The New York Times Company — Q3 2021 Form 10-Q
Business context and period: Global media company with one reportable segment, generating revenue mainly from subscriptions and advertising. The quarter ended September 26, 2021, comprised 13 weeks; the year-to-date period comprised 39 weeks. Comparisons below are with the corresponding 2020 periods unless stated otherwise.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Change |
|---|---|---|---|
| Revenue | $509.1 million | $426.9 million | +19.3% |
| Subscription revenue | $342.6 million | $301.0 million | +13.8% |
| Advertising revenue | $110.9 million | $79.3 million | +39.9% |
| Operating profit | $49.0 million | $39.6 million | +23.7% |
| Net income attributable to common stockholders | $54.7 million | $33.6 million | +62.8% |
| Diluted EPS | $0.32 | $0.20 | +60.0% |
Operating margin was approximately 9.6%, versus 9.3% a year earlier; net margin was approximately 10.7%, versus 7.9%. The quarter’s net income included a $27.2 million non-marketable investment gain ($19.8 million after tax, or $0.12 per share). Excluding specified items, adjusted diluted EPS was $0.23 versus $0.22, and adjusted operating profit was $65.1 million versus $56.5 million.
For the first nine months, revenue rose 16.2% to $1.481 billion; operating profit increased 81.7% to $173.9 million; net income attributable to common stockholders rose 66.6% to $150.1 million; and diluted EPS was $0.89 versus $0.54. Year-to-date results included the investment gain and a $3.8 million lease termination charge.
Revenue mix and subscriptions
- Q3 digital-only subscription revenue rose 27.9% to $198.6 million; print subscription revenue declined 1.2% to $144.0 million.
- Paid digital-only subscriptions reached approximately 7.588 million, up 455,000 sequentially and 1.525 million year over year. Total subscriptions, including print, were 8.383 million, up 21.6% year over year.
- Digital advertising increased 40.2% to $67.0 million; print advertising increased 39.4% to $43.9 million. Both benefited in part from comparison with pandemic-weakened 2020 advertising.
Cash flow, liquidity and debt
For the first nine months, operating cash flow was $209.6 million, compared with $206.7 million; investing cash outflow was $129.7 million, compared with $187.3 million; and financing cash outflow was $43.0 million, compared with $35.7 million. Capital expenditure cash payments were approximately $23.8 million. Cash, cash equivalents and restricted cash ended the period at $338.3 million.
Cash and marketable securities totaled approximately $1.043 billion at September 26, 2021, including $324.0 million cash and $718.5 million short- and long-term marketable securities. The company reported no borrowings under its $250 million revolving credit facility and compliance with its financial covenants. Management said existing cash, operating cash generation and other sources should meet financing needs for the next 12 months.
Material changes and management commentary
- Subscription growth reflected digital subscriber additions and customers moving from introductory to higher-priced plans. Management described its subscription-first strategy as successful.
- Marketing expense increased substantially: Q3 sales and marketing costs rose 65.5%, principally because media spending to promote subscriptions increased to $55.3 million from $27.3 million.
- Operating costs rose 18.8% in Q3, led by higher marketing, newsroom and product-development costs, as well as employee-related and incentive compensation costs.
- Compared with Q3 2019, total revenue was up 18.8%, but print advertising was down 25.4%; year-to-date print advertising was down 35.5%. Management cited secular decline and pandemic-related effects and cautioned some print advertising may not return to pre-pandemic levels.
Outlook, risks and unusual items
- No quantified revenue or earnings guidance was provided. Management expected to continue comparable cash dividends, subject to board consideration; the board approved a $0.07-per-share quarterly dividend after quarter-end.
- Management said the pandemic’s future effects remained uncertain, citing possible resurgences, economic conditions, travel restrictions and changing consumer behavior. It was increasing investment in offices and technology to support hybrid work.
- Other risks include competition, retaining and growing subscribers, advertising-market conditions, technology and cybersecurity, litigation, pension and multiemployer-plan obligations, labor matters, newsprint and distribution disruptions, and dual-class ownership concentration. The filing reported no material changes to the prior annual report’s risk factors.
- The company disclosed pending legal matters; an adverse outcome could materially affect results or cash flows for an individual period, although management did not consider a material effect on financial position likely based on information available.
- The Q3 investment gain included a partial sale and mark-to-market increase in a non-marketable equity investment. The 2021 nine-month period also included the $3.8 million tenant lease termination charge.
Important facts for investors to verify
- Whether digital subscriber additions and subscription pricing can sustain growth as pandemic-era comparisons normalize.
- Whether advertising recovery continues, particularly given ongoing print-advertising secular declines.
- How operating expenses, especially marketing, newsroom and product-development spending, evolve relative to revenue.
- The effect of the $27.2 million investment gain on reported earnings versus underlying operating trends.
- Liquidity, pension obligations, legal contingencies and the company’s ability to maintain dividends under changing conditions.