New York Times Q1 2021 Earnings
The publisher added 301,000 digital subscribers for the first quarter, the slowest gain in over a year. Profits jumped, beating Wall Street expectations.,
No doubt, President Biden has significantly lowered the temperature of the nation after four years under Donald J. Trump, a tumultuous period capped by the worst pandemic in a century. He may have also lowered interest in the news. For the first quarter, The New York Times Company recorded its smallest gain in new subscribers in a year and a half.
The Times reported a total of 7.8 million subscribers across both print and digital platforms, with 6.9 million coming for online news or its Cooking and Games apps. The company added 301,000 digital customers for the first three months of the year, the lowest increase since the third quarter of 2019.
The Times is still on a path toward its goal of reaching 10 million subscribers by 2025, and it has improved its profit margins as its digital business — which costs less than print — continues to rise.
The company reported adjusted operating profit of $68 million, a 54 percent jump from last year, as it generated more dollars from each subscriber, partly because of the expiration of promotional rates as the new year rolled over. Total revenue rose modestly, about 6.6 percent, to $473 million. Online subscriptions and digital advertising together rose 32 percent, to $239 million, and the print business continued its steady decline.
For the first time, the company announced the number of readers it calls registered users — 100 million. Registered users can read a limited number of free articles before being asked to pay.
In a statement announcing the earnings report, Meredith Kopit Levien, the chief executive, said the company’s large user base “grounds our conviction that we can substantially and profitably scale paid subscriptions over time.”
The Times met expectations for subscription sales, which rose 15 percent to $329 million; digital subscriptions vaulted 38 percent to $179.6 million. The surprise came from advertising, which fell 8.5 percent to $97 million. The company had expected ad revenue to decline by double that amount.
There was an unexpected bump during the quarter in digital advertising as revenue increased 16.3 percent to $59.5 million, largely from more direct sales of display banners and podcast commercials.
The increase is also tied to The Times’s trove of first-party data. The company can harness its database of subscribers to target ads. That means it doesn’t rely on third-party tracking software, which has fallen out of favor as privacy concerns mount. Apple, for example, just updated its software to make it harder to track users across apps on its iPhones, a change that does not affect The Times’s ad business.
Operating costs rose slightly, to $421.4 million, an increase of a little more than 1 percent over last year. The company spent less on travel and entertainment expenses because of the pandemic, but it has hired more people. General and administrative costs rose 7 percent, to $56.6 million.
For the current quarter, The Times expects subscription revenues to increase 15 percent compared with last year. Revenue from digital subscribers is likely to rise 30 percent, the company said. That would be a slowdown from 2020, when The Times had a sharp gain in readership. It was one of the heaviest news cycles in recent memory, as the country was battered by the coronavirus pandemic, saw the rise of a social justice movement after the killing of George Floyd and voted in a hotly contested presidential election.
Advertising is expected to pick up mightily. The company estimates a 55 percent to 60 percent jump from last year, when ad spending was severely curtailed because of the pandemic. Digital advertising is likely to rise even more, at 70 percent to 75 percent. Costs are also expected to increase as the company plans to spend more marketing dollars to attract new subscribers. Capital spending should reach as much as $50 million this quarter.
The Times is in negotiations with the NewsGuild, the union that represents about 1,400 newsroom employees. Increased salaries and benefits, as well as a better defined structure for improving diversity and inclusion, are key goals sought by the union. A new deal could result in higher costs for the company.
In April, the NewsGuild also asked The Times to recognize a newly formed union of tech and digital employees. In an email sent to the staff April 22, Ms. Levien effectively declined. “We believe the right next step is a democratic process that surfaces all the facts, answers questions from employees and managers, and then lets employees decide via an election,” she said.
The company’s cash pile remains high, at more than $890 million, and its free cash flow — a measure of a company’s financial heft — has been steadily rising over the last three years. In 2020, it averaged about $65 million in free cash flow each quarter, according to estimates by S&P Capital IQ.
The Times has also increased dividend payouts to shareholders every few years. It now pays 7 cents a share each quarter, which costs about $46.8 million a year, payments that benefit the Ochs-Sulzberger family that controls The Times.