Key Takeaways From New York Times’ Q4 Earnings

The New York Times Company (NYSE:NYT) announced solid Q4 results as its earnings per share and revenue came in ahead of expectations. NYT reported unprecedented growth in digital subscriptions, which helped the company stabilize its circulation revenues in the fourth quarter. The media company’s total circulation revenues increased 5% year-over-year (y-o-y) in the quarter, with digital-only subscription revenue growing strongly at 22% y-o-y to $64 million. In addition, the company’s other revenues grew 16% y-o-y to $29 million largely due to the Wirecutter and Sweethome acquisition in October 2016. However, headwinds in advertising revenues – particularly print advertising – more than offset the gains made in circulation, causing total revenues in the quarter to decline 1% y-o-y to $440 million.

On the expense side, the company’s operating costs increased 3% y-o-y in the quarter, primarily due to higher severance, advertising and technology costs, partially offset by lower print production and distribution costs. ^[1]

NYT’s adjusted operating profit declined 19% y-o-y to $96 million in the fourth quarter. This decline was due to lower print advertising revenues and higher costs, partially offset by higher digital circulation revenues. The company also posted adjusted earnings of 30 cents, down 19% compared to same quarter last year.

Overall Advertising Revenues Continue To Decline

NYT’s overall advertising revenues declined 10% y-o-y to $185 million in the fourth quarter, primarily due to headwinds in print advertising (-20%). This lower print advertising revenue was mainly due to declines in the luxury and retail categories. However, the company’s digital advertising revenues grew 11% y-o-y in Q4, driven by gains in smartphone branded content, marketing services and programmatic, partially offset by declines in the traditional digital display business. In fact, the revenues from smartphones contributed around 29% to the total digital advertising revenues in the quarter.

Digital Subscriptions Boost Circulation Revenues

NYT’s digital subscription revenue grew 22% y-o-y in the quarter and its print consumer revenue was flat in the fourth quarter. An increase in new subscribers in Q4 led to growth in NYT’s overall circulation revenues, which contribute more than half of the company’s total revenues. The company reportedly added 276,000 net new digital subscriptions to its News product in the quarter. In fact, the company added 220 million unique users in November itself. This surge in subscriptions could be attributed to coverage of the U.S. Presidential elections, growth in untrustworthy news sources and the newspaper’s coverage of President Trump.

On the print circulation side, revenues were slightly lower due to declines in single copy revenues. NYT’s home delivery revenues were flat in the quarter as compared to the prior year, since increased home delivery price in early 2016 more than offset the newspaper’s volume decline. The total daily circulation declined 4.3% y-o-y and Sunday circulation declined 3.5% y-o-y in the quarter.

Q1 FY 2017 Guidance

NYT expects approximately 6% y-o-y growth in circulation revenues, driven by continued strength in digital subscription revenues, which are expected to grow 25% y-o-y. For Q1 2017, the company expects strong growth in net new subscribers – more than 200,000 net additional subscriptions to its digital news products and approximately 15,000 net subscribers to its digital crossword product. However, the company expects its overall advertising revenues to decline, despite a growth projection of around 10-15% y-o-y in digital advertising.

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1. The New York Times (NYT) Q4 2016 Results – Earnings Call Transcript, Seeking Alpha, February 2 2016 [↩]