NEW YORK
,
February 2, 2022
(press release)
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Targets at least 15 million subscribers by year-end 2027, completes acquisition of The Athletic, and announces dividend increase and new share repurchase program As reflected above, both operating costs and adjusted operating costs excluding The Athletic are expected to increase approximately 13 to 15 percent compared with the first quarter of 2021 as we continue investment into the drivers of digital subscription growth and compare against another quarter of low spending last year. The Company expects cost growth on our core business (excluding The Athletic) to slow considerably in the second half of 2022. To view the full release including tables on the New York Times Company's website, click here.
NEW YORK, February 2, 2022 – The New York Times Company (NYSE: NYT) announced today fourthquarter 2021 diluted earnings per share from continuing operations of $.41 compared with $.06 in the same period of 2020. Adjusted diluted earnings per share from continuing operations (defined below) was $.43 in the fourth quarter of 2021 compared with $.40 in the fourth quarter of 2020.
Operating profit increased to $94.1 million in the fourth quarter of 2021 from $80.5 million in the same period of 2020 and adjusted operating profit (defined below) increased to $109.3 million from $97.7 million in the prior year, as higher advertising, subscription and other revenues more than offset higher costs.
Meredith Kopit Levien, president and chief executive officer, The New York Times Company, said, “Our performance in 2021 demonstrated the power of our digital-first, subscription-first approach as we posted our second-best year ever for net subscription additions and strongest operating profit and adjusted operating profit in many years, which was a result of our consistent strategy and focus. Since we launched our current strategy in 2015, we’ve been investing steadily into a once-in-a-generation opportunity to pioneer the development of a large and growing news and information market at a time when habits are up for grabs. Our priority from here is to continue this momentum by further penetrating our growing total addressable market and leveraging both our unique platform and the deliberate investments we’ve made in our journalism, technology, and adjacent products to build a larger and more profitable New York Times Company. For the third time in six years, we are setting a new, more ambitious target as we pursue the next phase in our growth journey.
“Our latest audience research suggests there are now at least 135 million adults worldwide who are paying or willing to pay for one or more subscriptions to English-language news, sports coverage, puzzles, recipes, or expert shopping advice. This large and growing addressable market, combined with our unique platform, gives us great confidence in our ability to continue to grow.”
In the fourth quarter, the Company posted 375,000 net new digital subscriptions, 171,000 of which came from News. The Company also reported that it achieved $2 billion in annual revenue for the first time since 2012.
Kopit Levien also announced today that with the acquisition of The Athletic, the Company surpassed 10 million subscriptions, well ahead of its stated goal of reaching that milestone by 2025. Separate and apart from The Athletic, the Company believes it would have reached this target well before 2025 on an organic basis.
To further penetrate the market, the Company is focused on becoming the essential subscription for every English-speaking person seeking to understand and engage with the world. That entails continuing to provide the highest quality, expert journalism on the broadest range of subjects while also meeting major daily needs around people’s lives and passions. The Company plans to increasingly promote a high-value New York Times bundled digital subscription, and has set a new goal of at least 15 million total subscribers to The Times by year-end 2027, a number that would be larger if expressed in individual subscriptions. With this, the Company will begin reporting the number of unique subscribers in the first quarter, while continuing to also report on individual subscription growth.
Comparisons
Unless otherwise noted, all comparisons are for the fourth quarter of 2021 to the fourth quarter of 2020. Given the impact of the Covid-19 pandemic on our business in 2020, we believe that certain comparisons of our operating results in 2021 to 2019 provide useful context for our 2021 results, and have provided those comparisons in the below commentary and the Supplemental Financial Information section. For comparability, certain prior-year amounts have been reclassified to conform with the current period presentation.
This release presents certain non-GAAP financial measures, including diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations); operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit, and as divided by revenues, adjusted operating profit margin); and operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs). Refer to Reconciliation of Non-GAAP Information in the exhibits for a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.
There were no special items in the fourth quarter of 2021.
Fourth-quarter 2020 results included the following special items:
• A $5 million gain ($3.1 million or $0.02 per share after tax and net of noncontrolling interest) reflecting our proportionate share of a distribution from the sale of assets by Madison Paper Industries (“Madison”), in which the Company has an investment through a subsidiary.
• $80.6 million in pension settlement charges ($58.9 million after tax or $0.35 per share) in connection with the transfer of certain pension benefit obligations to an insurer.
