The New York Times Company — Q1 2021 10-Q
Business context and period: Global media company with one reportable segment, generating revenue principally from digital and print subscriptions and advertising. The quarter ended March 28, 2021 and comprised 13 weeks; comparisons are with the 13 weeks ended March 29, 2020. Amounts below are in millions unless otherwise stated.
Key financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $473.0 | $443.6 | +6.6% |
| Operating profit | $51.7 | $27.3 | +89.1% |
| Operating margin | 10.9% | 6.2% | +4.7 percentage points |
| Net income | $41.1 | $32.9 | +25.1% |
| Diluted EPS | $0.24 | $0.20 | +20.0% |
| Adjusted operating profit (non-GAAP) | $68.1 | $44.3 | +53.7% |
| Operating cash flow | $32.9 | $38.9 | −15.2% |
Subscription revenue rose 15.3% to $329.1 million, led by digital-only subscriptions; advertising fell 8.5% to $97.1 million; other revenue decreased 10.0% to $46.8 million. Digital advertising increased 16.3%, while print advertising declined 31.6%. Digital-only subscriptions reached approximately 6.991 million, up 1.990 million year over year and 301,000 sequentially. Total subscriptions were 7.816 million, including 825,000 print subscriptions.
Total operating costs increased 1.2% to $421.4 million. Product development costs rose 25.6% and cost of revenue rose 3.1%, partly offset by an 18.5% decline in sales and marketing. Net income margin was approximately 8.7%, versus 7.4% a year earlier. The 2020 comparison included a $10.1 million gain on a non-marketable equity investment; there were no special items in Q1 2021. Adjusted diluted EPS, a non-GAAP measure, was $0.26 versus $0.17.
Liquidity, cash flow, and capital
At March 28, 2021, cash and cash equivalents were $275.2 million and short- and long-term marketable securities totaled $615.4 million, for combined cash and securities of $890.7 million. Cash, cash equivalents, and restricted cash were $290.2 million. Current assets were $786.7 million and current liabilities were $440.7 million. The company had no borrowings under its $250 million revolving credit facility and reported compliance with its covenants; the filing does not report outstanding debt borrowings.
Operating cash flow was $32.9 million; investing cash outflow was $26.2 million, including $21.8 million of net marketable-security purchases and $6.4 million of capital expenditure payments. Financing cash outflow was $18.1 million, including $10.1 million of dividends and $10.5 million of share-based compensation tax withholding. The company declared a quarterly dividend of $0.07 per share, paid in April 2021. Management said available cash and operating cash generation should meet financing needs over the next 12 months.
Changes, outlook, and risks
- Management attributed higher operating profit primarily to digital subscription growth and, to a lesser extent, digital advertising growth, which more than offset weaker print advertising, print subscriptions, and other revenue.
- Management expects digital subscription additions to moderate in Q2 after slower year-over-year net-addition rates in February and March. For 2021, it expects total net subscription additions in the range of 2019 additions; it cautioned that 2020 growth rates are not sustainable. No specific earnings or revenue guidance was provided.
- Management expects continued pressure on print advertising from pandemic-affected industries and secular trends, and cautioned that some print advertising revenue may not return to pre-pandemic levels. The full effects of COVID-19 remained uncertain.
- Other revenue weakness reflected fewer television episodes and lower live events, commercial printing, and building rental revenue; Wirecutter affiliate revenue partly offset the declines.
- Legal proceedings are incidental to the business. An unfavorable outcome could materially affect results or cash flows in an individual period, though management did not believe ultimate resolution was likely to materially affect financial position. The company reported no material changes to its previously disclosed risk factors or market risks.
Important facts for investors to verify
- Whether subscription additions continue to moderate and whether 2021 net additions meet management’s stated comparison with 2019.
- Whether growth in digital advertising and subscriptions can offset ongoing print advertising declines and pandemic-related pressure on other revenue.
- Cash conversion and investment needs, including the effect of working-capital movements, dividends, and pension funding; management expected approximately $10 million of 2021 contributions to the Adjustable Pension Plan.
- Potential exposure from pending legal matters and the effects of the COVID-19 outlook on advertising, operations, and liquidity.
- Performance measures labeled adjusted are non-GAAP; compare them with the reported GAAP results and the filing’s reconciliations.