Good morning everyone and welcome to The New York Times Company's Fourth Quarter and Full-Year 2021 Earnings Conference Call. All participants will be in a listen-only mode. . After today's presentation, there will be an opportunity to ask questions. . Please also note, today's event is being recorded. And at this time, I would like to turn the conference call over to Harlan Toplitzky, Vice President of Investor Relations. Please go ahead.

Thank you and welcome to The New York Times Company's fourth quarter and full-year 2021 earnings conference call. On the call today, we have Meredith Kopit Levien, President and Chief Executive 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. These statements are based on our current expectations and assumptions, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties that are described in the Company’s 2020 10-K and subsequent SEC filings. Given the impact that the COVID-19 pandemic had on our business in 2020, we will also present certain comparisons of our operating results in 2021 to 2019, which we believe in many cases provides useful context for our current year results. 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. And finally, please note that a copy of the prepared remarks from this morning's call will be posted to our investor website shortly after we conclude. With that, I will turn the call over to Meredith Kopit Levien.

Thanks, Harlan, and good morning, everyone. 2021 was a terrific year for The New York Times Company. It was our second best year ever for net subscription additions, despite changes in the news cycle following 2020's historic period. It was also a strong year in advertising. With these results, we saw the attractiveness of our digital-first, subscription-first approach show through. The company achieved $2 billion dollars in annual revenue for the first time since 2012, with revenue growing 16% compared with last year. Adjusted operating profit grew 34% and was our highest in many years, and we saw a 200 basis point improvement over 2020 margins, boosted by a recovering ad business. Looking ahead, our priority is to continue this momentum by further penetrating our growing total addressable market, and leveraging 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. Before I go into more detail about the future, let me put these plans in context of the incredible growth and successful execution of our strategy over the last few years, particularly in 2021. In early 2019, we established a goal of reaching 10 million subscriptions by 2025. With the acquisition of The Athletic, which closed yesterday, and the 8.8 million subscriptions we achieved on our own, we have now surpassed this target. Even without The Athletic, we believe we would have reached 10 million subscriptions far sooner than we originally anticipated. Our 1.273 million total net additions in 2021 were 23% higher than 2019, the year before the pandemic. Our profit growth in 2021 meant another year of strong cash flow that added to an already robust balance sheet, which has improved meaningfully over the past decade. This strong balance sheet…

Thank you, Meredith, and good morning. Fundamental strength in the underlying business exemplified by strong digital subscription unit growth, and healthy growth in both subscription and advertising revenues resulted in strong financial performance in the fourth quarter. Adjusted diluted earnings per share was $0.43 in the quarter, $0.03 higher than the prior year. We reported adjusted operating profit of approximately $109 million, higher than the same period in 2020 by $12 million and higher than 2019 by $13 million, an important comparison point given the impact that the pandemic had on our 2020 results. We added 171,000 net new subscriptions to our core digital news product and 204,000 net new standalone subscriptions to our other digital products, for a total of 375,000 net new digital-only subscriptions. The international share of total news subscriptions remained at 18% as of the end of the quarter. Total subscription revenues increased more than 11% in the quarter with digital-only subscription revenue growing 23% to approximately $205 million. Digital-only subscription revenue grew as a result of the large number of new subscriptions we have added in the past year and continued strength in retention of the $1 per week promotional subscriptions who have graduated to higher prices. It's worth noting that digital subscription revenue in the quarter was slightly lower as a result of the impact from a one-time adjustment made to reflect a change in the way we charge for subscriptions in a grace period. Digital news subscription ARPU for the quarter increased 5.5 percentage points compared to the prior year and was slightly lower compared to the prior quarter. This improvement in the year-over-year rate was primarily due to subscriptions graduating from their introductory price to either full price or an intermediate step-up price in the quarter, while the sequential pressure is largely…

Ladies and gentlemen, at this time we'll begin the question-and-answer session. . And our first question today comes from Thomas Yeh from Morgan Stanley. Please go ahead with your question.

