Good morning, everyone, and welcome to The New York Times Company's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. And at this time, I'd like to turn the floor over to Anthony DiClemente, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to The New York Times Company's fourth quarter and full year 2023 earnings conference call. On the call today, we have Meredith Kopit Levien, President and Chief Executive Officer; and Will Bardeen, 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 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 2022 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 and is available on our website at investors.nytco.com. In addition to our earnings press release, we have also posted a slide presentation relating to our results, also 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.

Thanks, Anthony, and good morning, everyone. 2023 was a strong year for the times that showcased the power of our strategy to be the essential subscription for every curious person seeking to understand and engage with the world. Our news report provided improved indispensable to so many people, providing original journalism across the full range of human experience. Our lifestyle products serve scaled audiences for games, sports, cooking and shopping recommendations. By putting them all together and giving millions of people multiple reasons to turn to the times every day, we delivered business growth and demonstrated our ability to penetrate a large market. We drove this performance amidst a tough year for the news industry in which we and others faced persistent headwinds. We continue to see lower levels of casual news audiences due in part to the ongoing shifts from the largest tech platforms, and our ad business grappled with the heightened market volatility impacting publishers. Our strategy is designed to both counter balance these headwinds and position us to be a category-leading global media subscription business. Let me share the highlights from the year. We added 880,000 net new digital subscribers, bringing our total to nearly 10.4 million and progressing us on the path to our next milestone of 15 million. The bundle accounted for a majority of our subscriber starts in the year, bundle and multiproduct subscribers made up 41% of our subscriber base at year-end, and those subscribers continue to be more engaged, best retaining and willing to pay more over time than single product subscribers. New York Times subscriber engagement as measured by the share of subscribers on our products each week, reached its highest point in nearly three years by year-end. And the time now sees more digital engagement than any other American news…

Thanks, Meredith, and good morning, everyone. In 2023, the successful execution of our essential subscription strategy drove strong financial results despite a challenging and dynamic environment. Our portfolio of market-leading news and lifestyle products was designed to grow our subscriber base, increase subscriber engagement and lifetime value and strengthen our multiple revenue streams. As our subscriber base has scaled, we've moderated our overall expense growth while continuing to prioritize strategic investments that help position us for long-term value creation. Our full year 2023 financial results demonstrate that our strategy is delivering as designed. We saw increases in revenue, AOP, EPS and free cash flow growth and free cash flow, and we finished the year in an even stronger market position. Overall revenue for the year increased 5% as growth in digital subscription, affiliate and licensing revenues more than offset ongoing declines in print. Combined with moderating cost growth, this resulted in AOP growth of 12% year-over-year and expanded our AOP margin by approximately 100 basis points to over 16%. The cash-generative nature of our business model was also evident. For the full year 2023, we generated approximately $338 million of free cash flow, up from approximately $114 million in the prior year. In addition to being driven by AOP growth, free cash flow benefited from lower cash taxes, lower CapEx and lower working capital outflows compared to 2022. We returned approximately $114 million to shareholders in 2023 through a combination of $69 million in dividends and $45 million in stock repurchases. Over the last two years, we've returned nearly 61% of our free cash flow to shareholders. As Meredith mentioned, we also announced a dividend increase of $0.02 to $0.13 per share, reflecting our confidence in the durability of our strategy. Now I'll discuss the fourth quarter's key results followed…

Thanks, Will. Our portfolio of differentiated news and lifestyle products is delivering growth and steadily improving unit economics, and we believe our multi-revenue stream model makes our business more resilient in a complicated environment. With this foundation, we believe strongly in our ability to create value through a premium product portfolio and world-class independent journalism, at a time when it is rare and more needed than ever. And now we're happy to take your questions.

[Operator Instructions] And our first question today comes from Thomas Yeh from Morgan Stanley.

I wanted to ask about the evolving relationship with big tech. I think you've historically approached commercial agreements with the philosophy of being able to drive engagement back to your own properties in light of some of the details around the open AI litigation and the deal with Apple News. Can you maybe just help us dimensionalize the structure of a licensing deal that you would see as proving not cannibalistic? And how do you kind of weigh the benefits and the offsets associated with an opportunity like that?

