Good morning, and welcome to The New York Times Company's Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Harlan Toplitzky, Vice President, Investor Relations. Please go ahead.

Thank you and welcome to The New York Times Company's second quarter 2020 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer; Meredith Kopit Levien, Executive Vice President and Chief Operating Officer; and Roland Caputo, Executive Vice President and Chief Financial 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 2019 10-K as updated in subsequent quarterly reports on Form 10-Q. 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 will turn the call over to Mark Thompson.

Thanks, Harlan, and good morning, everyone. Good morning and goodbye, because as everyone in the room must know by now, this is not just my 35th quarterly earnings call as Chief Executive of The Times, but also my last. Meredith takes the helm in just a few weeks time, which is great news for the company and its shareholders. She is a unique talent and will be a bold and brilliant CEO, but one of the changes she's going to bring is to the language Times' executives use on these calls. Let's take the word lumpiness, a rather fine expressive would useful in so many contexts, but never more so than when applied to advertising. Now, I've tried. God knows I've tried, to coach Meredith in the use of the word lumpiness. But frankly, it's hopeless. It turns out that unless you've spent decades steeped in true gnarly and above all British lumpiness, you just can't pronounce it with any conviction. Roland, needless to say, is a lost cause, but no more lumpiness, indeed, no more Queen's English at all. From now on, it's all going to be in American. To paraphrase George The Third in Hamilton, good luck with that but I do want to thank all of you and particularly, our analysts for your engagement and courtesy to me over the past eight years. You're testing of the company's strategy and performance has helped us improve both and as someone new to the public markets when I arrived in 2012, I've learned a lot from you. I also hope you will forgive me before I hand over to Meredith and Roland to tell the story of the quarter, if I say that it's a source of some pride to me that my last full quarter as CEO of…

Thank you, Mark. While you have indeed been ineffectual at working your particular views of English intellect to come at The Times, you have thoroughly succeeded in leaving the company far better than you found it. So on behalf all of your colleagues, let me say that we are immensely grateful to you for your inspired and steady leadership over the past eight years. You led us over the major chasm of transformation to become a global digital-first, subscription-first company and in doing so, you raised the ambitions, not just for this place but for the business of journalism everywhere. Having total digital revenue overtake print in your last quarter is a perfect punctuation to your incredible run. Journalist Ken Doctor had it just right last week when he said that you've had one of the most transformative runs of any publishing executives in modern times. And I personally could not be more grateful for the seven years of strong partnership and getting to work with you and learn from you for much of it. Now, I'll have more to say in the coming quarters, but you can largely expect that we will forge ahead and execute on the strategy that has guided us over the past five years. That means continuing to invest in our newsroom, our products and our brand. It also means continuing to increase our focus and emphasis on our product itself, both the journalism and the way that people find and uniquely experience it as the central engine of our business with plenty of work still ahead to build the world-class product and tech-operation to enable that. And it means investing in our people during all that it takes to attract and retain top talent in all of our major disciplines and ensuring that The…

Thank you, Meredith and good morning. I would also like to take a moment to acknowledge Mark’s upcoming departure and to thank him for his partnership over the past eight years. While I will surely miss working with Mark, I am equally excited by the prospects of continuing to work closely with Meredith in her new role. As I said last quarter, although we expect short-term results to be affected by a decline in advertising, our subscription business, which represented nearly three fourths of our revenue in the second quarter , provides a source of strength and resilience to a recurring revenue stream that we expect to grow further as we continue to Excel at our core mission. Adjusted diluted earnings per share was $0.18 in the quarter, $0.1 higher than the prior year. We reported adjusted operating profit of approximately $52 million in the second quarter, which is approximately $3 million lower than the same period in 2019. Total subscription revenues increased approximately 8.5% in the quarter with digital-only subscription revenue growing nearly 30% to $146 million. This represents a further acceleration in the sequential rate of quarterly growth largely as a result of the large number of new subscriptions we have added in the past year, strength and retention of the $1 per week promotional subscriptions who has passed a yearlong promotional period and have graduated to higher prices and the impact from our first ever digital subscription price increase which began late in the first quarter. Quarterly digital news subscription ARPU declined approximately 11%, compared to the prior year and approximately 3%, compared to the prior quarter. Consistent with the rates of decline we reported for the first quarter of 2020. For both sequential and year-over-year ARPU trends, the historically large number of newly acquired subscriptions, mostly…

[Operator Instructions] First question comes from Alexia Quadrani of J.P. Morgan. Please go ahead.

