Good morning, and welcome to The New York Times Company’s First Quarter 2022 Earnings Conference Call. All participants will be in a 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 of Investor Relations. Please go ahead.

Thank you, and welcome to The New York Times Company’s first quarter 2022 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. Other – excuse me, our actual results could differ materially due to a number of risks and uncertainties that are described in the Company’s 2021 10-K and subsequent SEC filings. 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. Before I begin, let me take a moment to acknowledge the bravery and dedication of our journalists in Ukraine and the surrounding region. Our reporters, photographers and support team have been on the ground since January, well before the war began, and their courageous work is helping people make sense of this tragic and still-unfolding conflict. This is precisely the kind of story that The Times is uniquely positioned to cover, and our readers have responded in large numbers and with deep engagement. Our ability to lead on, and engage our audience in, the biggest and most consequential stories of our time underpins our confidence in the updated strategy we detailed on our last earnings call. That strategy is to become the essential subscription for every English-speaking person seeking to understand and engage with the world. It’s grounded in three pillars: First, to build on our leadership in news to be the best news destination in the world; second, to be more valuable to more people by helping them make the most of their lives and passions; and third, to provide a more expansive and connected product experience that helps people engage with everything we have to offer in a way that makes The Times indispensable to their daily lives. With this strategy, we believe we have an opportunity to penetrate a large and growing addressable market to attract, retain and monetize subscribers and drive profitable growth as we progress toward our goal of 15 million subscribers by 2027. It was easy to see our strategy in action in the first quarter, which was a strong one in terms of net subscriber additions. Overall revenue grew more than 13% in the quarter, with digital subscription revenue up approximately 26% and total advertising up almost…

Thank you, Meredith, and good morning. As Meredith said, our first quarter subscription results give us real confidence in our ability to execute and deliver on the strategy we laid out for you on our fourth quarter call in February and we’re excited to be able to share more with you at the company’s Investor Day next month. Turning to the quarter, which is our first, including the financial results to the Athletic. Adjusted diluted earnings per share was $0.19, $0.07 lower than the prior year. Amortization of intangible assets associated with our first quarter acquisition of the Athletic, which was not included in the guidance we gave last quarter, reduced adjusted diluted earnings per share by approximately $0.02. We reported adjusted operating profit of approximately $61 million lower than the same period in 2021 by approximately $7 million. With the acquisition of the Athletic, we have begun reporting our results in two segments, The New York Times Group and The Athletic. Adjusted operating profit in The New York Times Group was approximately $68 million in the quarter, relatively flat when compared to the prior year, while The Athletic lost approximately $7 million. On a consolidated basis, the company added 387,000 net new digital-only subscribers and 382,000 net new digital-only subscriptions in the quarter. The number of digital-only subscribers with news entitlements increased by 312,000 in the quarter. Please note that the net subscription additions in the quarter were reduced by 67,000 as a result of a decision to grant Games access to our home delivery subscribers, who did not already have it as part of their print bundle. Excluding this impact, net subscription additions were 449,000 in the quarter. This had no impact on the number of subscribers. Our acquisition of The Athletic resulted in the addition of approximately…

We’ll now begin the question-and-answer session. [Operator Instructions] Our first question comes from David Karnovsky from J.P. Morgan. Please go ahead.

Hi. Thank you. Meredith, I know it’s early, but can you maybe discuss key learnings on The Athletic so far and any view into your thinking at this point on how you might position or market the product in a larger bundle alongside the Times?

Yes. Thank you and good morning. Listen, I’d say, we’re super excited about The Athletic as part of The Times now. I think we’re – echo what I said in my prepared remarks, we’re up to a really good start operationally. We’ve got a very clear playbook of what we have done to grow our subs and ads business at The Times. And we are well on our way to applying that playbook to The Athletic and we’re beginning to feel the effects of that in – certainly in audience development with lots more to come and we’ll begin to feel the effects of that on how we build and sort of optimize and perfect their funnel. And also as we apply a lot of ad know-how and build out ad products. So I’d say, broadly, we’re off to a very good start there. On the bundles, specifically, we intend to begin to introduce The Athletic into The Times bundle in the back half of this year. So sometime, in the second half, and I suspect you’re going to see that play out in a few different ways cross sell, up sell, inclusion in the bundle, we’re working through all that. Now I will say, I do think that’s the opportunity we’re most excited about a big reason for the acquisition and we think there’s a really big opportunity there.

Okay. And then just on advertising, just wondering if you could maybe speak to what you saw through the quarter, including the impact from a lot of reader engagement around war coverage, and then kind of any softening of demand that maybe you saw due to macro issues or inflation or things like that. Thanks.