2 Results from Continuing Operations
Revenues
Total revenues for the fourth quarter of 2021 increased 16.7 percent to $594.2 million from $509.4 million in the fourth quarter of 2020. Subscription revenues increased 11.2 percent to $351.2 million, advertising revenues increased 26.9 percent to $176.8 million and other revenues increased 22.1 percent to $66.3 million. Compared with the fourth quarter of 2019, total revenues increased 16.9 percent, as subscription revenues increased 27.6 percent, advertising revenues increased 3.2 percent and other revenues increased 7.3 percent.
Subscription revenues in the fourth quarter of 2021 rose primarily due to growth in the number of subscriptions to the Company’s digital-only products, which include our News product as well as our Games, Cooking, Audm and Wirecutter (to which a subscription option was launched during the third quarter of 2021) products (“other digital-only products”), and a benefit from subscriptions graduating to higher prices from introductory promotional pricing. Subscription revenue from digital-only products increased 23.1 percent, to $205.5 million. Print subscription revenues decreased 2.1 percent to $145.7 million, largely due to lower single-copy revenue, as well as lower domestic home delivery revenue, which declined 1.0 percent. Compared with the fourth quarter of 2019, subscription revenue from digital-only products increased 68.3 percent, largely due to growth in the number of subscriptions to the Company’s digital-only products, while print subscription revenues declined 4.9 percent due to lower single-copy revenue, which was partially offset by a 1.1 percent increase in revenue from our domestic home delivery subscription products.
The Company ended the fourth quarter of 2021 with approximately 7.6 million paid subscribers with approximately 8,789,000 paid subscriptions across its print and digital products. Of the 7.6 million subscribers, 6.8 million were paid digital subscribers with 8,005,000 paid digital-only subscriptions, a net increase of 375,000 subscriptions compared with the end of the third quarter of 2021 and a net increase of 1,273,000 subscriptions compared with the end of the fourth quarter of 2020. Of the 375,000 total subscription net additions, 171,000 came from the Company’s digital news product, while 204,000 came from the Company’s other digital-only products.
Fourth-quarter 2021 digital advertising revenue increased 23.3 percent and print advertising revenue increased 33.6 percent. Digital advertising revenue was $111.1 million, or 62.9 percent of total Company advertising revenues, compared with $90.1 million, or 64.7 percent, in the fourth quarter of 2020. Digital advertising revenue increased primarily as a result of higher direct-sold advertising, including traditional display and podcasts. Print advertising revenue increased primarily in the luxury and entertainment categories, which were more severely impacted by the Covid-19 pandemic in the fourth quarter of 2020. Compared with the fourth quarter of 2019, digital advertising revenue increased 20.5 percent as a result of higher direct-sold advertising, including traditional display and podcasts, partially offset by lower creative services revenues resulting from the closure of our HelloSociety and Fake Love digital marketing agencies, while print advertising revenue decreased 17.0 percent due to continued secular declines, further exacerbated by the Covid-19 pandemic.
Other revenues increased 22.1 percent in the fourth quarter of 2021, primarily as a result of revenue from live events, which were more severely impacted by the Covid-19 pandemic in the fourth quarter of 2020, as well as higher commercial printing and television series revenue. Compared with the fourth quarter of 2019, other revenue increased 7.3 percent, with higher Wirecutter affiliate referral revenues and licensing revenue more than offsetting lower television series revenues.
3 Operating Costs
Total operating costs increased 16.6 percent in the fourth quarter of 2021 to $500.1 million compared with $428.8 million in the fourth quarter of 2020, while adjusted operating costs increased 17.8 percent to $484.9 million from $411.7 million in the fourth quarter of 2020. Compared with the fourth quarter of 2019, total operating costs increased 16.2 percent, while adjusted operating costs increased 17.7 percent. Cost of revenue increased 12.0 percent to $280.2 million compared with $250.3 million in the fourth quarter of 2020, largely due to growth in the number of employees who work in the newsroom and on our Games, Cooking, Audm and Wirecutter products, as well as higher advertising servicing costs, subscriber servicing costs, audio content production costs; and print production and distribution costs largely as a result of growth in commercial printing. Compared with the fourth quarter of 2019, cost of revenue increased 8.1 percent as a result of growth in the number of employees who work in the newsroom and on our Games, Cooking, Audm and Wirecutter products; as well as higher subscriber servicing and digital content delivery costs, partially offset by lower print production and distribution and advertising servicing costs.
Sales and marketing costs increased 50.0 percent to $97.5 million compared with $65.0 million in the fourth quarter of 2020 due to higher media expenses, a component of sales and marketing costs that represents the cost to promote our subscription business. Media expenses increased 66.1 percent to $67.1 million in the fourth quarter of 2021 from $40.4 million in 2020 largely as a result of higher brand marketing. Compared with the fourth quarter of 2019, sales and marketing costs increased 36.7 percent, largely due to higher media expenses, which were partially offset by lower advertising sales costs. Media expenses increased 58.4 percent compared with the fourth quarter of 2019.
