The New York Times Company (NYSE: NYT) — 2019 Form 10-K
Business context and reporting period. The Company is a global media organization with one reportable segment, earning revenue principally from subscriptions and advertising, alongside licensing, commercial printing, events, affiliate referrals and other businesses. The fiscal year ended December 29, 2019 and comprised 52 weeks; comparisons are with the 52 weeks ended December 30, 2018. This is an annual filing, not a standalone fourth-quarter report.
Financial performance
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Total revenue | $1.812 billion | $1.749 billion | +3.6% |
| Subscription revenue | $1.084 billion | $1.043 billion | +4.0% |
| Advertising revenue | $530.7 million | $558.3 million | -4.9% |
| Other revenue | $197.7 million | $147.8 million | +33.8% |
| Operating profit | $175.6 million | $190.2 million | -7.7% |
| Net income attributable to NYT common stockholders | $140.0 million | $125.7 million | +11.4% |
| Diluted EPS | $0.83 | $0.75 | +10.7% |
| Cash provided by operating activities | $189.9 million | $157.1 million | +20.9% |
Operating margin was 9.7%, down from 10.9%. Adjusted operating profit, a company-defined non-GAAP measure, was $248.4 million versus $262.6 million; adjusted diluted EPS was $0.92 versus $0.81. Net income grew despite lower operating profit, supported in part by lower income tax expense ($24.5 million versus $48.6 million). The filing reports fourth-quarter 2019 revenue of $508.4 million, operating profit of $78.0 million and net income attributable to common stockholders of $68.2 million; corresponding fourth-quarter 2018 figures were $502.7 million, $74.7 million and $55.2 million.
- Subscriptions and digital: Subscription revenue rose as digital subscription growth more than offset declining print subscription revenue. Digital-only subscriptions reached approximately 4.395 million, up about 31%; total paid subscriptions were approximately 5.251 million, up 22.6%. Digital revenue totaled approximately $801 million, versus $709 million.
- Advertising and other revenue: Print advertising fell 9.7%; digital advertising grew 0.6%, with podcast revenue gains partly offset by lower direct-sold core-platform advertising. Other revenue growth reflected television and film, commercial printing and additional headquarters rental income.
- Costs: Operating costs rose 4.9% to $1.635 billion. Higher newsroom and product-development staffing, marketing and content costs outweighed lower print production and distribution costs.
- Liquidity and debt: Cash, cash equivalents and marketable securities totaled $683.9 million at year-end, down from $826.4 million. Current assets were $716.8 million and current liabilities $437.7 million; the current ratio was 1.64. The Company had no debt or capital lease obligations at year-end, after repaying $252.6 million during 2019. It had a $250 million five-year revolving credit facility with no outstanding borrowings.
- Cash uses and capital: Investing cash flow was positive $93.2 million, principally reflecting net marketable-security disposals, partly offset by capital expenditures. Financing cash flow was negative $295.3 million, primarily debt repayment and $31.6 million of dividends paid. The Company repurchased no shares in the fourth quarter; $16.2 million remained under its authorization.
Material changes and unusual items
- Digital growth offset, but did not eliminate, print declines: print subscription revenue fell 2.9% and print advertising revenue fell 9.7%.
- The Company added more than one million net digital subscriptions during 2019 and ended the year with a record subscription base. Standalone Crossword and Cooking subscriptions totaled approximately 966,000.
- In December 2019, the Company repurchased its headquarters condominium interest for $245.3 million. It also purchased the College Point facility land for approximately $6.9 million.
- Reported 2019 results included a $4.0 million restructuring charge related to closing digital marketing agency HelloSociety, $4.0 million of severance costs, and a $2.0 million gain from a multiemployer pension liability adjustment. The filing identifies these items and retirement costs as adjustments in certain non-GAAP measures.
- The qualified defined-benefit pension plans were underfunded by approximately $12 million, compared with $81 million in 2018. The Company separately reported $248 million of unfunded non-qualified pension obligations and approximately $82 million of multiemployer pension withdrawal liabilities.
Outlook, commentary and risks
Management described a subscription-first strategy centered on investment in journalism, digital products, audience engagement and marketing, alongside cost discipline and efforts to grow digital advertising. The stated goal was 10 million subscriptions by 2025. Management expected significant further investment in journalism in 2020. It expected approximately $9 million in qualified pension contributions in 2020 and said liquidity, together with operating cash generation and other sources, should cover financing needs over the next 12 months. In February 2020, the Board approved a quarterly dividend of $0.06 per share.
The filing specifically warned that an economic slowdown or the spread of COVID-19 could adversely affect advertising revenue. Other key risks include intense competition for subscribers and advertising; the possibility that digital subscriber growth or promotional-driven additions may not be sustained; continuing print declines; advertising-market shifts and dependence on major digital platforms and ad technologies; technology, cybersecurity, privacy and service disruptions; pension and labor obligations; and litigation or regulatory exposure. Management said unfavorable legal outcomes could affect an individual period’s results or cash flows, but were not expected, based on information then available, to materially affect financial position.
Investor verification priorities
- Track digital subscription additions, retention, pricing effects and progress toward the 10 million subscription goal; assess whether digital growth continues to offset print declines.
- Monitor advertising trends by print and digital, including direct-sold platform advertising, podcasts and exposure to economic conditions and third-party platforms.
- Compare revenue growth with operating costs and margins; distinguish GAAP results from management’s non-GAAP adjusted measures.
- Review cash generation and liquidity after the headquarters repurchase, capital spending, dividends and pension contributions, as well as availability and covenants of the $250 million credit facility.
- Evaluate pension assumptions and liabilities, including discount-rate sensitivity, multiemployer withdrawal estimates and required contributions.
- Assess the potential financial and operating effects of COVID-19, pending legal matters, cybersecurity or privacy incidents, and labor negotiations.