Yes. I’d say, broadly, we continue to be optimistic about both our competitive position in the ad business. And I talked to my prepared remarks about the kind of wide and varied product set. And I think – we believe advertising will continue to be an important, digital advertising in particular growth driver for The Times. And what we saw in the first quarter was just some of the effect of the very dynamic macroeconomic environment. So big categories like tech or under pressure, we saw some marketers pull back with the onset of war in Ukraine. And I’d say, we’re seeing some advertisers pullback just on the premise of inflation and the kind of dynamism in the market generally. On the flip side, we’ve got a print business that performed really well in the quarter – in the first quarter ahead of our expectation. And one of the things to note there is, it tends to attract advertisers in different categories. We still get a lot of luxury business and live entertainment business and print and those categories were really strong. So I’d put it all broadly in the category of we’re feeling the effects of what’s going on in the economy on the business, but long-term, we’re optimistic about what we can do in advertising.

Thank you.

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

Yes, good morning. Meredith, can you just talk a little further about the addressable market to 135 million people? Can you remind how much of that is outside the U.S., and also curious what percent of your digital subs right now are overseas versus where would that number say a year ago? That’s my first question.

Great. Good morning, Craig. So we think the addressable market is, somewhere in the neighborhood of 135 million people and growing. We think about 50 million of those people are outside the U.S. And that’s we get at that number by saying, what is the number of people outside the U.S. in English will pay for a news subscription. And we see the addressable market as the reminder of 135 million domestically and that’s people who have either already pay or willing to pay for a subscription to news and/or shopping advice, recipes, games, sports information podcasts. So that’s sort of how we look broadly in it. And I’ll just say, I’m not sure, what you’re asking me directly, but I’ll say, at 9 million and change subscribers. We think we’ve got a long runway for penetration, both domestically and internationally. And I’d say in news and beyond news, and that the bundle is going to be a big part, particularly in the U.S. as how we penetrate. On international, I think we’re in the teams, Roland, do you want to give the number?

So Craig, at the end of Q1, international stood at 19% of our subscribers. So the percent that was part of the net ads was a little bit higher than it has been in the last few quarters.

And I’ll just add, Craig, the 135 million number comes from sort of long tracking the market and how many people pay and also from our own research about willingness to pay across that widening product set.

Okay, great. And then my other question, on the digital advertising front, can you talk about The New York Times competitive advantage with all the first party data you have increasingly so going forward, I got to think, how that sort of sets you apart from your peers out there.

Yes. I’m happy to do that. We are probably three maybe four years into building and deploying a really robust first party data set and applying that to our proprietary ad units and really rich ad canvases. So both the units and the data underneath them are really – perform really well for marketers. And we are confident that we’re going to continue to build advantage there. The way to think about that is we just have an enormous amount of signal from our readers that we can use in privacy forward ways to do – to help marketers target. And it’s really working. And as with some of the other things that The Times does with data and the application of machine learning. So we use data and machine learning, obviously, on the subscription side of our business as well. It just kind of gets better and better. So you build more signal and you get better at deploying the signals. So we’re incredibly focused on the advantage. We’ve already built and believe we’re going to continue to add to it. And the sort of size – and the size of our audience and its depth of engagement for a publisher is a real differentiator as opposed for a platform, obviously platforms have enormous scale in how they do this. But for a publisher, we believe that makes us really advantaged and we’ve got a long track record. Now those products performing well for marketers. So we’re optimistic about it.

Great. Thank you.

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

Good morning, Meredith. Wanted to ask you to tell us what you think is keeping those people who are in your addressable market, but are not subscribers yet on defense. What does your research show? Why are those guys not subscribers yet? And what would it take for them to become subscribers? And how long – what would the trajectory be in your opinion? Would it be like a steady growth? Will it be waves driven by new cycles or some other patterns? So would appreciate your thoughts on this.

Yes, good morning. Good question. Let me first say, what does the trajectory look like? I just want to point to the new kind of medium long-term guide we gave on the last call, in which we reiterated here, which is we believe the next mile marker in the model is to get to 15 million subscribers, reminding you that that’s a sort of harder to achieve target than subscriptions by year end 2027. And we see that as a mile marker by no means and state. So that’s what I would say in terms of our plan for penetration now. I think it’s a really good question, like, what stops people from subscribing now, and I might flip it around a little bit and say, what gets people to subscribe is to make sure we are number one, able to convey the value of being in the subscribed state. One of the things we started talking to you about much more actively last year and began to do in the product much more actively last year is to differentiate between the anonymous registered and subscribed state. And there are a number of examples of that, but the most obvious one is I think in the second half of last year, we’ve launched our first subscriber only newsletters. And those are now 19 in number and I’ve said in my prepared remarks, we’re beginning to see real correlation with people who subscribers, who get those newsletters retaining better. We also see the sort of differentiated value for subscribers as something that over time will likely make more people convert as they see, yes, I can get a lot of news for free from The Times, but I get more. And I get something of even higher value if I pay.…

Thank you very much.

