The New York Times Company — Q3 2022 Form 10-Q
Business context and reporting period. The quarter ended September 25, 2022 (13 weeks); the nine-month period comprised 39 weeks. Comparisons are with the quarter and nine months ended September 26, 2021. The company operates The New York Times Group and, following its February 1, 2022 acquisition, The Athletic. Unless otherwise noted, financial amounts below are in millions of dollars.
Financial performance
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | $547.7 | $509.1 | $1,640.8 | $1,480.6 |
| Operating profit | $51.0 | $49.0 | $109.0 | $173.9 |
| Net income | $36.6 | $54.7 | $103.1 | $150.1 |
| Diluted EPS | $0.22 | $0.32 | $0.62 | $0.89 |
| Operating margin | 9.3% | 9.6% | 6.6% | 11.7% |
| Adjusted operating profit (non-GAAP) | $69.0 | $65.1 | $206.1 | $226.1 |
| Adjusted operating margin (non-GAAP) | 12.6% | 12.8% | 12.6% | 15.3% |
Revenue mix and subscriptions. Q3 subscription revenue grew 11.7% to $382.7 million, including digital-only revenue growth of 22.8% to $243.9 million. Advertising revenue was nearly flat at $110.5 million: digital rose 4.9%, while print fell 8.5%. Other revenue declined 1.9%. At quarter-end, the company reported 9.33 million paid subscribers and 10.75 million paid subscriptions; 8.59 million were digital-only subscribers. Digital-only subscribers increased by 180,000 sequentially and 1.01 million year over year, excluding subscribers added through The Athletic acquisition. Print home-delivery subscribers were about 740,000, down 20,000 sequentially.
Segment results. The New York Times Group generated Q3 revenue of $523.6 million and adjusted operating profit of $78.6 million, up 20.7%. The Athletic generated $24.1 million of revenue and an adjusted operating loss of $9.6 million in the quarter. For the nine months since acquisition, The Athletic’s revenue was $55.8 million and adjusted operating loss was $29.0 million.
Cash flow, liquidity and capital. Nine-month operating cash flow was $85.0 million, down from $209.6 million. Investing activities used $79.3 million, including $515.3 million paid for acquisitions (net of cash acquired), largely offset by net marketable-security maturities. Financing activities used $133.2 million, including $79.8 million of share repurchases and $41.9 million of dividends. Cash, cash equivalents and marketable securities totaled $468.6 million at September 25, versus $1,074.4 million at December 26, 2021; the decrease primarily reflected The Athletic acquisition and incentive-compensation payments. The company had no credit-facility borrowings, approximately $0.6 million of letters of credit, and a $350 million revolving facility maturing July 2027. Management said available cash and operating cash flow should meet financing needs over the next 12 months.
Balance sheet and debt. Total assets were $2.52 billion and stockholders’ equity was $1.54 billion. Current assets were $543.2 million and current liabilities $555.8 million. The filing reports no outstanding borrowings under the revolving facility; it does not identify other financial debt in the presented balance sheet.
Changes, outlook and risks
- Q3 revenue growth outpaced operating-profit growth. Costs rose 9.5%, led by cost of revenue, product development and general and administrative expense; technology costs increased 20.1%. Adjusted operating margin eased 20 basis points.
- Nine-month net income and operating profit declined year over year. Comparability was affected by 2022 Athletic acquisition costs of $34.7 million, higher depreciation and amortization including acquired-intangible amortization, and 2021’s $27.2 million non-marketable investment gain. 2022 also included a $34.2 million gain on a land transaction and a $7.1 million pension-liability adjustment gain. The 2021 period included a $3.8 million lease-termination charge.
- The Athletic was acquired for approximately $550 million in cash, including $523.5 million allocated to acquired assets and liabilities and $26.7 million related to accelerated stock options. The preliminary allocation included $249.8 million of goodwill and $332.0 million of acquired intangible assets.
- No quantified revenue or earnings guidance is provided in the supplied filing text. Management said it expects comparable cash dividends to continue, subject to board review; the quarterly dividend was raised to $0.09 per share. The company had repurchased $79.8 million under its $150 million authorization by quarter-end.
- Management highlighted inflation and potential labor, newsprint, supply-chain and broader economic pressures, as well as uncertainty in advertising spending, competition, subscriber growth, technology, and integration and realization of benefits from The Athletic. The company estimated that the tax rule requiring capitalization and amortization of research and development costs could reduce 2022 operating cash flow by approximately $50 million if unchanged.
- Legal matters are pending; management did not consider their ultimate resolution likely to materially affect financial position, though an unfavorable outcome could materially affect an individual period’s results or cash flows. The filing reports no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether digital subscriber additions, pricing and bundle engagement can sustain subscription growth, and how to interpret subscriber metrics after The Athletic accounting and counting-method changes.
- Whether The Athletic can reduce its reported adjusted operating losses and deliver expected acquisition benefits; review the preliminary purchase-price allocation and future amortization burden.
- Whether advertising softness and rising employee, technology, printing and distribution costs continue to pressure margins and cash generation.
- How much of the decline in cash and marketable securities reflects one-time acquisition and compensation outlays versus ongoing operating cash-flow trends; monitor the potential R&D tax cash impact.
- Review non-GAAP reconciliations and unusual gains and charges when comparing periods; assess the remaining share-repurchase authorization, dividend policy and available credit capacity.