Good morning. My name is Suzanne, and I will be your conference operator today. At this time, I would like to welcome everyone to The New York Times Company's Q3 2016 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Mr. Harlan Toplitzky, Executive Director of Investor Relations and Financial Planning and Analysis, you may begin your conference.

Thank you and welcome to The New York Times Company's third quarter 2016 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer; Jim Follo, Executive Vice President and Chief Financial Officer; and Meredith Kopit Levien, Executive Vice President and Chief Revenue Officer. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call, and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2015 10-K. In addition, our presentation will include non-GAAP financial measures and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our website, at investors.nytco.com. With that, I turn the call over to Mark Thompson.

Thanks, Harlan, and good morning, everyone. Our third quarter was marked by exceptional and in the case of digital subscription spectacular gains in our digital business but also by real pressure on print advertising. We have full confidence in our strategy and we believe that our results showed the rapid progress we're making in pivoting The Times from a print-dominated business model to a digital one. Let's begin with digital subscriptions. We saw remarkable gains in digital consumer business with a net increase of 116,000 subscriptions to our news products, more than twice as many as the same quarter last year and far more than any quarter since the pay model launched in 2011. Revenue from digital news subscriptions grew 15% year-over-year. As you'd expect, the marked acceleration in the number of net digital news subscription increases that we've seen in recent quarters is also leading to a steady year-over-year increase in revenue. We also added 13,000 net new subscriptions to our Crossword product, bringing the total number of digital-only subscriptions at the company to almost 1.6 million. So what accounted for our success with our digital news subscription business in the quarter? Well, first, the stellar work of our newsroom during the incredible news cycle we're living through has led to record audiences for The Times and, perhaps more important, increased engagement with our content. Times journalists have continued to own this election cycle and have distinguished themselves in their day-to-day coverage and by breaking numerous major stories about both candidates. We also launched two popular new podcasts and delivered groundbreaking coverage of the Olympics including spectacular visual and interactive journalism. But other factors are at work as well which is why we believe that the model will continue to perform strongly long after the 2016 election cycle is…

Thanks, Mark, and good morning, everyone. As Mark said, the third quarter reflects solid digital advertising and subscriber growth but a very challenging print advertising environment. Adjusted diluted earnings per share was $0.06 in the third quarter compared to $0.09 in the prior year. We reported GAAP operating profit of approximately $9 million compared to an operating profit of $22 million for the same period in the 2015. Overall, revenues are down 1% in the quarter with weakness in print advertising offsetting growth in both digital advertising and consumer revenues. Total circulation revenues increased by 3% in the quarter with digital-only subscription revenue growing strongly, up 16% to $59 million. On the print circulation side, revenues are down 1%, driven by lower single copy revenues. Home delivery revenues are flat in the quarter as home delivery price increase in early 2016 more than offset volume declines. Total daily circulation declined 5.5% in the quarter while Sunday circulation declined 3.8%. Total advertising revenues were down 8% in the quarter but print advertising declining 19% and digital advertising growing 21%. As we have said in recent quarters, the digital advertising results in the quarter reflect changing mix of advertising. In Q3, we saw a strong growth in branded content, smartphone, virtual reality and programmatic advertising revenues while traditional direct sold desktop display advertising was weak. Mobile revenues continues to grow at a rapid rate versus 2015 and represented approximately 24% of total digital advertising revenues in the quarter. Acquisitions contributed only a small amount to growth in digital advertising in the quarter. As creative services revenues have been rising rapidly, the cost to support those revenues has also increased in the quarter. Lower print advertising revenue was mainly due to declines in The New York Times as most major categories experienced declines.…

And your first question comes from the line of John Janedis of Jefferies. Your line is open.

This is actually Mike (15:07) on for John here. Mark, can you talk a little bit more about what you're seeing in print? The shift to digital isn't really a new narrative, so what's changing incrementally? Is it branding ad, shifting the website, categories weak across media, pricing pressure, any color you can give there?

I'm sorry. Just so I understand the question, you're asking about both digital and print or just about print?

