Good morning, and welcome to The New York Times Company’s Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. 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 second 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. 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. In a world that is getting ever-more complex, we believe that quality journalism can play an even more valuable role in people’s lives. Over the course of the year, we’ve introduced the next phase of our strategy to become the essential subscription for every English-speaking person seeking to understand and engage with the world. That strategy is 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 put those two things together in a more expansive and connected product experience or bundle that makes The Times even more indispensable to the daily lives of millions more people. We are making palpable progress in each of these areas, and have strong conviction in our path forward and ability to create shareholder value. Turning to our second quarter results, overall revenue grew more than 11%, with digital subscription revenue up nearly 26% and total advertising revenue up just over 4%. We had 180,000 net digital subscriber additions in the quarter, which represents an approximately 70% improvement over the second quarter of 2021, driven by the bundle, Games, and The Athletic. It was also a relatively strong period for subscriber engagement. There were two big success stories in the quarter: our effectiveness at getting more people to buy our all-access bundle, and the performance of our recent acquisitions. Together, they show our strategy in action. As I’ve said on the last few earnings calls and at our June Investor Day, we believe that the bundle will allow us to better penetrate our addressable market and drive more volume and higher ARPU. News remains core…

Thank you, Meredith, and good morning. As Meredith said, our second quarter results suggest real progress against our strategic goals in the face of macroeconomic uncertainties, and we have real confidence in our path forward and ability to create shareholder value. Turning to the quarter. Adjusted diluted earnings per share was $0.24, $0.12 lower than the prior year. We reported adjusted operating profit of approximately $76 million lower than the same period in 2021 by approximately $17 million, largely as a result of the expected losses from our acquisition of The Athletic. Adjusted operating profit in the New York Times Group was approximately $89 million in the quarter, lower by approximately $4 million compared to the prior year, while The Athletic loss of approximately $12.5 million. On a consolidated basis, the company added 180,000 net new digital-only subscribers and 230,000 net new digital-only subscriptions in the quarter, with strong growth in adoption of our bundle product. The number of multiproduct subscribers, which includes bundle subscribers grew by approximately 120,000 in the quarter, driven mainly by increases to the number of bundle subscribers. As Meredith mentioned, we began giving our bundle subscribers access to The Athletic late in the second quarter, and as a result, the disclosed number of subscribers with entitlements to The Athletic grew by approximately 420,000 in addition to the approximately 50,000 stand-alone athletic net subscriber additions. I also want to reiterate that we expect there to be variability in net additions from quarter-to-quarter as a result of seasonality and other factors that may affect audience. However, we remain confident in our ability to achieve our goal of 15 million subscribers by year-end 2027. Total subscription revenues increased approximately 13% in the quarter, with digital-only subscription revenue growing approximately 25% to approximately $239 million. Digital-only subscription revenue grew…

Thanks, Roland. Before we open the line for Q&A, let me just reiterate a few key takeaways. The macro headwinds we factored into our AOP targets are playing out largely as we anticipated. We slowed cost growth in Q1 and Q2 and expect that trend to continue through the remainder of the year. We’re doing better with The Athletic than we expected, and we’re encouraged by the potential tailwinds in the business, particularly around the power of the bundle. And with that, we’d be happy to open it up for your questions.

Thank you. We’ll now begin the question-and-answer session. Our first question comes from Douglas Arthur from Huber Research Partners. Please go ahead.

Good morning. Roland, I’m wondering on the breakdown of the subscription adds as opposed to subscribers. Can you give us a sense of the news-only ads in the second quarter? It’s a little hard to figure it out from the data you gave. Thanks.

Yes. I think the best way to get to that – we’re not breaking out the subscription by product, but I think the best way to get to what you’re interested in is to look at the number of subscribers with entitlements to the news product. And you can see that the delta there, that does include both the news stand-alone and the bundled news subscriptions.

So just – can you make any kind of gradation on second quarter momentum versus first quarter momentum for news only?