Product development costs increased 12.3 percent to $41.6 million compared with $37.1 million in the fourth quarter of 2020, largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives. Compared with the fourth quarter of 2019, product development costs increased 38.2 percent as a result of the factors listed above.
General and administrative costs increased 10.0 percent to $66.8 million compared with $60.8 million in the fourth quarter of 2020, largely due to a higher incentive compensation accrual, growth in the number of employees and higher consulting costs. Compared with the fourth quarter of 2019, general and administrative costs increased 22.2 percent largely due to a higher incentive compensation accrual and growth in the number of employees, primarily in the human resources and enterprise technology departments in support of employee growth in other areas.
Other Data
Interest Income and Other, net
Interest income and other, net in the fourth quarter of 2021 was $1.0 million compared with $3.2 million in the fourth quarter of 2020. The decrease was primarily a result of lower gains from non-marketable equity investments and lower dividend income from investments.
Income Taxes
The Company had income tax expense of $22.5 million in the fourth quarter of 2021 compared with an income tax benefit of $4.5 million in the fourth quarter of 2020. The increase in income tax expense was primarily due to a tax benefit from pension settlement charges in the fourth quarter of 2020. Excluding the tax benefit generated from the pension settlement charges in the fourth quarter of 2020, tax expense in the 4 fourth quarter of 2021 exceeded tax expense in the fourth quarter of 2020 primarily due to higher income from continuing operations in the fourth quarter of 2021.
Liquidity
As of December 26, 2021, the Company had cash and marketable securities of $1.07 billion, an increase of $188 million from $882.0 million as of December 27, 2020. Approximately $550.0 million was used subsequent to the fiscal year end to fund the purchase price of The Athletic.
The Company has a $250.0 million revolving line of credit through 2024. As of December 26, 2021, there were no outstanding borrowings under the credit facility, and the Company did not have other outstanding debt.
Acquisition of The Athletic
On February 1, 2022, we completed the acquisition of The Athletic Media Company, a global digital subscription-based sports media business that provides national and local coverage of more than 200 clubs and teams in the U.S. and around the world, for an all-cash purchase price of $550 million, subject to customary closing adjustments. The purchase price was funded from cash on hand.
Dividends and New Share Repurchase Program
The Company’s Board of Directors declared a $.09 dividend per share on the Company’s Class A and Class B common stock, an increase of $.02 from the previous quarter. The dividend is payable on April 21, 2022, to shareholders of record as of the close of business on April 6, 2022.
The Board of Directors also approved a $150 million Class A stock repurchase program. Class A shares may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. There is no expiration date with respect to this authorization. The new authorization replaces an existing authorization under which approximately $16.2 million remained.
Pension Obligations
As of December 26, 2021, our qualified pension plans had plan assets that were approximately $74 million above the present value of future benefits obligations, compared with approximately $36 million as of December 27, 2020. We made contributions of approximately $9 million to certain qualified pension plans in 2021. We expect to make contributions in 2022 to satisfy minimum funding requirements of approximately $10 million.
Capital Expenditures
Capital expenditures totaled approximately $9 million in the fourth quarter of 2021 compared with approximately $5 million in the fourth quarter of 2020. The increase in capital expenditures in 2021 was primarily driven by improvements in our headquarters building which are intended to address growth in the number of employees and to enhance technologies that support our transition to hybrid work with employees working both from the office and remotely.
5 Outlook
Below is the Company’s guidance for revenue and operating costs for the first quarter of 2022 compared to the first quarter of 2021, both including and excluding the impact of The Athletic, which will be consolidated in the results from yesterday’s closing or approximately two-thirds of the quarter:
The Company estimates The Athletic had operating losses of approximately $55 million in 2021 on approximately $65 million in revenue, and currently forecasts a slight improvement in operating losses in 2022, as the Company plans to make additional investments that will mostly offset revenue growth. The Company expects the following on a pre-tax basis in 2022 (including The Athletic):
• Depreciation and amortization: approximately $60 million,(1)
• Interest income and other, net: approximately $3 million to $5 million, and
• Capital expenditures: approximately $50 million.
The Company has adopted a change to its fiscal calendar and as a result, the Company’s 2022 fiscal year will end on December 31, 2022 and thereafter be the calendar year.
(1) Note that the purchase price allocation related to The Athletic has not been completed and therefore the related amortization is not included in this Outlook.
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