More of the shift from print to digital and...

Sure.

... just kind of what you're seeing incrementally.

Sure. So what we think we're seeing is a set of positive trends on the digital side, first of all, which include the significant growth year-over-year in the number of unique users, the people who come to New York Times at all (16:04). But what's been very pleasing is that we've seen our various measures of engaged users, the number of people who are coming to us 4 times a month, 10 times a month, amount of time spent, the breadth of content that people are looking at also ticking up. So we believe because both of the underlying quality of our journalism but also improvements to our digital products that we're seeing a rising tide of engagement with The New York Times. We're also – we've been improving the way we think about our marketing funnel and the way we convert users both in America and international where we've got a separate line of work deepening and improving our offering to users outside the United States. So all of that is leading to more users and also improvements in our understanding about the offers and the actual kind of portfolio of different packages that we offer subscribers. All of that is adding up to a significant acceleration in the way to which our digital subscription model is working. We think of ourselves, as first and foremost, a subscription business, but we believe there's great opportunities for us in digital advertising. And as I said in my remarks, we've seen, I think, an astonishingly rapid change in our thinking about advertising, and the 21% year-over-year growth in digital advertising in Q3 is really a testimony to the extent to which we have got very, very exciting and rapidly growing lines in our digital advertising business. Our success in smartphone, our…

Yeah. I'll add two things to that, Mark. One is if you look at the digital advertising business in Q2, for the first time, what we consider the growth businesses, which Mark just ticked off, mobile, programmatic, branded content, things related to video and virtual reality are actually slightly larger than the legacy digital businesses for the first time but only slightly. In Q3, the growth businesses were meaningfully larger than the legacy businesses. So that's a very positive trend and sort of suggests that the strategy is working. On print, I'll just add to what – print advertising specifically – I'll add to what Mark said. The consumer demand for print is still very much there. I think what we produce in print today is more unique as a media experience today than perhaps it's been – at any other time in our history, and I think it's incumbent upon us to make sure that the market understands that. And I'll add that as we do more and more major cross-platform-integrated programs with big marketers, print very much has a place. It has a place in those programs. It also still has a place for marketers who want to bring the traffic to their retail stores or who want to tell the world that something important is happening as part of their story. So we – as Mark said, we've seen periods of real pressure on print before, and we've also seen periods where that's moderated.

Okay. Thank you. And if I could follow-up with just one more. Growth in digital continues to be impressive. Understanding the new cycle here, can you help us understand the primary sources in terms of that circ growth and to what extent the increase was U.S. versus international?

Sure.

And sort of then on a related topic, how much of the cost to acquire a sub increase? Thank you.

Sure. So broadly, I think the performance in the third quarter was very, very good for a number of reasons and the compounding effect of those reasons obviously, news cycle was one of them. So more traffic, more engagement. I would also say related to news cycle but not precisely the same thing, our quality differential was probably more noted in terms of journalistic quality that has been just given how many big stories The Times broke, it was able to let the world know about it, so that had an effect. At the same time, we are getting far better on everything having to do with marketing execution. So, on the acquisition side, we're getting much better at sort of thoughtfully optimizing the funnel, particularly how we think about incrementing the meter when people come to us through side doors. Still have a lot of room for improvement there ahead. We're also getting much better at targeting the right offer to the right prospect at the right time. So understanding who they are and what they might be likely to buy from us. And then we're getting better at retention and that is a combination of things. One, we understand what offers retain better and we're seeing quite a bit of impact from that with more room to improve. And we're getting better at understanding usage patterns and how to either identify people who seem to be at risk of leaving us, get them to engage more with The Times. We're also getting better at understanding where people have service issues, how to improve upon those issues or at least improve upon our communication with them. So all of that, I think had a compounding effect on the quarter and even as we look sort of beyond the third quarter to say, post election, why do we expect the business to keep improving, we think we've got a lot of room on just marketing execution to keep getting better.