Yes. I'll start, Thomas. Will can come in behind me as he sees fit. We are -- you've seen the deals we've done over the last couple of years, and you're referring to the one I referenced in my prepared remarks that we've just done with Apple -- Apple News Plus for the Athletic and Wirecutter. We're generally looking for three things; does this make sense in the context of our essential subscription strategy by which I mean is it helping us in some way to build direct relationships; and that can be through very direct ways or through helping us grow audience and awareness for our brands in the case of this partnership we've just built with Apple News Plus in the Athletic. We certainly see it as doing that. And then we look at the dimension of our IP rights being sort of appropriately respected and used in a responsible way and is their fair value exchange. And I would say any time we look to engage with a big tech partner or any partner for that matter, those are the considerations we're making. And I think we've got a good track record of doing deals that live up to those standards.

Is the attribution still critical to building and reinforcing the overall IP? Like is that something that you would ever potentially forgo in an AI situation that would be economic and still beneficial to you?

I want to make sure I understand your question. I maybe try that one more time.

Yes. Just in terms of branding and the idea that I think historically with Apple News, the ability for them to kind of ingest your content into their own platform has, I think, been a little bit of a barrier to your reasoning around licensing to them. I was just asking, I think, in the vein of kind of the AI and the proliferation of some of that and the potential loss of attribution, if there ever is economic model that makes sense for you to kind of forgo some of that.

Yes, I understand what you're saying. I'll say two things, both kind of related to what I've already said. One is, I think the most important thing we can do as a business, and I talked about this a bit in my prepared remarks, is to have products that are so valuable at scale and kind of widely understood for their brand marks and the credibility and the trustworthiness they provide that people are inclined to build a direct relationship with us, and will come to us on a very regular basis. So that's the main game we are playing to the extent that there are other ways to tap into the vast arsenal of IP that we create every day that we've created for close to two centuries. We are open to that as long as there is fair value exchange and it's supportive of the broader business model.

And then maybe just to squeeze one last one for Will. I wanted to revisit the capital allocation philosophy. You reiterated the 50% return of free cash flow over the medium term. But I think you've been pacing a little bit below that in 2023. Was there any specific reason that led to a pause in repurchase activity and potential uses of cash that you see as an attractive opportunity to maybe drive organic growth instead?

Thanks, Thomas. I think you should just take our capital allocation strategy as unchanged, that target 50% over the medium term, and we have said, don't expect that sort of to be linear to any quarter, even any year. Over the last two years, we've returned 61% in a combination of dividends and share repurchases. And I think you can expect us to continue to track against our target over the mid-term.

Our next question comes from David Karnovsky from JPMorgan.

Meredith, I don't know what you're willing to say on the lawsuit with open AI, though any thoughts would be welcome. But maybe separate to that, are you still in discussions with other AI platforms for potential licensing deals? And can you speak to how the discussions might be going and the prospects for any agreements near-term? And then Will, just a question on the outlook. The Q1 cost growth looks to be a touch above the pace of the past few quarters. I know sometimes there's timing issues. I want to see if there's any call out here. And if you could provide any view on the cost trend for the remainder of the year?

I'll start. Thanks for the question. And as you suggest, we're in active litigation. So there's not much I'll say about the case specifically, but more broadly on making deals, and this goes a little bit to the way I answered Thomas' question. You've seen the deals we've done over the last couple of years. You can imagine we are talking to potential partners all the time. And you've seen directly in the complaint that we're talking of potential generative AI partners I'd say we are being really selective and thoughtful about what partnership makes sense for us in the context of our strategy and our rights being respected to our IP and fair value exchange for that IP.

I'll take that cost growth guide question. I'm not going -- I don't think there's anything that I'll specifically call out for Q1, simply to say that there can be some variation quarter-to-quarter in cost growth that you've seen in the past and certainly can expect to see that occasionally. But overall, I think the two themes I hit in my remarks are the things to focus on, which is, number one, cost discipline. We're very, very focused on it. Relentlessly reallocating resources to areas of high impact and really focusing on leverage in G&A and the sales and marketing lines and getting efficiencies out of places like our print supply chain legacy areas. So that's theme number one. And then theme number two is that we will continue to make targeted strategic investments that we believe are creating value in our journalism and in our product development to really make sure we're investing for the long term and solidifying our competitive position. So I think those are the two themes to hit there.

Our next question comes from Ashton Wells from Evercore ISI.

I think digital-only subscriber ARPU in Q4 was down modestly from Q3. What drove the sequential decline? And how should we be thinking about ARPU growth in the first half of 2024 as more bundled subscribers are stepped up? And related to this, how are the bundle step-ups performing versus your expectations?