Yes. Hi, Doug. I’ll take that. I would say what you’re seeing in the quarter is our strategy in action. We are really pushing the bundle. We’re intervening in the news flow to get people to buy the bundle instead and having real success with that. And the – so – and obviously, news is part of the bundle, but we’re incredibly focused on that at this point. I’ll say two more things, just I’m not 100% sure what you’re getting at, but I’ll say two more things that the performance in the quarter overall was meaningfully better from a subscriber standpoint than the second quarter of last year. News starts in and of themselves were also better and it was – I think you may be asking about that, and it was a relatively strong period kind of across the board, across the portfolio for subscriber engagement. And we look closely at what’s the percent of subscribers on site, and that was broadly in line with the same period last year. But obviously, we have – on a percentage basis, we have a larger number of subscribers. And I’ll mention one more thing, which is – we are feeling very confident about the levers we have in our hands to drive that engagement, both within news. So if you look at our home page, programming or use of e-mail newsletters, we are really focused on bringing people back to site more regularly and have a lot of confidence that there are plenty of levers there. In addition, as we continue to market and merchandise and push the bundle, we believe we have a lot of levers to get people to engage with the bundle. And the point here is that news cycle is going to ebb and flow, news engagement is going to ebb and flow. And the bundle, we believe, makes us that much more indispensable, kind of independent of the news cycle and whatever is going on in the news cycle.

Okay. A final question. I think when you closed in The Athletic, you were talking about an adjusted operating loss in the mid to low 50s. Can you sort of give us a sense of where you are now?

Yes. So that statement referred to what we believe that the loss looked like last year. I believe our statement was we felt we would do a little bit better than that. And actually what we’re seeing now is we think we’re going to do – we’re going to definitely do a bit better than we expected. So said differently, I would not take the $12.5 million loss in Q2 and extrapolate that to get the full year loss. We’ll do a bit better than that we expect to.

Okay, thank you.

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

Thanks so much. Going off of what Doug was asking on the subscribers with news net adds, which I think increased 40,000 this quarter compared to 80,000 in the year-ago quarter sequentially despite what I figured it would have been a relatively strong news cycle. I know there’s quarterly volatility in typical 2Q seasonality. Could you maybe just further characterize what you’re seeing from how hot or cold news cycle is in the current quarter or in 2Q? And from a churn or gross starts perspective, how that shaped out relative to prior quarters?

Yes, I’m happy to do that. Hi, Thomas. So a couple of things. I would say the second quarter generally has, if you go back and look at history, most of the time, there are some seasonal factors at work. I’ll say two things, at least one of which I may have said in answer to Doug’s question, we actually had more news starts in the second quarter this year than we had last year. And you’re asking about churn. I’m going to make a broad comment on churn, which is the base is larger. So even at what we believe is a very manageable churn number, you just lose more people every – the raw number is higher because of the size of the base. But we are feeling confident that our churn number is manageable. And there’s nothing in the quarter that we’re seeing that makes us overly concerned about churn. And I think what you’re also seeing is focus on a very deliberate strategy of becoming the essential subscription with a widening value proposition, and you’re seeing us push that. You’re seeing us push the bundle, push The Athletic, push given all of the momentum that Wordle brought, you’re seeing us shift a lot of time and attention and energy to games. Let me step back though, Thomas, and just add a couple of points on news that may be useful here. I said in my prepared remarks, it remains core to the value proposition, and I expect it will always be that. We’re always going to see – or we – certainly, our history has been that the news cycle is going to ebb and flow. We have yet to see one without the other. And I think we have plenty of levers still to come to drive news engagement. And just one more kind of step back point on news. We do what we think we’ll sort of see variability. We’ve seen it before from quarter-to-quarter, people asked us after the 2016 political cycle, are people less interested in news, and again, after COVID. And I would say, the patterns are going to – the tide goes in and out, but over a long time horizon, I think we remain very confident that news is going to be central to the value proposition and just plays a huge role here.

Okay. Yes, that’s very helpful, Meredith. And then second, can you give us some color on the comments that you made about the spending philosophy adapting to the macro? I mean which areas does it make sense to adjust in the near term versus other areas where it might make sense to invest through a cycle?

Yes. Great. Really good question. Let me sort of make two points, broad points to make sure I’m giving you the whole picture. Roland and I have been talking for a while now about the idea that cost growth was going to begin to really come down in a considerable way in the back half of this year. So I want to say, setting aside the macro environment, you’re seeing that. A lot of that is about the product itself becoming an increasingly strong engine of engagement and conversion, and you’re seeing us be able to have an effect on marketing spend as a result of that. So let me say that first. And then if you add to that, the headwinds we’re seeing from advertising are playing out kind of broadly as we would expect them to. And so we’re very focused on making sure we’re kind of resilient if and as those headwinds from macroeconomic uncertainty continue. We believe the two most important areas of continued investment for the time will not be different from what you’ve heard from me before, are in our journalism and in our digital product development, and we intend to continue to invest into that. That’s our moat. That’s how we kind of build our structural advantages. And at the same time, we’re looking at cost to make sure we are strategically prioritized to those things and to the highest impact work to drive our medium and long-term strategy.