Thanks so much. Quick question on -- and you're shifting focus for unique subscribers rather than individual subscriptions. Is there any change in your approach at the consumer level for those subscribers who are signing up for separate services currently? You mentioned keeping standalone services in place, but do you anticipate any near-term ARPU headwinds if subscribers have multiple services shift towards a premium bundle? And then, Roland, last quarter you spoke about expectations for core margins remain similar in 2022 versus 2021 pre-Athletic. Given some of the advertising strength that we're seeing flowing into this year, should we anticipate some benefit there or do you see opportunities to reinvest that upside? Thanks so much.

Hi, Thomas. I think Roland loves to answer both of those. Go for it, Roland.

Yes, thanks, Thomas. So let's talk about the ARPU first. The driving motivation behind moving to a more intentional marketing of the bundled offering is that Meredith talked a little bit about there's higher retention, but there's also higher ARPU, right. So folks are willing to pay a higher price to be able to experience more of the breadth of the whole New York Times offering. So actually over time, we expect this to be a tailwind to ARPU as more folks are subscribing to a higher price bundle. We don't expect to offer the bundle to anyone say today who's got a multi-product subscription. We wouldn't offer this bundle for less than they're already paying. So I think it's more of a tailwind on ARPU than a headwind.

Yes, Roland, I'll just add that we're still experimenting with pricing. And you're going to see us do that for a while.

And then you asked about, I guess, a little follow-up on the margin question. And you heard, Meredith, in her prepared remarks describe what we think that the profit contour is going to be for 2022. And that is an increase in dollar profits this year ex The Athletic, probably not covering the full expected Athletic loss, but we will have growth in our absolute profits.

Okay, that's helpful. And then just maybe a last one for me on the advertising strength. Can you revisit the plan to drive the ad opportunity at The Athletics, and maybe some of the timing and operational goals that you're hoping to get you to -- to for the rest of the year?

Sure, Tom, I'm happy to take that one. I would say we expect the business at The Athletic, we characterize to look very much like the business we have at the Times, which is an ad business to get this differential value from being subscription first, meaning premium ad products, first-party data, the opportunity to work with a select group of marketers on multi-platform, partnerships and an audio opportunity. So I think it's our expectation is characterwise, it will be quite similar. This is a playbook that we really understand. And we've been running now for some time, at the Times quite well. And we're really excited to get started now that we're closed on applying that to The Athletic and we think it can be done in a way that is subscription first and consistent with our subscription ambitions.

And our -- our next question comes from Kannan Venkateshwar from Barclays Capital. Please go ahead with your question.

Thank you. Roland maybe, just for -- just to put a finer point on some of the guidance. If you just take your first quarter guidance on The Athletic on numbers with and without The Athletic and analyze that it seems to imply roughly an annual loss of about $80 million for The Athletic. Is that roughly in the ballpark? And is it fair to just extrapolate the guidance from the first quarter to the rest of the year and I don't know if there's some front-ended costs because of the integration there. So that's one? And then, when you think about the ARPU in the quarter, it was sequentially lower. But I think, I mean, earlier in the year when you've talked about ARPU, I think there was an expectation that it would actually accelerate through the year as we reach Q4. So if you could just help us understand what really changed with respect to the cadence there? And I have one last follow-up on costs. Maybe we can do that later?

Okay, great. Those are two really good questions. I'm glad you asked The Athletic question in terms of the run rate. So the first quarter expectations are not representative of the run rate. We still believe that and I think I did have that in my prepared remarks that we believe that the dilutive effect of The Athletic will be a bit below the $55 million that -- that that they lost in 2021. So you would not want to extrapolate in the first quarter. I don't know quite how you get to $80 million, but there are some increases in upfront costs that will not run through the year. So again, I think I'll turn everyone back to the prepared remarks where it should be something less than the $55 million. On the ARPU question, I do recall in prior calls that we expected year-over-year ARPU to continue to increase, while sequentially it wouldn't necessarily happen. Now, specifically for the fourth quarter, couple of things. The net ads, the really healthy net ads in Q3, and they were heavily weighted towards the last part of the quarter. So that effectively dilutes ARPU going into the next quarter, and we hadn't -- we hadn't a quarter where we had a good amount of net ads on promotions in Q4. So when you take those two effects together, that is -- that's affecting the sequential ARPU event.

Got it. And on the cost side, I mean, you've come in ahead of the cost guidance, or your costs have been lower than guidance. I think for a couple of quarters or a few quarters now. But is that because of conservativeness or is that because something in your plan changed? And cost got pushed out? So how should we think about that guidance?