Thank you very much. And Mark, we will miss you and your accent.

Thanks, Alexia. Thank you.

So, best of luck ahead. Just a couple of questions, pretty straightforward, can you provide a bit more color on the digital sub growth in the quarter? I guess, any sense at how it trended, whether it sort of progress, I know you usually don’t comment month-to-month, but curious given all the volatility and all the news if it was heightened in certain months versus others. And I guess, just on that same point, I guess any color you can give us in terms of engagements in the quarter where people saw just very engaged with COVID news or is it really broadened out?

Sure. I mean, I am not going to answer all of this, just to say, we don’t disclose very much in this area. One completely obvious point is that major new stories and it has been a very busy period for news, obviously throughout in audiences, both at the unique user level and also in terms of engagement. But Meredith, can you help Alexia to all on this?

Yes. I mean, what Mark has said is obviously right. So we won’t comment on quarter-to-quarter, but it is probably worth saying we do see some audience fluctuation based on what’s going on in the news as we see that. We’ve been a quarter ago and it should force in the opposite direction as we work on the new registration dates, customer journey and our work on engagement has kind of sort of underlying state-wise in respect to that. So, while audience plays a bit – to driver and the model it’s the only one and more we are focused on registration and conversion and engagement and registered users that has sort of a smoothing out effect.

And then any thoughts when you may resume the tenured price increases? I know you put a pause on that during the crisis here?

I am getting the signal but my sound could be better. So I picked up my phone, my colleagues will let me know if that’s not working. We – I am a getting thumbs up from Harlan. So, we paused – we did a big chunk of the price increase and then we paused when COVID hit, just because the go wake get in what was going on if it was the right thing to do and we work with them on that price increase this fall to a smaller, but still substantial cohort of people.

And then just lastly, a quick question on your investments into the TV side as well in the audio, sort of the podcasting, any really comments given in terms of what the returns are like in maybe the TV and video versus the audio, I mean, there is a big sense to put more of an incremental dollar in one versus the other?

I would say, we’ve got, as I said in my remarks, we’ve got really big ambitions for audio journalism and to what the times could do at audio opportunity now that we’ve got sort of triple spread of the daily and through real productions and new partnerships with this American lives. Those are the only things we just moved. Tariffs – mean interview podcasts here as well. So, I think you can expect to see us continue to invest in audio for a number of reasons and I would say in contrast on TV and film, we are really pleased with what we are doing and I would say it’s too less an economic driver and more about how we get Times Journalism to more audiences and how we get more people to connect with our brand.

Thank you very much.

The next question comes from Kannan Venkateshwar of Barclays. Please go ahead.

Thank you. Mark, obviously congratulations on a fantastic tenure. And I guess, it begs the question now the company is doing phenomenally well and as you highlighted it’s - the trends over the last four quarters have accelerated significantly. So I guess it begs the question of why now from a timing perspective?

Yes. Again, a fair, fair question, Kannan. I mean, I told the Board when I arrived in 2012, I thought that between five and – well, between five and eight years it was a battle run from my point of view. I like to as we have a big fresh strategic puzzle to work and to work through it. And I think, I mean, one of the really important things for this company, it’s a long transition. This got many years to go is fantastic momentum and I think the idea that from time-to-time, you bring leaders with fresh ideas and new kind of energy to apply to the puzzle in terms if you make sense. And I think you’ve probably seen a bit like a relay race. We’ve been kind of make sure that the next runner is up to speed and running up full pelt by the time baton passes, Meredith, obviously done a lot of so. same circumference: But I can also apply myself to a big new do you see strategic problem or servicer problem in other places. So, to me, this is one of the healthy ways of keeping the momentum of a given company going especially, when you are in the middle of such a gigantic transition.

Thank you, Mark, and all the best. And, Meredith from your perspective, in terms of strategic priorities, obviously there are a lot of areas there are still growth opportunities. You highlighted podcasting and video as potential areas for expansion. But when you think about this, I guess, there are two strategic questions that you probably be working through in the near-term. One is the distribution strategy. You have the choice of using services like Spotify or Hulu or the legacy TV networks for distribution or given the brand of New York Times, you yourself can be an aggregator. An aggregator in general have seen a lot more value creation over the last few years when it comes to digital business models. So, it would be great to get your thoughts on how you think your newer businesses from a distribution strategy perspective could evolve? And in terms of the content cost itself, I mean, podcast, you’ve made some investments but on the video side, you’ve relied more on partnerships in order to defy the production costs. Is that a self-owned model for content going forward where you could essentially use some more investment dollars? Thanks.

