New York Times Beats Expectations On Digital Growth
The New York Times Company‘s (NYSE:NYT) stock hit a nine-year high after reporting solid fiscal second quarter results on July 27. The company’s stock has gained more than 46% in 2017 and is up 73% since the U.S. election. NYT again reported unprecedented growth in digital subscriptions, which helped the company stabilize its subscription revenues in the second quarter. The company’s total subscription revenues increased 14% year-over-year (y-o-y) in the quarter, with digital-only subscription revenue growing strongly at 46% y-o-y to $83 million. In addition, the company’s other revenues grew 22% y-o-y largely due to affiliate referral revenue associated with the Wirecutter and Sweethome acquisition in 2016.
NYT’s advertising revenue grew 1% y-o-y, primarily due to strong 23% growth in digital advertising, partially offset by continued headwinds in print advertising (-11%). The company’s overall revenues grew 9% y-o-y to $407 million, driven by very strong digital revenues. In terms of total subscriptions, the company now has around 3.3 million total subscriptions (print and digital), an increase of 37% since the same quarter last year.
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On the expense side, the company’s operating costs increased 11% in the quarter, due to higher marketing costs, increased compensation costs and costs from acquired companies, partially offset by lower print production and distribution costs. NYT’s adjusted operating profit increased 23% to $67 million in the second quarter, driven by the growth in digital and print subscription revenues. The company also posted adjusted earnings of 18 cents, up 64% y-o-y compared to the same quarter last year.
Overall Advertising Revenues Grew For The First Time Since Q3 2014
NYT’s print advertising revenue decreased 11% y-o-y while digital advertising revenues grew 23% in the second quarter. The lower print advertising revenue was mainly due to declines in display advertising (-11%), primarily in the luxury, real estate, technology and telecommunications and travel categories. The increase in the company’s digital advertising was driven by gains in smartphone branded content, marketing services and programmatic.
Digital Subscriptions Boost Subscription Revenues
NYT’s digital-only subscriptions grew 63% y-o-y in the quarter, a net increase of 93,000 subscriptions to the digital news product. This increase in new subscribers in Q1 led to growth in NYT’s overall Circulation revenues, which contribute more than half of the company’s total revenues. Moreover, the increase in home delivery revenues in the quarter, which primarily resulted from a price increase in early 2017, also led to an increase in overall circulation revenues, as it more than offset volume declines. However, the newspaper witnessed a reduction in the number of print copies sold during the quarter.
Q3 Guidance
NYT expects its digital subscription revenue to grow at a solid 40% y-o-y. However, the company also expects its overall advertising revenues to decline, despite double-digit growth expectations for digital advertising.
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