The New York Times Company — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 26, 2022; comparative periods ended June 27, 2021. Amounts below are in U.S. dollars. The company acquired digital sports publisher The Athletic on February 1, 2022; its results are included from that date and reported as a separate segment.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $555.7 million | $498.5 million | $1,093.1 million | $971.5 million |
| Operating profit | $51.7 million | $73.3 million | $57.9 million | $124.9 million |
| Net income | $61.8 million | $54.3 million | $66.5 million | $95.4 million |
| Diluted EPS | $0.37 | $0.32 | $0.40 | $0.57 |
| Adjusted operating profit | $76.2 million | $92.9 million | $137.1 million | $161.0 million |
| Adjusted operating margin | 13.7% | 18.6% | 12.5% | 16.6% |
| Operating cash flow | Not provided by quarter | Not provided by quarter | $16.1 million | $110.4 million |
Q2 GAAP operating margin was approximately 9.3%, versus 14.7% a year earlier. Q2 net income included a $34.2 million pre-tax gain related to a lease and planned sale of land at the College Point facility; excluding that and other specified items, adjusted diluted EPS was $0.24 versus $0.36. For the first half, adjusted diluted EPS was $0.44 versus $0.62.
Q2 subscription revenue rose 13.1% to $383.6 million; digital-only subscription revenue rose 25.5% to $238.7 million. Advertising revenue increased 4.1% to $117.4 million, as print advertising rose 15.1% while digital advertising declined 2.4%. Other revenue increased 17.6% to $54.7 million.
Business changes and operating performance
- At quarter-end, the company reported approximately 9.17 million paid subscribers, including 8.41 million digital-only subscribers, and 10.56 million total subscriptions. Digital-only subscribers increased by 180,000 sequentially. Digital-only subscriber ARPU was $8.83, down 7.5% year over year.
- The New York Times Group Q2 revenue grew 7.6% to $536.1 million, but adjusted operating profit declined 4.4% to $88.8 million as costs grew faster than revenue.
- The Athletic generated Q2 revenue of $19.5 million and an adjusted operating loss of $12.6 million; for the period since acquisition through June 26, it generated $31.7 million of revenue and a $19.4 million adjusted operating loss.
- Total Q2 operating costs rose 19.6% to $504.0 million. The company cited higher journalism and staffing costs, subscription servicing, newsprint and fuel, marketing, product development, and technology spending. Technology costs rose 24.2%.
Cash, debt, and capital allocation
- At June 26, cash and cash equivalents were $161.3 million; short- and long-term marketable securities totaled $292.1 million. Combined cash and securities were $453.4 million, down from $1,074.4 million at December 26, 2021, primarily reflecting The Athletic acquisition and annual incentive compensation payments.
- Current assets were $473.3 million and current liabilities $534.3 million. The filing reports no outstanding borrowings under its revolving credit facility at quarter-end and compliance with its covenants.
- Six-month investing cash outflow was $81.2 million, including $515.3 million for acquisitions, substantially offset by net maturities of marketable securities. Financing cash outflow was $92.7 million, including $54.5 million of share repurchases and $26.9 million of dividends.
- The company said cash, operating cash flow, and other sources should cover financing needs for the next 12 months. Its $250 million revolving facility was amended after quarter-end, on July 27, to provide up to $350 million through July 27, 2027; there was no initial borrowing.
- The company approved a $150 million share repurchase authorization in February and had used approximately $54.4 million by June 26. It increased the quarterly dividend to $0.09 per share and said it currently expected comparable dividends to continue, subject to Board review.
Outlook, risks, and unusual items
- No specific consolidated revenue or earnings guidance is provided in the filing. Management emphasized subscriber growth and said it expects elevated cash tax payments over the next few years if the tax-law requirement to capitalize and amortize research and development costs is not repealed or deferred.
- Management attributed weaker digital advertising in Q2 to the macroeconomic environment, reduced marketer spending adjacent to news coverage, and lower programmatic impressions. Print advertising benefited partly from recovery in categories affected by the pandemic a year earlier; management noted continuing secular pressure on print advertising and print subscriptions.
- Six-month operating cash flow fell sharply year over year, which the company attributed principally to incentive compensation and cash tax payments, lower net income, lower receipts from prepaid subscriptions, and higher other assets.
- Unusual items include $34.7 million of first-half acquisition-related costs for The Athletic, including accelerated stock options and transaction and integration expenses; $2.7 million of Q2 severance; and the $34.2 million land-sale-related gain. The Athletic purchase price allocation remained preliminary, including $249.8 million of goodwill and $332.0 million of acquired intangible assets before amortization.
- Risks identified include subscriber growth and retention, advertising-market conditions, competition, technology and cybersecurity, privacy and payment processing, labor and pension obligations, newsprint and distribution costs, litigation, pandemic-related uncertainty, and realizing benefits from The Athletic. Management said pending legal matters could affect results or cash flows in an individual period, but did not believe their resolution was likely to materially affect financial position.
Important facts for investors to verify
- Whether digital subscriber growth and ARPU trends translate into durable subscription revenue and improved profitability.
- The Athletic’s subscriber economics, operating losses, integration progress, and realization of expected acquisition benefits.
- Whether digital advertising stabilizes and whether print-advertising recovery offsets secular declines.
- Cash flow recovery, the effect of R&D tax capitalization on cash taxes, and liquidity after acquisition spending, dividends, and repurchases.
- The final purchase accounting for The Athletic and the continuing effects of acquired-intangible amortization and the one-time land gain on comparisons.