I am probably going to have to clarify the last bit of the question, but let me try the first two. I would say, in general, you can, as I said in my remarks, you can expect us to continue at least broadly with the strategic themes we’ve been at for five years now. And one of those big themes is, we really believe in the power of Times being a destination and then being something that people come to directly and then ask for by name. audio or in TV: And I’ll say in the audio space it’s not clear yet, what a destination is, but in many cases, the daily which is a program is a destination. It’s in and of itself something that people ask for by name as they come to every day and it’s now a distribution channel for us to launch other great work into the world and could imagine the same of serial productions or any of the other podcasts that we are doing as we announce very large audiences. So, long-winded way to say, we’ve learned a lot about what it means to be and build a destination I think we are going to continue to be very focused on doing that on being something that people come to directly and ask for by name. But we also, I mean, operate with a healthy sense of reality that there is very big players need a system who are very important to driving our funnel. Google, Facebook, others in the case of our news business and Apple, Spotify and others in the case of audio. And you’ve seen based on what we’ve done in television that there are places where we have seen that the best way to building audience for Times Journalism, Times Content is with others distribution outlets. And that’s why we had our first major foray into regular television with FX and Hulu as the distribution partners and I think we’ve learned a lot from them and we’ll continue in that partnership with the new production. I am not sure I understood the last bit of questions you may have to ask it again.

Yes. It’s mainly around the investment strategy for content. Is it going to be more on your balance sheet or sort of maybe a shared model like you’ve done with video?

I would say, you’ve seen us now apply a mix of organic development. So, using our capital to build things and I think we’ve done that quite successfully in the gaming space and in the lifestyle space with our cooking product and you’ve also seen us use our capital for inorganic ways and I’ll point, we haven’t talked a lot about the Audm acquisition. But I’ll point to that as an important experiment in two ways, Audm is a destination in and of itself, so just going back to the point I made earlier about the important destination in subscription, but it is also an aggregator of other audios. So it’s spoken-word audio from now the Times, but when we acquired it, it’s spoken-word on journalism from the advantage and the York and New York Magazine and it continues to be that. So, among other things, the Audm acquisition gives us a great experiment in aggregation about the content.

Got it. Can I ask one question on subscriptions? If you could just help us think through the channel shifts in terms of originations and also the mix shifts. News cycle is obviously important to generate more subs as we’ve seen over the last couple of quarters, but I am sure there is different consumer behavior when it comes to churn across different cohorts. So if you could just help us think through how this has evolved over the last, maybe three or four years as subscription growth has accelerated in terms of growth contribution from the top of the funnel versus the bottom of the funnel that would be very helpful. Thanks.

Okay, good. Crack at it and if I may I am actually getting at your question and then Roland may want to come in here, as well. I would say, that a version of this in my remarks, but audience continues to be a very important aspect of how we think about our funnel and as audience grows, that’s that the audience story of the last two quarters have been a very important part of the story. And I think we said in the last call that we, you know, as we - I think sort of step function change in audience. I think we see the opportunity grow and change. But, behind that, our new customer journey that we launched a year ago, which is registration-based. It opens up, I think new stabilizing function we bring people in the register where much were more affected at getting them to come back and reengage and to stimulate further news and that’s a really important of the puzzle. So, I think the broad answer to your question is our own organic means of engaging people, become more important in our regi model. So, can we get you to come back and engage through a newsletter, can we message you in a more commercial way and getting to come back engage or come and get you to download the App, and if you do that, you are more likely to subscribe. So, I would say, our own organic channels in a regi model becomes that much more important. But Roland, anything you want to add to the answer?

Kannan, did you have a retention question inside that question? I can address that if you like.

Yes.

So…

The question was, if you look at the churn across different cohorts, as people have rolled off for promos, that behavior has changed. So, if you could help us think.