Yeah. If I can say, we typically don't go into detailed cost per order and lifetime value calculations, we said (24:00) we don't disclose them. I think the progress on retention, or progress on reducing churn is very interesting. We are making meaningful progress on churn despite the fact we are well, well into the model. We're five years into the model, and we're making significant progress. We believe we have considerable further scope to improve churn from where it is today. We believe as we've been operating, have been working, we've not run out of scope or anything like. So we think our chances of improving the fundamental economics of our digital subscription model are still there.

Yeah.

So when we look at growth, we think both of the scale of potential in the U.S. and beyond, including millions of people who are not subscribers but who are really regular users of The Times who we can reach. And secondly, we think the ways in which we can actually improve both through the – as with the geometry and the economics of acquisition, but also by improving the retention coefficient in the model we can make significant further progress. So, we're very bullish about that.

Yeah. I'll add two more things. Our products keeps getting better, particularly our product on the smartphone, and as we add more visual and video work to the experience, and as we service more varied kinds of content in terms of both topics and whether or not they're graphic or visual or video, I think that will have an effect. And as Mark said, there's still room to improve and grow there. And then we're just getting better at how we think about the bundles.

Okay. Thank you.

Thank you, Mike (25:47).

Your next question comes from the line of Alexia Quadrani of JPMorgan. Your line is open.

Hi, there. Just if I could follow up on your commentary just now on the print advertising weakness. It just seems to be such an industry headwind first for so, so long here and I know you guys have done a fantastic job on the circulation side, with the price increases and sort of stemming the circulation revenue decline there and obviously a great job on digital as well both in circulation and now more recently on the digital advertising. I guess when you look at strategically your properties longer term, does it ever come up in a conversation or consideration that maybe the print model eventually doesn't have advertising. Is that even viable? I guess, I'm understanding the demand from the consumer perspective of the contingency of this weakness from an advertiser marketing perspective. I'm just wondering how that sort of comes into play when you have these longer-term strategic decisions internally?

So, hi, Alexia. Let me have a quick go. I'll hand over rapidly to Meredith. We have a U.S. print product, the physical New York Times which would be contribution margin positive to the company without a single advertisement in it. So, in other words, this is an important generator of cash for the company even net of advertising. Now we don't believe that print advertising is going to disappear anytime soon, but the strength of the modern print product is of immense. And as you say, we've been able to maintain very solid revenues from the print product because of our pricing power even through we've seen some attrition in numbers. And, so when we think about the print product, we don't just think about print advertising or anything like that. I mean, and we're talking about a company which once had a reliance of maybe 80% of revenue on print advertising. And you heard us say that in the present quarter, print advertising represented 22%, only 22% of the company's revenues. We want to defend it, and we want to fight for every dollar we can get from print advertising. And I think sometimes as people who observe The Times don't realize the extent to which our success in subscription both in print and now in digital, combined with our digital advertising means that our exposure to print advertising is much less than many of our competitors. Do you want to talk, Meredith, about how we're thinking about print advertising now?

Sure. What I'll say is I think there's still – despite the pressure we're feeling broadly in print, there's still quite a bit of demand for the special things that we do in print the things that surprise and delight the reader, the highest value customer, so it's something like our fall arts preview. If you've looked at that over the last few years that continues to be enormously successful from an advertising perspective and is seen by many in the industry as a very important sort of marketing time of which to announce shows and opening and things happening in the cultural world and that works across categories. If you look at things like cover wraps, we have a real demand for wrapping the paper from September to the end of the year particularly on Sundays. So, I'm going to keep saying I do think for many, many marketers there's still a place for print. And one of the things that makes The Times unique is we now have a number of very large partners, very large partners across many different categories where people are coming to us and buying an idea or an effort around a particular important event in their business. And print is just part of how that gets expressed. And I think for us that means it will sustain or has the potential to sustain maybe longer or differently than it will in other places.

Thank you so much.

Thanks, Alexia.

As there are no further questions in the queue at this time, I'll turn the call back over to your presenters (30:26), Mark.

Thank you for joining us this morning. We look forward to talking to you again next quarter.