Thank you.

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

Thank you. So Roland, I just wanted to check something on ARPU, and I’m not sure if the math is correct because of some of the restatements. But when we look at ARPU sequentially, it looks like ARPU declined even though news – the next news numbers were a lot lower than we expected, excluding The Athletic. So if we take out The Athletics, it looks like sequentially ARPUs were down maybe low-single digits. And this implies that churn in news was potentially a lot higher. And this also goes back to the previous question around new subs. But if originations were higher than last year, but – and subs were a lot lower than last year, and ARPUs are basically having this trend, then it would imply churn is a lot higher. Could you just give us some kind of a sense around sequential churn through the year in news? I mean if that’s gone up substantially?

Yes. So let me start, before I talk to churn, which I will, let me talk to kind of the other side of the equation, which is the starts. There’s a large number of games starts in the quarter driven by our acquisition of Wordle and what that’s done to drive folks to funnel and bring them to our other games product and subscribe to games. So that might be a piece that you want to consider. The increase in – I’m sorry, the decrease in ARPU once you take out The Athletic though, is very slight. So I think maybe the games is the missing piece there. On the churn side, we did not see any difference in churn in the quarter from previous quarters. So it’s not being driven by churn.

And I’ll just add to that, to us, the most important driver of churn is or of retention of not churning is subscriber engagement, and we’re making a point to say, subscriber engagement in the second quarter was relatively strong, and that is broadly across the portfolio and for news.

Great. Thank you.

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

Thank you. Good morning. Meredith, I think my question is for you. So in the press release, you said that and I think in your prepared remarks, you mentioned that the bundle included The Athletic starting this quarter. So in terms of engagement, can I ask you what you’re seeing with subscribers? Do you see a net addition of time spent and an increase in engagement after you do that? Because you would think that if someone was very sport – interested in sports they would already have The Athletic. So I would be curious if you could talk about what you see in terms of engagement within the bundle by different products when you introduce them to people.

Yes. And that’s a great question. Let me say a couple of things. We put The Athletic into the bundle for all digital access subscribers and then ultimately print subscribers too, who are – who count at the – in June and for many of them at the very end of June. So I don’t have good data to share yet, but you can regard the direction of travel here as we are very encouraged by what we’re seeing, I’d say, in terms of everything about the bundle. And our general thesis about the bundle, which is that people pay more, a little bit more to start and more over time, they engage more and they retain better as kind of playing out. So that’s why you hear us talking optimistically and in encouraging ways about the bundle. And we’ll see The Athletic is going to play a big role in that bundle in the back half of the year. And so I’ll likely have more color to add once it’s doing that. But let me say, I think you’re asking kind of a more important broad question about can we get people to engage across the portfolio of products when they buy the bundle. And what I’ll say is that’s a huge area of focus, we talked about this a lot at Investor Day. We have a lot of levers to do it. It’s quite important that we do it and we’re very encouraged by what we’ve seen in kind of the first half of this year with our ability to do that. And there are two things I’ll point to. We’re doing I think much better work with still more to come on getting people who buy the bundle to onboard and sort of experience multiple products. I think that’s at the root of your question. And then you’re going to see more of games, in particular, playing a role in the overall experience. You’re going to see us start to connect the products in a better way. And I think – so I think there’s real running room there to do that even further. I think I’m getting at what you’re asking about, but please feel free to ask again, if not.

No, this is it. Thank you.

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

Yes. Good morning. A question on cost. Let me start there. Just give us a little more details, if you would, about your cost outlook for later this year, where specifically you’re cutting back on, where you’re investing heavily? And spending on media, you talked about being down, the second quarter. If you take out The Athletic, how should we expect the median cost to do in the second half of the year? And then I have a follow-up. Thank you.

Yes, I can start, and Meredith, you can jump in.

Yes.

But the big difference is going to be in our marketing spend, in our media spend. And I think you’ll see the decrease in that year-over-year spend show up. The vast majority of it showing up there. We don’t expect to slow cost growth in journalism or in our engineering. So again, I think where that’s going to show up when you look at our lines of expenses, most of that is going to manifest itself in the sales and marketing line. We don’t think it’s time to pull back on investment in areas that we believe makes sense for the long-term that are going to expand our moat versus the competition. And so we don’t plan to do that in this cycle given the – even given the economic uncertainty.