Yes, so in 2021, I think the market for talent was such that we didn't end up growing our net heads, quite at the rate that we had expected. And that held back our cost growth a bit. Our guidance, we aim to be accurate, we don't aim to be too conservative. So I would not chalk it up to conservativeness. And we feel good about our guide of 13% to 15% core business for Q1.

Thanks. One last, if I may. In terms of a follow-up on the churn comment you made? Is it possible for us to get some context around the three components of churn and what the contribution was in the quarter? Thanks.

So the one-time event that I mentioned in the international market was pretty substantial. The card processes didn't have time to adjust to the announcement of the changes in regulation. So that was a pretty big chunk of it. But the other thing I'd point to is just overall, we did make this intentional change in the way we're working with the journey and trying to get folks to subscribe earlier in the journey than we previously had. Because we believe being a subscriber is the best way to actually engage and interact with the product. So we did tradeoff a little bit of initial early tender churn for that. And as I mentioned, we think that's going to pay off in the long run in terms of cumulative lifetime value, because the conversion rates are that much higher and net ads are that much higher. And that was also a fairly sizable chunk.

And our next question comes from Vasily Karasyov from Cannonball Research. Please go ahead with your question.

Good morning. Roland. I think my questions are for you. Can you please tell us how Q4 net ads actually came in relative to the expectations that you shared with us on the Q3 call. And then I wanted to ask you to talk about the LTV to CAC ratio that you saw in 2021, how it compares to 2020, what the drivers are and then what does your change of focus that was the net subscribers mean for your LTV to CAC calculations? Thank you.

Okay. So let's talk about net ads a bit. First thing I want to say is, we're really confident in our subscriber growth potential in all categories, in news, in our other products, in the bundle. And I think, the real hard evidence for that confidence is we've just shared a new target, publicly. And with that target, you can track our progress. That said the newscycle is going to ebb and flow and we don't live and die on one quarter. Q4, I just emphasize that specifically in Q4, we pulled back on friction a bit, which is what we told you, we would do on the Q3 call. I won't repeat myself on optimizing the journey in pay flow which I just spoke to, and so that made churn a little worse, made net ads a little lower. None of this was outside of our expectations. And I believe we did our best to signal that on the Q3 call.

Okay. On the LTV to CAC?

Yes, let's start here. LTV to CAC and you asked versus 2020 and 2020 was an exceptional year, really a Black Swan year and especially in terms of LTV to CAC because the organic demand was so strong. And we took advantage of that by pulling back on our marketing. So in 2021, a more normalized year, the LTV to CAC ratio obviously went down a bit. And as we told you, we've had a little bit, a little bit, a little bit worse churn, which takes the LTV down a little bit. So the combination of those two things, the first being the most prevalent driver here, both lead to LTV to CAC coming down but we're really comfortable where the LTV to CAC ratio is right now, we think it's healthy.

And what do you think happens to it, when you -- with your focus shifting towards unique subs as opposed to product specific subs?

Yes, it's a good question. I don't really see. Let's talk about the components little bit, I don't really see the percent of organic starts to pay starts changing all that much. And as I mentioned in response to Kannan's question, we expect a change in mix meaning mix of bundle versus individual products. As that becomes more weighted towards -- more weighted towards a bundled subscription, there's two effects that should help lifetime value. One is the ARPU, and the other is being better retention.

And our next question comes from Craig Huber from Huber Research Partners. Please go ahead with your question.

Thank you. My first question, I guess, Meredith, obviously your digital ad revenues are doing quite well here up about 20%, 21% over two years. If you could just talk about the environment for digital advertising beyond maybe just the first quarter, if you can think a little bit further there. And also curious the changes with Apple's iOS system with data privacy, et cetera on their, is there any material impact to your gross rate of digital advertising. I have a follow-up.