Our next question comes from Doug Arthur from Huber Research Partners. Please go ahead.

Yes, thanks. Roland, maybe because I stayed up and watched the overtime period of the rangers.

Yes, it was a heart break, complete heartbreak.

That was a tough one. You got to disaggregate these subscriber numbers for me. You’ve got a number with The Athletic, without The Athletic, with the 67,000 kind of games that were you’ve now reversed. Can you break the number down and is the implied or stated news only? Did you say 312,000? Because that’s a pretty significant upside surprise if so.

Correct. So let me start with this. We’re – as I started to talk about on the last call, when we announced it, we’re going to change our reporting to being more subscriber centric. What we really think that folks should focus on is our total number of subscribers and the amount of money they pay us on. In terms of APRU, we think that that is the best representation of the economics of the business. With that, we’ve got a few other ways we break it out, which we think are important. And you can see that in the release and the tables and the release. So we show the number of multi-product subscribers, which we believe is an important disclosure since we’re talking about making the bundle being much more important to driving our economics. We do show the digital only subscribers with a news entitlement, which we also think is an important disclosure since news is our main product and will remain that, will always be that. And then of course, we’re breaking out The Athletic as we have two reportable segments to give folks really good insight into how that, that business that we just acquired is going. So if – Doug, if you look at the digital only subscribers with news entitlements line on the table, you can see the comparison to both last year and the fourth quarter. So that comparison to the fourth quarter reveals an increase of 312,000 people. More people that have entitlements to the news product than did last quarter. So that’s the sequential way to look at it.

And is it fair to say that, that relative to your expectations coming into the quarter, given the strong news flow, I mean, we’ve seen that Reuters news yesterday reported a big upside surprise in revenues. So do – did that drive the number, I guess is the question?

I’d say two things drove our subscriber numbers. We had the newscycle, the big news about a war on the European continent in Ukraine. And then the acquisition of Wordle brought tens of millions of folks into our audience, which helped drive a lot of game subs. So we’re really happy with the numbers both in terms of the number of bundles we sold, the number of games standalone that we sold. It was a very good quarter. We’re very satisfied with it.

Okay, great. Thank you.

Our next question comes from Thomas Yeh from Morgan Stanley. Please go ahead.

Hi, great. Thanks for taking my questions. Meredith, I was hoping you could give us some thoughts on the local news initiative that Dean Baquet is now spearheading. How should we think about The Times level of investment? What kind of scope this entails? And maybe just framing that opportunity out and then a follow-up one more on The Athletic. Now that you’ve spent some more time with the company post close. Can you help us think through the seasonality of sports in terms of, which quarters might have more outsized opportunity and how we might think about that impacting kind of the cadence of the subscriber net ads there. Thank you.

Sure. Good morning, Thomas. Both good questions. Let me start on seasonality. What we see in the historical pattern from The Athletic is that the second quarter, it actually mimics our own business. The second quarter tends to be slower seasonally and the back part of the year tends to be stronger. So similar to what we see at the times for the – what we now call The Times group and for our own news business. On the initiative, we announced thank you for noticing that the initiative we announced that Dean Baquet will be running, which is essentially a I’d refer to it as a really important talent. We aspire for it to be a really important talent development engine for really high quality journalism at a local level. I would say not material from an investment standpoint, there’s an enormous amount of know-how in the building. Dean is an extraordinary leader. I can’t quite say enough about him. He came out of the local ecosystem, and there’s an extraordinary amount of kind of know-how an expertise in the building. And the idea is to be able to use that expertise, to develop more high quality journalism at the local level, and to develop the talent than can do that. And I’ll just give you a comp for it. We have an incredible fellowship program already broadly for journalism where we bring Roland, I don’t know if you remember the number, but my guess is it’s in the dozens of people in every year as fellows I think they do a yearlong fellowship, and then after that, some of them get hired. Many of them go kind of into the broader news ecosystem. And I would regard this in a similar way, and I would also regard this as the times we – Roland and I both long said, and our publisher has long said the health of the ecosystem is quite important to The Times, and this is a way for us to make sure we’re playing our part in continuing to develop the ecosystem. But from a cost perspective, I would say nothing material for to be concerned about. And long-term, this is talent development, which is really good for the business and good for we think we’ve got an attractive model where we know how to develop talent and then see the attractive economics from that overall – over the time horizon, we’ve been talking about/

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.