Good morning, and welcome to The New York Times Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions]. 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 Fourth Quarter and Full Year 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. 2022 was the first full year of executing our strategy to become the essential subscription for every serious English-speaking person seeking to understand and engage with the world. We're proud of our results, which reflect the differential value of our expanded product portfolio, the multi-revenue stream nature of our model, strong unit economics and disciplined cost management. I'll start by sharing a few highlights from the year. Consolidated adjusted operating profit was $348 million, well ahead of our guidance and an increase over 2021. At The New York Times Group, we grew adjusted operating profit by 14% and drove more than 100 basis point improvement in margin. Notably, that margin improvement follows a 200 basis point improvement in 2021 and reflects palpable progress on our journey to building a larger and more profitable company. Moreover, these results demonstrate the proven nature of our model to grow profit even in a dynamic and challenging market. They also give us the confidence to announce a new midterm target for capital return, a new share repurchase authorization and our fifth consecutive annual increase to the quarterly dividend payment. We recorded just over 1 million net digital subscriber additions for the year, our second best year ever for net adds behind only our blockbuster 2020. We ended 2022 with 9.6 million total subscribers, including print. We achieved that result despite contending with many of the same pressures impacting others in a digital subscription industry at the moment. With each passing quarter in 2022, we saw increasing proof that there is strong demand for a bundle of our news and lifestyle products. Both the total volume of new bundled subscribers and the share of new subscribers choosing the bundle grew significantly over the course of the year. We reached…

Thank you, Meredith, and good morning. As Meredith said, we're very pleased with the fourth quarter results we are reporting today. We're reporting $348 million in adjusted operating profit for the year, an increase of $13 million versus last year. This means annual growth of The New York Times Group more than offset the losses at The Athletic. Turning to the quarter. Adjusted diluted earnings per share was $0.59, $0.16 better than the prior year. It's worth noting that we've modified the definition of adjusted diluted EPS to exclude the impact of amortization of acquired intangible assets to improve the comparability of earnings across periods. This adjustment was $0.04 per share in the quarter and $0.16 for the full year. We reported adjusted operating profit of $142 million in the quarter, higher than the same period in 2021 by over $32 million. Adjusted operating profit at The New York Times Group was approximately $149 million, an increase of $40 million compared to the prior year while The Athletic had adjusted operating losses of approximately $7 million. In the fourth quarter, the company added 240,000 net new digital-only subscribers and 240,000 net new digital-only subscriptions, with, as Meredith noted, continued strong growth in adoption of our bundled products. The number of digital-only bundle and multiproduct subscribers grew by approximately 380,000 in the quarter, driven mainly by increases to the number of new bundled subscribers, augmented by existing subscribers who upgraded to the bundle. Moving to revenues. As a reminder, the company has adopted a change to its fiscal calendar and as a result, our 2022 fourth quarter and fiscal year included an extra 6 days as compared with 2021. The earnings release published this morning reports revenues on both a GAAP and estimated 13-week basis. A reconciliation of revenues can be…

[Operator Instructions]. Our first question comes from David Karnovsky from JPMorgan.

Meredith, just on the update to the capital return program. Can you maybe discuss a bit, the background to revisit this, less than a year later, you haven't updated your midterm operating targets. Just wanted to better understand what you're seeing in the business that gives you the confidence to kind of increase the allocations to buyback and dividend? And then Roland, you mentioned just now cost -- or cost growth dropping sort of in the back half of the year. I'm not sure if you'd be willing to kind of say a few overall would expect to grow margin in 2023?

Sure. I think I can give a short answer, which is just the update on capital return reflects real confidence in our strategy. We had a very strong year -- strong first year of execution. We like what we're seeing, and we think the model itself is a strong one and a durable one. But Roland, you may add more detail to that.