Yes. Hi, Craig. I'll pick the second one first, and just say no, not that we've seen. So in terms of impact on Apple, and I'll add that we think our own proprietary first-party data products make the Times a compelling place for marketers, particularly in an environment where people are more concerned, not less about privacy, so no particular impact and we think the winds are blowing in our direction in terms of what we've built with first-party data. More broadly, I'll go back to something Roland and I have both been now for a few quarters, which is we like our ad business better today than we have been in quite some time. We've worked really hard to have a business that sort of runs on the same high octane gas as the subscription business, which is register of logged-in deeply engaged users whose data we can use and privacy board ways to target ads. And we're optimistic that that is a sustainable strategy. And you're hearing on optimism in our descriptions, I always get the caveat that digital advertising tends to be a demand-driven market, not a supply-driven market, we -- but we're -- we certainly feel good about where we are and good about the competitive nature and differential value of our products that. And as I've said, one of the things we're particularly excited about is pretty close to a Greenfield opportunity with The Athletic to build a similar business in nature and character to what we have at the time.

Then also want to ask, given this environment of the much higher inflation numbers out there roughly 7% year-over-year, how do you think that impacts your business here or is it immaterial in terms of how you think about your revenues and obviously, the cost as well, if you could touch on that? Thank you.

I'll just say, Roland you can add to this as well. But we've sort of broadly considered everything we understand today about the macroeconomic environment in what we've shared with you thus far.

And my last question that I haven't heard you guys talk much lately about your various audio products, maybe if you could update us on that? And is there any chance down the road, you guys might start charging for any of that? Thank you.

Yes, I'm happy to do that. I will take few things about audio, we had another strong year in engagement with our audio products, led by The Daily, which I think celebrated its fifth birthday yesterday. So we continue to be very, very happy to have one of the largest general interest news podcasts there is and it continues to be a huge performer for us in every way audience advertising and directing attention to other podcasts. So I'll say we continue to be excited about experimenting with what I would describe as the multiple different ways. Our differentiated audio offerings can play a role in our subscriptions funnel. And you're seeing us do that indirectly, we bring people into the funnel through The Daily. And the other podcasts we have the Ezra Klein Show, has a strong listenership and growing and we're excited about all the podcasts we have with the potential to do that. And then you saw us make a move, gosh now losing track time, but a couple of years ago, a year ago, to acquire Audm, which is -- it was a small acquisition. But it's a really cool audio app for read aloud audio, long-form narrative journalism. And that gives us a real petri dish to experiment with a destination product where people come specifically to listen to read aloud journalism. And then I'll also say we have still a beta in the market, around NYT Audio, which is really experimenting with the possibility of the Times having an audio destination. And I would say, we've got lots of irons in the fire. In any scenario, we're optimistic that audio is going to play a big and important role in either directly or indirectly, in our subscription business. And there's a ton of demand for it as an advertising business. And we're excited about the products that we have and expect to continue to add to it.

That's great. Sorry, my last question on that. What is the number of unique listeners that you have either daily or monthly and that's all I have. Thank you very much.

We -- I don't think we've disclosed that. I'll just say it continues to be strong. I think we've said stuff in the neighborhood of a couple million people a day to listen to The Daily. I don't think we've disclosed beyond that. But it's in the range of a couple million or a few million for The Daily.

And our next question comes from Vijay Jayant from Evercore ISI. Please go ahead with your question.

Hi, it's Davis on for Vijay. Just a few questions if I could. Have all non-promotion digital news subscribers received a price increase now and how should we think about price increases for your digital news product going forward? And how does bundling kind of effect how you think about price increases. And then I just had a second question, want to follow-up to the LTV to CAC question. I understand it's worse than 2020. But compared to 2019 levels, how does the LTV to CAC compare?

Okay, so I'll take the pricing question. So let me be clear. Are you asking about the price increase on the tenured subscribers or the step-up of the promotional? I think I heard the question. I think the intent is about the price increase on the tenured subscribers.

Yes, correct.

Okay. So, yes, we are almost done with that program. There are not that many folks who fall into the category of getting moved from 15,000 to 17,000 months left. So the effect of that the little boost we get from that is pretty much exhausted. And at this point, we don't have any plans further on tenured price increases. As far as I'm sorry, Davis, can you repeat the second part of your question?

Yes. And then how does kind of bundling affect, how you think about price increases?

