NY Times (NYT) Q2 Earnings Beat, Digital-Only Subscribers Up
The New York Times Company NYT delivered second-quarter 2023 adjusted earnings of 38 cents a share, which beat the Zacks Consensus Estimate of 21 cents. The metric surged 35.7% from the prior-year reported figure.
Total revenues of $590.9 million comfortably beat the Zacks Consensus Estimate of $578 million. Markedly, the top line increased 6.3% year over year.
Impressively, there has been an improvement in subscription revenues compared to the prior-year quarter. The average revenue per user for digital-only subscriptions increased to $9.15 in the quarter under review from $9.04 in the preceding quarter and $8.83 in the same period last year. On the digital advertising front, there has been a notable year-over-year improvement. However, print advertising revenues continued to struggle. Amid these developments, the company's strategic bundled subscription offering has shown momentum.
Subscription Revenues Rise
Subscription revenues of $409.6 million grew 6.8% year over year. We had expected total subscription revenues to increase 6.4% during the quarter under review.
The upside can be attributed to the increase in the number of subscribers who are paying higher prices, more individuals subscribing to the company's digital-only products and others upgrading to bundle packages. The subscribers who are paying higher prices are primarily a result of subscribers whose introductory promotional prices have graduated to higher prices. The implementation of price increases on tenured subscribers for digital news and Games subscribers has contributed to this upside.
The New York Times Company Price, Consensus and EPS Surprise
The New York Times Company price-consensus-eps-surprise-chart | The New York Times Company Quote
Subscription revenues from digital-only products jumped 13% to $269.8 million. However, print subscription revenues fell 3.5% to $139.8 million due to lower domestic home delivery revenues, which declined 3.9%. We had expected a 12.9% increase in digital-only subscription revenues and a 4.3% decline in print subscription revenues.
The company ended the quarter with roughly 9.88 million subscribers across its print and digital products. Of the 9.88 million subscribers, approximately 9.19 million were digital-only subscribers. Of the digital-only subscribers, about 3.30 million were bundle and multiproduct subscribers. There was a net increase of 180,000 and 780,000 digital-only subscribers compared with the preceding quarter and the second quarter of 2022, respectively.
Management envisions third-quarter 2023 total subscription revenues to increase about 8-10%, with digital-only subscription revenues anticipated to rise approximately 14-17%.
A Look at Advertising Revenues
Total advertising revenues of $117.8 million rose marginally by 0.3% from the prior-year period. We had expected a 7.9% decline in total advertising. The better-than-expected results highlighted an increase in digital advertising revenues.
Digital advertising revenues increased 6.5% to $73.8 million. This can be attributed to higher revenues from direct-sold and open-market programmatic advertising, partly offset by lower revenues from podcasts and creative services.
Meanwhile, print advertising revenues declined 8.6% to $44 million in the quarter under review. The metric decreased primarily in the entertainment, finance, healthcare and advocacy categories, partly offset by growth in the luxury category.
For the third quarter of 2023, The New York Times Company expects digital advertising revenues to increase in the mid-single-digits and total advertising revenues to remain flat.
Other Highlights
We note that other revenues jumped 16.1% year over year to $63.5 million during the quarter under review due to higher Wirecutter affiliate referral revenues, an increase in licensing revenues related to a Google commercial agreement, and higher TV and film revenues. The New York Times Company estimates a 13-16% increase in other revenues in the third quarter of 2023.
Adjusted operating costs rose 4% to $498.7 million during the quarter. Management anticipates adjusted operating costs to increase approximately 5-8% in the third quarter of 2023.
The total adjusted operating profit increased 20.9% to $92.2 million during the quarter under review, while the adjusted operating margin expanded 190 basis points to 15.6%. Higher digital subscription and other revenues more than offset higher adjusted operating costs.
Segment Details
The New York Times Group’s revenues increased 4.5% year over year to $560.5 million, faring better than our estimated growth of 2.5%. Subscription revenues rose 5% to $385 million due to growth in subscription revenues from digital-only products, partly offset by a decline in print subscription revenues. Advertising revenues fell 2.2% to $112.3 million, stemming from lower print advertising revenues, partly offset by higher digital advertising revenues.
The adjusted operating profit jumped 12.6% to $100 million. This can be attributed to higher digital subscription and other revenues, partially offset by higher adjusted operating costs and lower advertising revenues.
Revenues totaled $30.4 million in The Athletic segment, up 55.3% year over year. We had expected segment revenues to increase 30.8%.
Subscription revenues rose to $24.6 million from $17 million in the second quarter of 2022, mainly due to an increase in digital-only subscribers with The Athletic and the favorable impact of an additional month in 2023. The adjusted operating loss decreased to $7.8 million from $12.6 million in the year-ago period.
Financial Aspects
The New York Times Company ended the quarter with cash and marketable securities of about $510.4 million, reflecting an increase of $24.1 million from $486.3 million as of Dec 31, 2022.
The company incurred capital expenditures of about $5 million during the quarter. Management envisions capital expenditures of about $50 million in 2023.
The board of directors authorized a $150 million share repurchase program in February 2022. As of Aug 4, 2023, the company had repurchased 4,295,081 shares for about $148.6 million, and $1.4 million remained under the authorization. In February 2023, The New York Times Company’s board of directors also approved a new $250 million Class A share buyback program.
We note that this Zacks Rank #3 (Hold) stock has risen 25.8% year to date compared with the industry’s growth of 24.6%.
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