Well, I mean, I just want to say we're really pleased to increase the return to shareholders at this time. And we believe that doubling that minimum percentage of free cash flow that we aim to return illustrates the real confidence in the business and the desire for us to return capital to shareholders. And I guess the last thing I'd say is both the dividend increase and the new share purchase authorization at the levels we announced reflect the company's balanced approach to returning capital. David, your second question, I think, was a cost -- related to cost but got to margin expansion, I believe. And what I'd like to just say is we aim to modestly increase our margins this year in 2023.

Our next question comes from Doug Arthur from Huber Research Partners.

Two quick things. Meredith, The Athletic did $5.3 million of advertising according to this table in the fourth quarter. I realize you had extra days. It's a seasonally strong quarter. But that's evolving towards a $20 million annual run rate. You have to be somewhat pleased with that. Is that a fair statement?

I'll just say, ads are off to a promising start. We're optimistic about The Athletic as a real driver of advertising. And I could go on and on, but I'd basically be giving -- affirming that we're excited about ads on The Athletic, and we like what we see so far.

Is there any -- can you put any kind of contours around what type of advertising or -- I mean, I'm on The Athletic all the time, but what type of advertisers you're attracting?

That's a great question. I'd say there are kind of two buckets. One, The Times has a pretty wide base of advertisers, but we get particular campaigns from those advertisers. And one of the things we're really pleased to see in the early days with The Athletic, and I think we launched ads in September, Roland and Harlan are nodding. We got -- we had some of the same advertisers to The Times but giving us different campaigns, targeting different people. So that's one. And then two, there's just a whole category of advertisers who spend a lot of money around sports and who The Times doesn't necessarily get, and we think there's real promise there as well. And as you know, we sent our former head of ads from The Times over The Athletic to build that business and a couple of folks went with him, and they've built out a team, and I would just say it all feels very promising. I'll give you one more kind of technical detail. The Athletic's -- The Athletic did have a very small ad business when we acquired it. That was largely an audio business. They have a lot of podcasts, which are great. You should listen to them. And so, what we're adding here is a premium display business, like the business we have on The Times with great ad canvases, and you can imagine all the things we've done with The Times including building a rich trove of first-party data and building partnerships with marketers that want to do something kind of more meaningful than just run display. You can imagine, we're good at that at the Times, and we're kind of bringing all that to The Athletic.

Great. And then, Roland, just one sort of contextual question. In terms of this bundled multiproduct subscriber number of 2.5 million, is there a way to kind of give some color as to how much of that is print? How much of that comes from The Athletic? I mean how does that number break down in terms of what people are going at?

Yes. So first of all, I think last quarter, we changed the definition of that to exclude print. So that is exclusive -- that 2.5 million is exclusively a digital number. So that's the first thing to level set. You've also got two other categories of subs that we disclosed, and you'll see how many folks have news in their subscription, how many folks have Athletic in their subscription. And you can track those increases as well. So a bundle will count there as well as a standalone. So the majority of the folks in that have at least a news entitlement and obviously, they have something else. So that's by far the biggest chunk. And I would just add to that, the fastest growing piece of that is the bundle.

Okay. So you used to call it total multiproduct subscribers. That included print. You've wiped that out. You've cleaned that up.

That's right. We cleaned that up.

Our next question comes from Vasily Karasyov from Cannonball Research.

Meredith, you touched on it in your prepared remarks, but I wanted to ask you to talk in more detail what you're seeing in how your subscribers or trial subscribers behaving in this -- over the past several quarters that were going through inflation, recessional, whatever we want to call it, macro headwinds and stuff like that. Are you finding any kinds of behavior that are surprising to you and causing you to adjust your strategies, retention practices and acquisition strategies? So would appreciate some color on that.