Yes, pretty good. So a couple of things. One is we are still in a kind of a testing mode as to what the right price will be for that bundle. But you could expect it to take sort of the same approach, we would take a similar approach to what we've done, meaning there'd be a promotional price, and then a step-up, and then a full price. And some folks would go to full right away, and others would step-up. So that's probably the model, but we're still testing what those right price points are both in terms of the promotional rate, and the full list wrap rate. That said, ultimately, the play here is that ARPU will increase, as folks are subscribing to the full breadth of The New York Times, which provides a lot of value on an everyday basis for a lot of needs beyond news. So longer-term, ARPU should increase as that mix changes, and we're confident that that mix will change in the right direction.

That's right. Well, and I'll just add two things to that. The bundle is a bet on both volume and ARPU. We're still in the early days of penetration of the data in growing market, and we think it helps us get to more volume, and also with the more valuable products that that people engage with for more needs in their lives. So we get is about both those things. And we think given where we are in the journey still early, we can grow both, we believe we can grow both volume and ARPU.

And then your question was, I guess a follow-up on LTV to CAC. And I guess I'll just -- I'll add a little bit to what I said before. And that is, we -- Meredith mentioned in the prepared remarks that we expect to get more efficient on the marketing side, because of the improvements we're making in the product and the like. So that's going to actually help our LTV to CAC ratio, because we don't expect to be marketing at the same -- necessarily at the same rate. So as that efficiency goes up, that should also be a tailwind to LTV to CAC. I don't have the 2019 figures in front of me, but again, the numbers are very healthy, we're happy where they are, and I suspect they are -- they would be higher.

And our next question comes from Doug Arthur from Huber Research Partners. Please go ahead with your question.

Yes, thank you. Can you hear me?

Yes.

So good morning. Meredith it's early days on The Athletic, is it safe based on the numbers you threw out in the press release and what's been reported there're around 1.2 million subscribers. Is there any way to sort of discuss longer-term kind of aspirations there is sort of the first line of offense to kind of protect the level it's at now given the change in ownership and kind of it's new for The Athletic being under your umbrella, and then grow it from there or anything you can add or sort of frame that over the next -- your aspirations over the next three to five years would be helpful and then I have a follow-up?

Yes, let me say a few things about it. Number one, we certainly acquired The Athletic because we believe there's real growth potential for subscribers, particularly in an Athletic that's owned by The New York Times. And we see that growth potential three ways. We think owning The Athletic and being able to meet daily needs in sports helps bring more people into The New York Times funnel that we think it helps us sell more news and bundled subscriptions. We believe that the platform and the products that we've built will enable us to direct some of that funnel to grow subscriptions pretty Athletic, which we prescribe, we -- some of the first moves we'll make will be about distribution and audience development at The Athletic applying the insights we've gained from our customer journey to The Athletic and also applying a lot of what we've learned about how to drive engagement and repeat engagement. So we see growth in both those places so to The Athletic and so standalone subscription, and also for the broader sort of potential of times bundle or The Times News product. And in addition to that, we see a real opportunity with the ad business, which I think I've described now in both of my prepared remarks and the answer to your question. As far as how to kind of characterize the ambition, what we've tried to do in this moment is to give you another mile marker of what we're aiming for on the journey. We've expressed it in subscribers versus subscription so 15 million subscribers would translate to a larger number of subscriptions. And you can imagine that that is a combination of more New York Times new subscribers and bundled subscribers and standalone subscribers, including The Athletic. So we've got a lot of confidence and optimism in what we've described to you so far. And I think that headline number, a rough doubling of where The Times was, at the end of last year, is the best way we can describe it to you and our ambitions for The Athletic are within that.

Excellent. And then as a follow-up, Roland in terms of the guidance, you do make the comment in the press release that you expect core business costs growth to slow considerably in the second half. Is some of that the marketing efficiency you talked about? Or is there more at work there?

Some of that is yes, clearly some of that is marketing efficiency. And if you look at the comps specifically on sales and marketing, but the marketing component within that we spent quite a bit in the back half of 2021. We don't expect to do that in 2022. So that's -- that is that plays a big role in the slowdown in cost growth in the back half of 2022.

And ladies and gentlemen, at this time, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Harlan Toplitzky for any closing remarks.

Thank you very much for joining us this morning and we look forward to talking to you again next quarter.

And ladies and gentlemen with that we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.