So, we are now 22 months into the first offerings of the $1 a week. So nearly two years. That retention curve for other folks on $1 a week, you could almost fit it right on top of the retention curve at 22 months for the prior offers and at each point of that curve, it’s almost identical a slope that alone fits in and it et cetera are almost identical. When we feel that back a little but further, the folks who we stepped up to an intermediate price, they retained a little bit better than the folks we step up to full price. And then, if we look at more recent cohorts, if we look at the COVID cohort, so, back in Q1, you have a massive number of people subscribing and you are curious of how they retain and while it’s still early, you could fit that curve on top also. So, we are seeing a retention that makes us quite happy no matter how we split these cohorts. And as we’ve been growing and growing and growing the base, our overall churn numbers has been within one or two tenths of a percent either way the entire time for many, many, many quarters. So, the retention story is very good. From your cohort it’s very good for folks who came in on a discount, I mean get it stepped up and it’s also very good for the tenured folks who got a price increase – a base price increase last quarter.

That’s great. Thank you so much.

The next question comes from Vasily Karasyov of Cannonball Research. Please go ahead.

Thank you. Good morning. I was wondering if you would like to comment on the 10 million subscriber goal that you’ve put forward several – sometime ago and given how strong the sub base is growing, maybe the timeline for it or the order of magnitude, anything would be very interested to hear, what you have to say?

I’ll go first, I think, Meredith again should address it. Well, I announced that goal I think in the early quarter for Q4 2018, so in February 2019, with a milestone of 10 million by 2025. That’s high quite a few people other executives on the call – that why it was totally was a slightly crazy number. 18 months later, the company clearly close to two-thirds the way that already with more than five years to run. So, it looks now, I think like assuming the strategy continues to deliver strong gains. It looks probably like an underestimate. I do want to say about a 10 million was always a milestone. It was not just kind of a like a terminal target or a prediction of when the model would plateau. We don’t know when it’s going to plateau and my view is that the opportunity the company has is immense given both the ecosystem, the falling away a lot of competition, but also the attractiveness of a product in the kind of virtual circle that we got going in terms of great journalism and audience engagement. So, the answer is, I think what we felt as recently as 18 months ago, like a really stretching milestone for the company. Now that was in our gross, because obviously there are several million more subscribers to get, but we feel eminently achievable well within the timetable I set. But Meredith, you should – you’ve got a little as we pass the baton to you on this call pretty much, you should talk about this, as well.

Yes. I don’t know I have a whole lot to add. I think, you got most of it, Mark. I’ll just say, we see the market for subscription journalism to be large. We think it’s at least 100 million have – and we think the opportunity is big for us and others to participate in that market.

All right. Thank you.

The next question comes from John Belton of Evercore. Please go ahead.

Thank you. First, Mark, I am going to miss you. Good luck. And congrats to Meredith. So, I have a couple on pricing. So first, Roland, given all the comments you just made about retention across all these different subscriber price cohorts, have you changed the strategy in terms of a number of $1 for a week customers, you are stepping up the full price versus intermediate at the one year anniversary. Now, on a related note, I think you said in the prepared remarks that 8.5% in the quarter. Should we expect that to continue improve sequentially on a year-over-year basis moving forward? And then, what does that imply for international ARPU in the quarter? And just any update on international pricing strategy. Thanks. Sorry for all the questions.

Okay. I’ll see if I can retain all of them. So, in terms of the strategy on the step-up pricing, meaning presumably the percent that we are asking to move to a step-up pricing which means pricing low as we are stepping up to a full price. We are still targeting approximately 50-50 on that. Where we making progress on AI is, that amount – the percentage that the model is picking. But, at this point, we don’t have evidence that we should come off the 50-50. So that’s still in place. Right, I did reveal for the first time the domestic ARPU change versus the international, obviously, intentionally to expose the fact that we are discounting pretty heavily internationally. We think that’s the right pricing strategy in a lot of countries. It’s not one price in all countries. So, countries with lower GDP or where a basket of similar goods is priced low, we want to price to sell in those markets. On the domestic side, so, yes, the ARPU is down 8.5%, but John, the key here is, depending on how many news subs we bring on and we are going to continue to use the $1 a week promotion and it’s been very successful both in bringing on new subscribers and we’ve been able to step the prices up. We’ve proved that also in the last few cycles. So, as long as we are bringing on these very large amounts of new subscribers, I don’t expect ARPU to stabilize quite yet.

Got it. All right, thanks. And talk to you soon.

The next question comes from Craig Huber of Huber Research Partners. Please go ahead.

Yes. Good morning. Thanks. Mark, I want to say you did a heck of a job last years. We are going to miss you and congratulations Meredith on the new position.

