The New York Times (NYT)

Q3 2011 Earnings Call

October 20, 2011 11:00 am ET


Paula Schwartz - Assistant Director of Investor Relations & Online Communications

Martin A. Nisenholtz - Senior Vice President of Digital Operations

James M. Follo - Chief Financial Officer and Senior Vice President

Janet Robinson - Chief Executive Officer, President and Executive Director


Douglas M. Arthur - Evercore Partners Inc., Research Division

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Leo Kulp - Citigroup Inc, Research Division

John Janedis - UBS Investment Bank, Research Division

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Craig A. Huber - Access 3:42, LLC

William G. Bird - Lazard Capital Markets LLC, Research Division



Good day, and welcome to The New York Times Company Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to your host, Ms. Paula Schwartz. You may begin.

Paula Schwartz

Thank you, Matt, and good morning, everyone. Welcome to our third quarter 2011 earnings conference call. We have several members of our senior management team here to discuss our results with you, including: Janet Robinson, President and CEO; Jim Follo, Senior Vice President and Chief Financial Officer; Scott Heekin-Canedy, President and General Manager of The New York Times; and Martin Nisenholtz, Senior Vice President of Digital Operations.

All of the comparisons on this conference call will be for the third quarter of 2011 to the third quarter of 2010, unless otherwise stated. Our discussion will include forward-looking statements, and our actual results may differ from those predicted. Some of the factors that may cause them to differ are included in our 2010 10-K.

Our presentation will also 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 corporate website at

Now we'll turn over the call to Janet Robinson.

Janet Robinson

Thank you, Paula, and good morning, everyone. We continue to execute on our strategy of transforming our business. This quarter, we made significant progress in developing a robust digital subscription revenue stream, reducing our operating cost, meaningfully improved our liquidity through the early repayment of high-interest debt and tripled our initial investment on the sale of a portion of our stake in Fenway Sports Group. Our results also reflect the current sentiment of the larger economy, as factors ranging from the European debt crisis, to weaker consumer confidence, led to a challenging advertising environment.

At the same time, we achieved 6% growth in operating profit before depreciation, amortization, severance and special items through incremental subscription revenue, resulting from the launch of The New York Times digital model, as well as through continued focus on cost management. While the lack of clarity on the direction of the economy caused advertisers to exercise more caution than we saw in the first half of the year, maintained its strong traffic levels and continued to fulfill its premium advertising commitments in the quarter.

Our digital subscription initiatives remained our top focus in the third quarter, as The Times continued to build its pay offerings. The Boston Globe launched the new subscription site,, and the International Herald Tribune this month announced its own digital subscription packages.

These last 2 items are excellent examples of how our digital monetization efforts are evolving. We continue to position ourselves to capitalize on our digital content across many of our brands in our ongoing effort to build a meaningful, digital subscription revenue stream.

Turning to our results for the quarter, with expenses down 4%, we saw GAAP operating profit grow to $33 million, from $9 million in the same period of 2010. Our operating profit before depreciation, amortization, severance and special items increased to $65 million in the third quarter, from $62 million in the same period in 2010.

Circulation revenues are a boost from our new digital paid products at The Times. Total circulation revenues were up 3% for the company, and 6% for our New York Times media group in the quarter. It is worth noting that The Times has also seen benefits to home delivery circulation, following the launch of its digital subscription plans due to an uptick in new orders and improved retention.

Digital advertising revenues are a loss of 5% in the third quarter, driven by continued challenges of The About Group, which saw a 21% decline in advertising revenue. Although digital advertising growth across the News Media Group did not see quite the same strength in recent quarters, it posted a 6% gain. In fact, in the 2-quarter period since the launch of digital subscription packages at The Times, the News Media Group has seen an 11% increase in digital advertising revenue with, of course, contributing heavily to that total.

Print advertising revenue was down 10% in the quarter. And as a result, total advertising revenues were down 9%, and total company revenues were down 3%. Diluted earnings per share, excluding severance expense and special items, were $0.05 in the third quarter, compared with $0.07 in the same period of 2010.

On a GAAP basis, we reported diluted earnings per share of $0.10 in the quarter, compared with a diluted loss per share of $0.03 in the third quarter 2010 period.

Returning to our digital initiatives, 2 quarters into the pay model launch, we have seen very good momentum and paid digital subscribers grew to 324,000 at the end of the third quarter. This total paid digital number includes subscribers to the digital packages, e-readers and replica editions. The large majority of these subscribers have now advanced to paying full rates to access The Times' digital content. If our experience with print subscribers is any indication, now that these subscribers have converted to full payment, it is highly likely that they will become loyal users.

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