Sure. And great question. Broadly, my answer is we're not seeing much on the subscriber engagement or on the subscriber front that surprised us. Subscriber engagement, which was a huge area of focus in 2022, I think has gone well. We really like what we see. And I'd say part of why it's gone so well is, as we put a lot of energy and resources into deliberate intervention to get people if they were new subscribers to experience more, and if they were bundled subscribers or potential bundled subscribers to do other things with us. We are building our understanding of what really drives that additional engagement if you buy the bundle versus news, I alluded to that in my prepared remarks. And it's -- if you engage with a second product, so if you're a new subscriber and you've also engaged with The Athletic or you also engage with cooking or games, that is a retentive behavior. So we're very focused on driving that, and I would say, put a lot of energy into executing and that has gone well. I'll add because I think you're poking at it. We said a year ago at this time, maybe even a little further back that it was going to be really important to keep churn to a manageable level. And I think we've done that. It will be an ongoing focus, given the size of the base now. It's quite important to the net add story. But so far, so good, and we -- the bundle strategy plays a role in that. But just broadly, I think we have been able to hold churn to a manageable level.

Our next question comes from Thomas Yeh from Morgan Stanley.

Meredith, you mentioned expectations for a sequential positive digital subscriber ARPU trend to continue throughout '23. Does that include some benefit from these experiments that you cited around individual stand-alone products? And any more color on what you're planning to implement there from a pricing change perspective would be really helpful? And then secondly, just any color on the drivers of the ad trends into 1Q. I think down low single digit seems to be sequentially better than the core trends in 4Q, excluding the extra days. Has the macro pressures that you kind of cited as picking up stayed the same or updated as we headed into the last few months, that would be great?

So I think I can remember all that. So on ARPU, there are a few things at play here. One is we continue to be successful at transitioning subscribers from promotions to interim and full prices. That's going well. And that's obviously a huge part of the model and the story here. And so, that's a big driver. That's one. Two, I'll just remind you that the bundle itself, at every price point, even on a promotion, is a little more expensive than any individual product on a promotion. And then, of course, over time, the assumption is we're going to transition bundle subscribers to higher prices as well. And that sort of the pricing power of the bundle versus individual products carries through the transition to full price. So one, transition full price continuing to go well. Two, more bundled uptake has positive effect on ARPU. And then three, to your question, I think you're asking more sharply. Yes, we have been in the market since the very end of last year testing price increases to a portion of the population who are tenured subscribers to individual products, so news and the other stand-alone products. And as I said in the prepared remarks, we like what we see. So far, I'll just remind you, we've got experience here. I think I always forget if this is '20 or '21. I think in 2020, we did a major price increase. First one we had done since pay model launch for tenured news subscribers. And we went about that, and I kind of test first very rigorous way. And it went well. And that's what we're doing here as well. And all of that should play a role in subscriber monetization and ARPU improvement, and that is a real focus for us this year. So I think that's the first question. On ads, look, I think we've got the right strategy in ads. It is a really tough market, it's a complicated market, but the Times benefits from a few things. One, and this goes to Doug's question earlier, within -- better with The Athletic but even before The Athletic, we play in a wide range of categories, and I think that helps us. Different categories fare differently in market cycles. For example, luxury was strong in the fourth quarter and other categories weren't. So in general, the wits of our sort of marketer interest for the Times helps us. And then I'm just -- I'm going to keep saying that the basic thing the Times offers, which is a really premium environment with a very strong and growing powerful body first-party data that can help marketers target in privacy-forward ways is really benefiting us. So I think the strategy and the model are just really enduring in advertising.

Our next question comes from Ashton Welles from Evercore ISI.

Quick question on media expenses. I get that they were elevated in 2021 with some elevated marketing spend, but it also seems like they dropped below the 2020, 2019 run rate. Should we expect that going forward into '23?

So let me talk a little bit about that. Reducing that marketing spend over time has always been a part of our plan. We've communicated that to the market for quite some time. And as we continue to improve our digital products through the investments we're making in our journalism and in our product development, that's enabling the reduction, has enabled the reduction in that marketing spend. Going forward, I think you can think about it in this vicinity, that there may be a quarter where we want to spend some brands. So that's always on the table. We did not do that in Q4. But other than that, you can see this, I think, a pretty typical run rate for the near future.

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, and the company looks forward to talking to you again next quarter.

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