Thanks, Craig. Thank you.

Thank you.

My question is, Mark, where was the number of journalists? The number you have, when you first started the company years ago, where is it right now? And maybe if Meredith could just speak about maybe on a go forward basis, I assume you guys want to continue invest in that area on the content side of things?

Sure. Yes. Of course, Craig. So, I haven’t got the exact number in front of me, but I want to say that we are at about 1,750 at the moment across new joining in premium, so 1,750 and that’s probably 250 or slightly more than 250 more than that went on by the time or changed at the end of the time. So, we’ve been able – we had in the first couple of years, we had some buyouts and layoffs and we had some sense which is been about organizational change and shifts which new leadership themselves that wanted to make to pivot to that their new strategy. But, obviously, it’s encouraging that we’ve been able to build our strength at a time when and this is nothing to be pleased about. So when you have unused rooms obviously being depleted. But Meredith will tell you about – well, help you about what’s going to happen from now on.

Yes. I’ll say a few things, but the first one to say is, that the single most important driver of what the company has been able to do in its business strategy and particularly its subscription strategy in the last eight, nine years has been the continued investment in these room and the journalists and the expansion of format and in putting more reporters, more journalists, more evidence in more places. So you can assume that we are going to continue to invest hardly in these in our journalism say, broadly. Also two more things about that, I think I talk a lot about the produce itself as the primary engine of the business and by that, I mean, the ability of the journalism to be successfully different from free alternatives of a quality that people will pay for it. And I also mean the ability to help people find and experience more of it and I would say on the second, we still have a lot of distance to travel to be really effective at surfacing all that we already make to people so that they get in a digital environment, particularly in a mobile environment, so they get to the stuff that’s more going to be most relevant for them. So, I think there is always going to be an important corpus of Times Journalism that everyone who gone from the Times should see. But there is still a lot of room for us to get better at surfacing particular stories, particular kinds of journalism to match people’s interest. And that brings me to my third point, which is, we can assume we’ll continue to invest hardly in the journalism and so we continue to expand in new formats as we’ve talked extensively about on this call in audio and to some degree in film and TV. But it’s worth saying and I think we’ve said a version of this at prior call, that that investment doesn’t have to scale with subscriptions and that’s in part because of the second thing I said, I think there is still a lot of room for us to get better at surfacing the stuff we already make the great journalism, we already make to the very, very large audience we have in a lot of the work of driving more subscriptions, lies in our ability to do that really effectively.

Appreciate that, Meredith. I want to also ask you about the daily. Maybe if you could just update us on a number of listeners each week if you would, next if you want to give me now versus say, a year ago? And then a longer term strategic question, I guess, on the daily podcast, I was just curious, how much thought have you given, maybe if you think of - its roughly 18 months about starting the charge for the daily podcast. And I ask that whether you charge for an annual basis but also perhaps maybe include it in the news only digital product and it gives another reason to raise prices down the road on that product, but also help drive the digital subscriber signups for the news only product that you included in there down the road. Do you sort of transition you think you can make down the road here, starting with this product is obviously being very well received out in the marketplace. Thanks.

Yes. Well, let me just start on the audience for the daily. My – I think I can’t help but say, the audience is now vastly larger than the audience for the paper, daily or Sunday even at its peak. And most of the listeners to the daily are people who probably never read the newspaper. So, it’s really done an incredible job of widening the audience for the Times that’s bringing new people to the brand. I think now we are somewhere above 3.5 million average daily listenership for the daily, which is almost twice where we were a year ago. One of the things that’s been particularly remarkable in this period is the resilience of the daily even during quarantine, during stay at home orders. I am not sure that’s been the case for listenership to audio in general, particularly because people use drive time. So, we’ve been very, very pleased to see that. And then, just turning to the other part of your question. I think the daily has been very, very powerful in a number of ways to the company. I have to say it’s a really strong and particularly resilient ad business as is audio generally to Times. And so, we continue to be optimistic about that. But as we’ve said in prior calls, we believe that we have some evidence that the daily plays a real role in bringing people into our subscription funnel. One of the great things about it is, it’s substantially a single story every day so often relieves people wanting more on that particular story or other stories. And so, then they come to the Times to get more and when you know that people who listen to the daily feel it’s going to be for our brand. If you…

Great. Thank you and then best of luck to you, Mark going forward.

Thanks so much.

This concludes our question and answer session. I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.

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

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.