The New York Times Company — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023, compared with periods ended September 25, 2022. The 2023 quarter included one additional day. Financial figures below are in millions unless otherwise noted.
Business context
The Company operates two reportable segments: The New York Times Group (NYTG) and The Athletic. It earns revenue principally from subscriptions and advertising, with other revenue including licensing, Wirecutter, commercial printing, rentals, television and film, and live events. Management recast prior-period operating-cost presentation; this did not change operating profit, net income or cash flows. Segment comparisons also reflect a revised allocation of bundle revenue and expenses to The Athletic.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $598.3 | $547.7 | $1,749.9 | $1,640.8 |
| Operating profit | $63.6 | $51.0 | $147.2 | $109.0 |
| Net income | $53.6 | $36.6 | $122.5 | $103.1 |
| Diluted EPS | $0.32 | $0.22 | $0.74 | $0.62 |
| Operating margin | 10.6% | 9.3% | 8.4% | 6.6% |
| Adjusted operating margin (non-GAAP) | 15.0% | 12.6% | 13.5% | 12.6% |
- Q3 revenue rose 9.3%; subscription revenue rose 9.4%, advertising 6.0%, and other revenue 14.9%. For the first nine months, revenue increased 6.7%, led by subscriptions and other revenue; advertising declined 0.9%.
- Digital-only subscription revenue increased 15.7% in Q3 and 14.3% year to date, while print subscription revenue fell 1.8% and 3.3%, respectively. At quarter-end, the Company had 10.08 million total subscribers, including 9.41 million digital-only subscribers; digital-only subscribers increased 210,000 sequentially.
- Q3 digital advertising increased 6.7%, with direct-sold display impressions up 14% but average rates down 6%. Year-to-date print advertising declined 4.7%. Management cited secular print declines and macroeconomic pressure on advertising spending.
- NYTG Q3 revenue was $563.9 million, up 7.6%, and adjusted operating profit was $97.7 million, up 20.5%. The Athletic revenue was $34.4 million, up 45.8%; its adjusted operating loss narrowed to $7.9 million from $12.1 million.
- Q3 cost growth included higher journalism compensation, product development and general and administrative costs. Nine-month operating costs also included $15.2 million of impairment charges; the prior-year period included $34.7 million of acquisition-related costs.
Cash flow, liquidity and capital
- Nine-month operating cash flow was $224.1 million versus $85.0 million; free cash flow, a non-GAAP measure defined as operating cash flow less capital expenditures, was $207.6 million versus $57.2 million. The prior-year comparison was affected by a one-time payment related to The Athletic acquisition.
- Cash and cash equivalents were $235.6 million at September 30. Cash plus short- and long-term marketable securities totaled $587.8 million. Current assets were $658.1 million and current liabilities $554.0 million.
- The Company reported no borrowings under its $350 million revolving credit facility, with approximately $0.6 million of letters of credit outstanding; it was in compliance with financial covenants. The filing reports no other debt balance.
- Nine-month capital expenditures were $16.5 million. Dividends paid were $51.4 million and share repurchases were $43.6 million. The quarterly dividend was increased to $0.11 per share in 2023.
Outlook, risks and unusual items
- Management said cash, operating cash flow and other sources should be sufficient to meet financing needs over the next 12 months. It expects comparable cash dividends to continue, subject to Board consideration; no specific earnings or revenue guidance is provided in the filing.
- Management estimated an approximately $31 million negative 2023 operating-cash-flow impact from tax rules requiring research and development costs to be capitalized and amortized. Actual impact depends on spending and potential legislative or regulatory changes.
- The Company recorded a $2.5 million Q3 impairment of the Serial trademark after lowering long-term advertising and subscription revenue expectations for Serial podcasts. It also recorded $12.7 million of Q2 impairment charges for unused leased office space.
- A voluntary lump-sum pension offer to certain former employees closes November 14, 2023. The Company expects a Q4 settlement charge, but could not estimate it as of the filing date.
- Risks cited include intense competition, subscriber growth and measurement uncertainty, advertising-market weakness, labor and compensation pressures, inflation and printing/distribution costs, pension obligations, technology and cybersecurity risks, privacy compliance, litigation, and geopolitical and economic uncertainty. Management reported no material changes to the prior Form 10-K risk factors and no material change in market risks.
- Pending legal matters are described as incidental to the business; the Company said no loss beyond recorded amounts was reasonably possible as of September 30, 2023. Disclosure controls were deemed effective, with no material change in internal control reported.
Key facts for investors to verify
- Whether digital subscriber additions and bundle growth can continue while bundle ARPU declines; Q3 bundle and multiproduct ARPU fell 18.8% year over year, while total digital-only ARPU rose to $9.28.
- Whether advertising growth persists, given falling rates in digital display and programmatic advertising and weakness in year-to-date print advertising.
- Whether cost growth—especially journalism, technology, compensation and product development—remains below revenue growth, and how The Athletic’s operating losses evolve.
- The eventual Q4 pension settlement charge and the realized cash impact of R&D tax amortization rules.
- The significance of impairment and other adjusted-measure exclusions; compare non-GAAP results with GAAP operating profit and cash flow.