The New York Times Company — Q1 2023 10-Q
Business context and period: Unaudited results for the quarter ended March 31, 2023, compared with the quarter ended March 27, 2022. The company reports NYT Group (NYTG) and The Athletic. The Athletic was included for approximately two months in Q1 2022 versus the full quarter in Q1 2023; Q1 2022 also had one additional day. Amounts below are in U.S. dollars.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $560.7 million | $537.4 million | +4.3% |
| Subscription revenue | $397.5 million | $372.0 million | +6.9% |
| Advertising revenue | $106.2 million | $116.3 million | -8.6% |
| Operating costs | $532.8 million | $496.4 million | +7.3% |
| Operating profit / margin | $27.9 million / 5.0% | $6.3 million / 1.2% | — |
| Adjusted operating profit / margin | $54.0 million / 9.6% | $60.9 million / 11.3% | -11.4% / -170 bps |
| Net income | $22.3 million | $4.7 million | — |
| Diluted EPS | $0.13 | $0.03 | — |
| Adjusted diluted EPS | $0.19 | $0.21 | -9.5% |
| Cash from operations | $50.7 million | $(14.7) million | — |
| Free cash flow | $44.7 million | $(23.2) million | — |
Digital-only subscription revenue rose 14.1% to $258.8 million; print subscription revenue declined 4.4% to $138.8 million. Paid digital-only subscribers reached 9.02 million, up 190,000 sequentially and 790,000 year over year. Total paid subscribers were approximately 9.73 million. Digital-only subscriber ARPU was $9.04.
NYTG revenue increased 1.3% to $532.1 million, while adjusted operating profit fell 8.8% to $61.8 million and margin declined to 11.6% from 12.9%. The Athletic generated $28.6 million of revenue and an adjusted operating loss of $7.8 million, versus $12.2 million of revenue and a $6.8 million loss in the prior-year period; comparisons are affected by the additional month included in 2023.
Liquidity, capital and balance sheet
- At March 31, 2023, cash and cash equivalents were $235.4 million; short- and long-term marketable securities were $239.1 million. Combined cash and marketable securities totaled $474.4 million, as reported by management. Restricted cash of $13.9 million was primarily collateral for workers’ compensation obligations.
- Current assets were $634.4 million and current liabilities $540.5 million. Total assets were $2.47 billion and stockholders’ equity $1.58 billion.
- The filing reports no drawn borrowings under the $350 million revolving credit facility; approximately $0.6 million of letters of credit were outstanding, with the remaining commitment available. The company said it was in compliance with facility covenants. The facility matures July 27, 2027.
- Q1 financing cash outflow was $58.5 million, including $30.7 million of share repurchases, $15.1 million of dividends paid and $11.0 million of share-based compensation tax withholding.
- The board approved a $250 million repurchase authorization in February 2023, in addition to the remaining prior authorization. Approximately $264.3 million remained as of March 31. The quarterly dividend increased to $0.11 per share, paid in April.
Changes, outlook and risks
- Revenue growth was led by digital subscriptions and other revenue, while advertising weakened: digital and print advertising declined 8.6% and 8.7%, respectively. Management attributed advertising pressure in part to macroeconomic conditions and lower podcast, creative-services and print advertising revenue.
- Adjusted operating costs increased 6.3% to $506.8 million. Management cited higher newsroom and technology staffing, cloud and digital delivery costs, and print production costs; lower NYTG marketing spending partly offset increases. Technology costs rose approximately 19.6% to $105.2 million.
- GAAP operating profit improved substantially partly because Q1 2022 included $34.7 million of acquisition-related costs for The Athletic. Adjusted operating profit and adjusted EPS, which exclude specified items, declined year over year. Q1 2023 included $3.8 million of severance expense and $1.5 million of multiemployer pension withdrawal costs.
- Management said cash, operating cash flow and other sources should be sufficient to meet financing needs over the next 12 months. No specific revenue or earnings guidance is provided in the supplied filing text. Management expects the tax treatment of research and development costs to reduce 2023 operating cash flow by approximately $45 million; actual impact depends on spending and potential legislative or regulatory changes.
- Key risks cited include competition and subscriber growth, advertising-market conditions, inflation and labor costs, print supply and distribution costs, geopolitical and economic uncertainty, technology and cybersecurity, privacy and data protection, litigation, pension and multiemployer-plan exposure, and acquisition-related risks. Pending legal matters could affect results or cash flows in an individual period, though management did not expect their ultimate resolution to materially affect financial position. Management reported no material change in risk factors and no material change in market risks.
Important facts for investors to verify
- Whether subscriber additions and digital ARPU sustain subscription growth as print subscriptions continue to decline.
- Whether advertising weakness persists and how it affects revenue mix and operating margins.
- Whether cost growth, especially technology, newsroom and Athletic costs, moderates relative to revenue growth.
- The cash-flow impact of R&D tax amortization and the company’s continuing dividends and share repurchases.
- Performance of The Athletic, noting that year-over-year comparisons include unequal periods of ownership.