That’s right. And I’m just going to add a beat because I think it’s important to say that set aside the market uncertainty, it has long been our plan, and you’ve heard Roland and I talk about this to get the product itself to do more of the work to engage and convert. And we talked about that a lot at Investor Day, all the levers we have within each individual product in the portfolio and across the bundle. And so that has sort of been part of the plan, and that’s why we’ve said we expect marketing costs to begin to come down this year.

And also, Meredith, maybe can you talk a little bit further about engagement, what you maybe saw in the second quarter, putting aside The Athletic, engagement in terms of maybe number of minutes spent using, say the news-only product versus a year ago? How is it sort of trending for you right now?

Yes. Good question. We don’t share anything about number of minutes spent. What I will say is that broadly, we put it in our prepared remarks that it was a relatively strong period for subscriber engagement and broadly the percent of subscribers on site in the second quarter this year was consistent year-on-year with the same period last year. And obviously, we have more subscribers now. So that’s – we think that’s a very good thing. We’re very, very focused on that number. And I’ll add to it, not to repeat too much of what I said before. We’ve talked for a long time about kind of which levers we have in our hands to drive engagement, and I’ll just say our work there, our experiments, our testing and learning there is really working. And I’ll point to two things. We are getting better, taking a long time, but we are getting better at a more customized, personalized homepage experience, so we’re getting better at sort of knowing what to put in front of you. Obviously, a lot of it is still dictated by judgment. But we’re getting better at reflecting an important story you might have missed or where you are in the world, and therefore, what you should see. And that plays a real role in engagement. And then the other thing I’ll mention which we did not talk a lot – we didn’t talk at all about in the prepared remarks, but it’s really a successful product intervention. We have a lot of newsletters now. We have a big portfolio of newsletters, some of which are subscriber only. By the way, that is going very well as a mechanism to help people engage and retain. But we also have newsletters that we can spin up based on something going on in the news. So we have something called the updates from the newsroom, which will send when something happens sort of in the moment. And we’re seeing real progress on being able to bring people back to site or bring them back into a Times experience with the content.

Great. Thank you.

The next question comes from David Karnovsky from J.P. Morgan. Please go ahead.

Hi, thank you. Meredith, just on advertising, I wanted to see if you could provide some additional color on what you’re seeing right now, which I think you said is kind of in line with what you’d expect for this type of environment. Was there an observed kind of decel through the quarter at all, maybe for certain verticals? And then what products or data can you offer marketers to help keep them engaged with the platform even with the economic risk? Thanks.

All good questions. I would say the headwinds are broadly playing out in advertising as we expected they would. So nothing is surprising us here. And we’ve kind of factored that into much of what we’ve been saying to the market. You asked about kind of are we seeing it in particular categories. The nice thing about Times as we work across a lot of categories and we have a very varied product set, but we are in fact seeing more pressure in some categories. So in digital advertising, we saw real pressure on tech and streaming and finance, which I think you would expect given the macroeconomic uncertainty. And on the flip side, we have categories that can over present in print, luxury is a very big one. And entertainment is another one. And those continue to be brisk. So this is the moment where we really appreciate having not just a variety of digital products, but kind of a whole portfolio of products. And I think Roland mentioned in his prepared remarks, you see a little bit of pullback sometimes depending on the news cycle. I have been around the ad business a long time. There are occasions where advertisers say I’m less interested in being adjacent to news, and we saw a bit of that. That feels very cyclical to me, and this is another place where we’re very happy to have a wide product set with advertising opportunities across – really across a breadth of kinds of content. The last thing I’ll say is that our – I think you’re asking me about what’s working? Our first-party data products and our premium ad canvases that perform really well with those first-party data products are continue to be strong performers in a market where advertisers want to be in privacy-forward environments and in premium environments. And then the last thing I’ll say, it is early days, but we are very excited about the opportunity with The Athletic. It’s – we’re – even the conversations we’re able to have around it just put us in different categories, different kinds of advertisers or even like some of the same advertisers but who are going after different kinds of people, and we’re really optimistic that over the medium, long-term, that’s going to be a real growth driver.

Great. Thanks a lot.

This concludes our question-and-answer session. I’d 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.