The New York Times Company — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 27, 2021 (13 and 26 weeks, respectively). Comparisons are with the corresponding 2020 periods unless noted. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions.
Business context
The Company operates as one reportable segment, earning revenue principally from subscriptions and advertising, alongside licensing, Wirecutter, building rentals, and other businesses. Management describes its strategy as subscription-first. It cautions that pandemic-related trends and seasonal factors affect comparisons and that interim results are not necessarily indicative of full-year results.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $498.5m (+23.5%) | $403.8m | $971.5m (+14.7%) | $847.4m |
| Operating profit | $73.3m | $28.8m | $124.9m | $56.1m |
| Operating margin | 14.7% | 7.1% | 12.9% | 6.6% |
| Net income | $54.3m | $23.7m | $95.4m | $56.5m |
| Diluted EPS | $0.32 | $0.14 | $0.57 | $0.34 |
| Operating cash flow | Not presented quarterly | $110.4m | $118.6m |
- Q2 subscription revenue rose 15.7% to $339.2m; digital-only subscription revenue increased 30.3% to $190.1m. Advertising rose 66.4% to $112.8m, including digital advertising up 79.6% and print advertising up 48.0%. Other revenue increased 8.7% to $46.5m.
- For the first six months, subscription revenue grew 15.5% and advertising 20.7%; other revenue declined 1.6%. Compared with the first six months of 2019, total revenue was up 11.0%, while advertising remained down 14.6%, reflecting persistent print advertising weakness.
- Paid digital-only subscriptions reached approximately 7.133 million at quarter-end, up 142,000 from Q1 and 1.463 million year over year. Print subscriptions were approximately 803,000, down 22,000 from Q1.
- Q2 operating costs increased 12.4% to $421.4m, with growth in journalism, marketing and product development costs. Management’s non-GAAP adjusted operating profit was $92.9m, versus $52.1m a year earlier; adjusted diluted EPS was $0.36 versus $0.18.
- Six-month operating cash flow was $110.4m, down from $118.6m. Capital expenditure cash payments were about $15m. Cash, cash equivalents and restricted cash ended the period at $335.5m.
Balance sheet, liquidity and capital
- Cash and cash equivalents were $320.9m, and short- and long-term marketable securities totaled $625.7m. Together these were approximately $946.6m at June 27, 2021.
- The Company reported no outstanding borrowings under its $250m unsecured revolving credit facility and said it was in compliance with its financial covenants. The filing does not report other outstanding debt in the presented balance sheet.
- Current assets were $881.2m and current liabilities $446.5m. Management said cash, operating cash generation and other sources should meet financing needs over the next 12 months.
- Cash used in financing activities was $30.3m in the first six months, mainly dividends of $21.8m and share-based compensation tax withholding of $10.9m. A $0.07-per-share quarterly dividend was declared June 30 and paid July 22, 2021.
Material changes, outlook and notable items
- Management expected 2021 total net subscription additions to be in the range of 2019 additions, while noting that this was difficult to predict precisely. It said 2020’s pandemic-related subscription growth was not expected to be sustainable; Q2 net digital additions were modest relative to Q2 2020, though improved month by month after a March low.
- Advertising rebounded from pandemic-affected 2020 levels, but management warned that secular trends and lower spending in affected sectors may continue to weigh on print advertising; some print advertising revenue may not return to pre-pandemic levels.
- The Company cited ongoing uncertainty from COVID-19, including possible effects on demand, advertising, live events, employee return-to-office costs and operations. Management did not expect a material liquidity impact based on information then available.
- Q2 included a $3.8m lease termination charge related to a tenant at the headquarters building. The first half of 2020 included a $10.1m gain on a non-marketable equity investment, affecting year-over-year comparisons of non-operating income.
- Pending legal actions are described as incidental to the business. Management said an adverse outcome could materially affect results or cash flow in an individual period, but did not believe ultimate resolution was likely to materially affect financial position.
- The filing reports no material changes to the risk factors in the 2020 Form 10-K. It identifies competition, subscriber retention and growth, advertising-market conditions, technology and cybersecurity, privacy and data protection, litigation, pension obligations, labor matters, and COVID-19 among relevant risks.
Important facts for investors to verify
- Whether subscription growth and pricing can sustain revenue growth as pandemic-driven additions normalize.
- Whether digital advertising strength offsets continued structural declines in print advertising.
- How operating-cost growth, especially journalism, product development and marketing, affects margins and cash generation.
- The cash-flow effect of working-capital movements, planned investment, dividends and pension funding; the Company expected approximately $9m of 2021 contributions to the Guild-Times Adjustable Pension Plan.
- Developments in COVID-19 impacts, pending litigation, and the $7.5m contingent consideration liability associated with the Serial Productions acquisition.