Sure. Let me take that. I mean I think the way to think about the sequential decline in ARPU, it's very much a reflection of things we've seen before, which is a good quarter of net ads. And given the nature of our promotional pricing strategy, we expect to see that when that happens. I think the important thing for us to focus on, obviously, the year-over-year ARPU growth in the quarter. And then looking forward, as we've said, we expect modest year-over-year ARPU expansion for digital-only subscribers. So that's the expectation going forward. I think we have -- I talked about in my remarks, the drivers of that expansion in Q4. And I think probably we're saying that first driver, which was the step-up the bigger bundle cohorts as we've been bringing on more and more bundled subs is going to be one of the main drivers in 2024 as well. And I said in my remarks, it's still early. So we'll have increasing numbers coming in throughout the year, but we remain encouraged by what we see that bundle subscribers at those step-up moments are retaining better and monetizing better than these only subscribers.

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

Got two questions. Meredith, the deal with Apple News Plus that started late in the fourth quarter. Did you get any read-through at all? Or is it on the impact? Or is it just too early? And what kind of are your expectations there?

Great question. Tiny impact, I think I'm looking at Will and Anthony, if they want to characterize that anymore, but tiny impact, just based on the timing and then, obviously, bigger impact to come. And the -- there are a handful of things we're particularly excited about in this deal. One is as we've talked about with you and others, we are very, very focused on building audience and brand awareness and use of the Athletic, and we see Apple News Plus is a great way to do that. Apple is doing a lot of interesting things in sports, really good partner for us there. And the Times has very, very big ambitions for the athletic in sports, and we see this as helping us achieve that. So it's good in any number of ways and you'll -- you can expect to see the impact on a go-forward basis.

Doug, did you have another question or you offset?

Well, I just -- I didn't want to beat a dead horse, but it seems like your digital advertising outlook for Q1, is I wouldn't call it optimistic, but it's more constructive, I think, than what we just witnessed in the fourth quarter is, I guess, just trying to measure your conviction level on that?

Yes. Well, let me preface it by saying its hard -- advertising is hard to call. We don't have a ton of visibility, but I'll say a few things. We did in digital in the fourth quarter, a fair amount of what I would describe as marketer news avoidance. You have the war between Israel and Hamas break out in early October. And that that had an effect in both display and audio. And at the same time, what you see us doing to lap up some of the demand to work with the times and we're doing this anyway we are extending our ad products very aggressively to other parts of the portfolio beyond news. The Athletic and Games have been real bright spots so far, and we see a lot of running room in both of those places and potentially in Cooking and Wirecutter as well. So I would say we are -- we're long on news over a medium and long-term time horizon. We also have a lot of other places to kind of lap up interest in working with the Times for marketers. And the core of the business, Doug, which is those premium at canvases and first-party data continues to be resilient.

Our next question comes from Vasily Karasyov from Cannonball Research.

Meredith, so do I understand correctly that when you say in your prepared remarks that the headwinds in the advertising market that carry into this year 2024. You mentioned the current events, the Middle Eastern situation and so on, they just advertisers not wanting to advertise next to the content that's driven by current events? Or is there something more structural because you also mentioned publisher volatility. And I was wondering if you could explain a little more what the TAM means?

Yes. Listen, I think it was a volatile ad market that tends to hit publishers hard when it happens. We have a lot of, what I'm going to call, structural confidence in the core of our ad business. Premium campuses and first-party data and core New York Times are now extending out to our other products with a lot of running room is really working. So that's the message I want to convey and I think I answered the other part of your question before. To the extent you're asking how do we think about publishers relative to platforms or any other business that are in the ad business in a big way, I would say marketers use publishers, they tend to differently than they use the big platforms. One of the things we -- that gives us a lot of confidence is while we tend to get more middle and upper funnel advertising, meaning sort of not direct response, more brand in most parts of our portfolio. Our ads because of the way we sequence ads and the first-party data, our ads are really perforant. And what you're watching us do is extend those ads across more parts of the platform. And I would say there, we just have -- it's early days on Athletic and Games and potentially Cooking, Wirecutter, and we think we've got a lot of running room. I'm actually going to use that as a segue to mention an experiment. We're also -- I'll go back to the question Thomas asked about at the top of the call, and I'll talk about ads here, too, related to your question, and it's about AI. We have been using AI in our ad business sort of the whole way through with first-party data, and I think generative…

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Anthony DiClemente for any closing remarks.

That's it. Thank you all for joining us this morning, and we very much look forward to talking to you again next quarter. Take care.

And ladies and gentlemen, with that, the conference has concluded. We thank you for attending today's presentation. You may now disconnect your lines.