarter 2018 results included the following special items:A $1.3 million charge ($0.9 million after tax or $.01 per share) in connection with the redesign and consolidation of space in our headquarters building.
Second-quarter 2017 results included the following special items:A $2.0 million pre-tax expense ($1.2 million after tax or $.01 per share) related to the redesign and consolidation of space in our headquarters building.
The Company had severance costs of $2.2 million ($1.6 million after tax or $.01 per share) and $19.3 million ($11.6 million after tax or $.07 per share) in the second quarters of 2018 and 2017, respectively.
Results from Continuing Operations
Revenues Total revenues for the second quarter of 2018 increased 1.8 percent to $414.6 million from $407.1 million in the second quarter of 2017. Subscription revenues increased 4.2 percent, while advertising revenues decreased 9.9 percent and other revenues increased 40.0 percent.
Subscription revenues in the second quarter of 2018 rose primarily due to growth in recent quarters in the number of subscriptions to the Company’s digital-only products. Revenue from the Company’s digital-only subscription products (which include our news product, as well as our Crossword and Cooking products) increased 19.6 percent compared with the second quarter of 2017, to $98.7 million.
Paid digital-only subscriptions totaled approximately 2,892,000 at the end of the second quarter of 2018, a net increase of 109,000 subscriptions compared with the end of the first quarter of 2018 and a 24.0 percent increase compared with the end of the second quarter of 2017. Of the 109,000 additions, 68,000 came from the Company’s digital news products, while the remainder came from the Company’s Cooking and Crossword products.
Second-quarter digital advertising revenue decreased 7.5 percent, while print advertising revenue decreased 11.5 percent. Digital advertising revenue was $51.0 million, or 42.8 percent of total Company advertising revenues, compared with $55.2 million, or 41.7 percent, in the second quarter of 2017. The decrease in digital advertising revenue reflected a smaller audience as well as a decline in creative service revenues.
Other revenues rose 40.0 percent in the second quarter primarily as a result of growth in our commercial printing operations, four additional floors of rental income from our New York headquarters building and affiliate referral revenue associated with the product review and recommendation website, Wirecutter.
Operating Costs Operating costs decreased in the second quarter of 2018 to $373.3 million compared with $378.6 million in the second quarter of 2017, largely due to lower severance costs, which were partially offset by higher marketing costs as well as costs related to growth in commercial printing. Adjusted operating costs increased to $355.2 million from $342.4 million in the second quarter of 2017 primarily as a result of higher marketing and commercial printing costs.
Raw materials costs were $17.8 million in the second quarter of 2018 compared with $15.8 million in the second quarter of 2017, due to higher newsprint prices and, to a lesser extent, higher volume as a result of growth in commercial printing operations.
Other Components of Net Periodic Benefit Costs/(Income) Other components of net periodic benefit costs/(income) increased in the second quarter of 2018 to $1.9 million compared with ($1.2) million in the second quarter of 2017 primarily due to lower expected returns on pension assets partially offset by lower interest costs.
Interest Expense and Other, net Interest expense and other, net decreased in the second quarter of 2018 to $4.5 million compared with $5.1 million in the second quarter of 2017 as a result of higher interest income from cash and cash equivalents and marketable securities.
Income Taxes The Company had income tax expense of $10.0 million in the second quarter of 2018 compared with $6.7 million in the second quarter of 2017. The increase was largely due to higher income from continuing operations in the second quarter of 2018.
Liquidity As of July 1, 2018, the Company had cash and marketable securities of $779.2 million (excluding restricted cash of $18.1 million, substantially all of which is set aside to collateralize certain workers’ compensation obligations). Included within marketable securities are approximately $68 million of securities used as collateral for letters of credit issued by the Company in connection with the leasing of floors in our headquarters building. Total debt and capital lease obligations were $251.9 million.
Capital Expenditures Capital expenditures totaled approximately $15 million in the second quarter of 2018 compared with $22 million in the second quarter of 2017. The expenditures were primarily related to improvements at our College Point printing and distribution facility and the ongoing redesign and consolidation of space in our headquarters building.
Outlook Total subscription revenues in the third quarter of 2018 are expected to increase in the mid-single digits compared with the third quarter of 2017, with digital-only subscription revenue expected to increase in the high-teens.
Total advertising revenues in the third quarter of 2018 are expected to decrease in the low-single digits compared with the third quarter of 2017, with digital advertising revenue expected to increase approximately 10 percent.
Other revenues in the third quarter of 2018 are expected to increase approximately 50 percent compared with the third quarter of 2017.
Operating costs and adjusted operating costs are expected to increase approximately 10 percent in the third quarter of 2018 compared with the third quarter of 2017 as a result of higher marketing costs and growth in commercial printing operations.
The Company expects the following on a pre-tax basis in 2018:Depreciation and amortization: $58 million to $60 million, Interest expense and other, net: $17 million to $19 million, and Capital expenditures: $65 million to $75 million.
Conference Call Information The Company’s second-quarter 2018 earnings conference call will be held on Wednesday, August 8 at 11:00 a.m. E.T.
Participants can pre-register for the telephone conference at dpregister.com/10121617, which will generate dial-in instructions allowing participants to bypass an operator at the time of the call. Alternatively, to access the call without pre-registration, dial 844-413-3940 (in the U.S.) or 412-858-5208 (international callers). Online listeners can link to the live webcast at investors.nytco.com.
An archive of the webcast will be available beginning about two hours after the call at investors.nytco.com. The archive will be available for approximately three months. An audio replay will be available at 877-344-7529 (in the U.S.) and 412-317-0088 (international callers) beginning approximately two hours after the call until 11:59 p.m. E.T. on Wednesday, August 22. The passcode is 10121617.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those predicted by such forward-looking statements. These risks and uncertainties include changes in the business and competitive environment in which the Company operates, the impact of national and local conditions and developments in technology, each of which could influence the levels (rate and volume) of the Company’s subscriptions and advertising, the growth of its businesses and the implementation of its strategic initiatives. They also include other risks detailed from time to time in the Company’s publicly filed documents, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The New York Times Company is a global media organization dedicated to enhancing society by creating, collecting and distributing high-quality news and information. The Company includes The New York Times, NYTimes.com and related properties. It is known globally for excellence in its journalism, and innovation in its print and digital storytelling and its business model. Follow news about the company at @NYTimesPR.
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