Key Takeaways From New York Times Q3 Earnings

The New York Times Company (NYSE:NYT), one of the leading newspapers in the U.S., announced mixed Q3 results as its earnings per share came in ahead of expectations but revenue missed. A higher digital subscriber base helped the company stabilize its circulation revenues. However, headwinds in advertising revenues more than offset the gains made in circulation, causing total revenues in the quarter to decline 1% year-over-year (y-o-y) to $364 million. Even though its digital circulation and ad revenues grew over the quarter, its print circulation and the related ad revenue continue to decline, reflecting the secular downturn in the print industry.

On the expense side, the company’s operating costs increased 3% y-o-y to $357 million, primarily due to higher severance, advertising and technology costs, which were partially offset by lower print production and distribution costs ((The New York Times (NYT) Q3 2016 Results – Earnings Call Transcript, Seeking Alpha, November 2 2016)).

Moreover, NYT’s adjusted operating profit declined by 18% y-o-y to $39 million in the third quarter. This decline was due to lower print advertising revenues and higher costs, which were partially offset by higher circulation revenues. The company also posted adjusted earnings of 6 cents, down 33% compared to same quarter last year.

Advertising To Continue Downward Trend

In the advertising segment, the company witnessed a strong quarter in digital advertising (+21% y-o-y), owing to a changing advertising mix. This quarter saw revenue growth in branded content, smartphone, virtual reality, programmatic advertising and commercial collaborations with advertisers, despite facing declines in the traditional digital display business. The revenue from smartphones contributed around 24% to the total digital advertising revenues this quarter. In addition, NYT is also planning to launch a VR project (The Daily 360) with the help of Samsung, which will publish at least one video each day on its NYT platforms (desktop, mobile, VR apps) as well as Samsung’s VR content service.

On the other hand, NYT continued to experience headwinds in print advertising (- 19% y-o-y). This decline was primarily due to a decline in the New York Times as its major categories experienced declines. As a result, the media company’s overall advertising revenues fell by 8% y-o-y to $125 million.

Digital Subscription Boosts Circulation Revenues

NYTs total circulation revenues increased by 3% y-o-y in the quarter, with digital-only subscription revenue growing 16% y-o-y to $59 million. The company experienced growth in the digital consumer business, with a net increase of 116,000 subscriptions to its news products, more than twice as many as the same quarter last year. The media company’s revenue from digital news subscriptions grew 15% y-o-y, and the company also added 13,000 net new subscriptions to its Crossword product. The total number of digital-only subscriptions at NYT reached almost 1.6 million in this quarter.

On the print circulation side, revenues declined 1% y-o-y, primarily due to lower single copy revenues of both total daily circulation (- 5.5% y-o-y) and Sunday circulation (-3.8% y-o-y). Moreover, the increase in NYT’s home delivery prices more than offset its volume declines, and as a result its home delivery revenue was also flat in the quarter.

Q4 Guidance

NYT’s overall growth in circulation revenues is likely to be driven by the continued growth in digital subscription revenues, partially offset by decline in print circulation. The company expects approximately 100,000 net additions to its digital news products along with 10,000 additions to its Crossword product. However, the company expects its overall advertising revenues to decline, despite a growth projection of around 10% y-o-y in digital advertising.

Have more questions? Please refer to our complete analysis for New York Times 

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology