Good morning, and welcome to The New York Times Company's First Quarter 2024 Earnings Conference Call. Please note that today's event is being recorded. At this time, I will turn the floor over to Anthony DiClemente, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to The New York Times Company's First Quarter 2024 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 2023 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. In addition to our earnings press release, we have also posted a slide presentation relating to our results on our website at investors.nytco.com. And finally, please note that a copy of our prepared remarks from this morning's call will be posted to our investor website shortly after we conclude. And with that, I will turn the call over to Meredith.

Thanks, Anthony, and good morning, everyone. As our Q1 results demonstrate, we're off to a strong start this year. Our strategy to become the essential subscription for every curious person seeking to understand and engage with the world is working as designed and is positioning us to sustain our growth through a dynamic media environment. Let me describe how. First, our world-class news destination combined with our distinctive products in games, sports, cooking, and shopping advice are attracting large and passionate audiences in giant spaces. Each of these complementary products addresses a different need in people's lives, meaning there's always a reason to seek out The Times. Second, our subscribers are deeply engaged. The share of subscribers spending time on our site and apps each week is now at its highest point since the surge we saw during the pandemic. That's a clear sign that we're delivering value to users and increasing their likelihood of building long-term relationships with The Times. Third, the high level of engagement we see reinforces our conviction that we can grow digital-only ARPU year-on-year as we use our multiple pricing and monetization levers. And fourth, we've strategically designed our diverse product portfolio to also power multiple revenue streams beyond subscription in advertising, affiliate, and licensing, each of which we expect to deliver growth in 2024. In sum, our portfolio of products creates many paths for The Times to reach big audiences and drive the type of deep engagement that grows subscribers and revenue. That makes our business more resilient and positions us well to take advantage of new opportunities even in a rapidly changing media landscape. With focused execution and disciplined cost management, we expect our essential subscription strategy will propel another year of improving profitability and margin expansion as well as strong free cash flow generation. Turning now to our first quarter results. We had a quarter of steady revenue growth and significant AOP growth powered largely by our digital subscription business. We added 210,000 net new digital subscribers in the quarter, making further progress on the path to our next milestone of 15 million subscribers. Volume growth in the first quarter was driven by bundle and multiproduct subscribers as well as single product subscribers, with our bundle and multiproduct subscribers accounting for over half the digital starts in the quarter. Bundle and multiproduct subscribers now represent 43% of our subscriber base, and we expect to surpass 50% by the end of next year. Core to driving subscriber growth is having products that deliver unique value. That starts with news, where just this past Monday, The Times was recognized with 3 Pulitzer Prizes, our industry's highest honor. The awards showcase the many ways our journalism impacts society. Investigative reporter Hannah Dreier was honored for documenting the pervasive exploitation of migrant children in unsafe working conditions, a series that led to sweeping reforms in business and government. Katie Engelhart, a contributor to the Times Magazine, won for her intimate portrait of a mother's dementia and her family's ensuing legal, emotional, and ethical struggles. And we received the International Reporting Prize for our investigative work into the origins and aftermath of the Israel-Gaza war. This is a recognition of the importance of our ongoing and extensive coverage of the war, which has included thousands of articles and photos, hundreds of videos, and real-time reporting from around the world. Beyond illuminating the most urgent stories of the day, we are continuously expanding our report, making it more accessible, and evolving how our journalism comes to life. That includes producing more personally relevant reporting into science-backed health and wellness, and it includes experimenting more ambitiously with audio by introducing the ability to listen to much of our report via AI-powered automated voice and also by introducing a new listen tab in our core news app. The performance of Games in the quarter provides further evidence for how creating more valuable products translates into user and business impact. We now have 2 puzzles, Wordle and Connections, with tens of millions of weekly users and another homegrown hit in Strands, our daily word hunt game released in March. Our growth here means we have lots of opportunities to deliver more value to more people. As one example, we're unlocking the ability for subscribers to play the full archive of 1,000-plus Wordle puzzles. Given the very strong engagement with games and our focus on continuing to add product value, we expect to be able to increase monetization over time. We're also adding value at The Athletic, where we've been deliberate about building awareness and it's paying off. The Athletic audience levels were up again in Q1, both year-on-year and quarter-on-quarter, helping fuel advertising growth and keeping us on track to profitability by next year. The Athletic is making the most of major moments of fan interest like the Super Bowl and March Madness and excelling in its always-on coverage of coaching changes, free agency drafts, and other news impacting teams. We're as excited as ever about the giant opportunity we see in sports and making steady progress on our ambition to become a top destination for sports news globally. We delivered another quarter of the modest year-on-year ARPU growth we've been targeting since 2022. Our ability to successfully transition subscribers on promotional prices to higher prices is a durable driver of ARPU expansion, and the primary reason we're confident we'll see continued ARPU growth this year. Total advertising revenue came in slightly better than guidance, thanks to print declining less than expected. We continue to feel the impact of some marketers avoiding certain hard news topics last quarter. Even still, we are seeing a pickup in advertiser demand so far in Q2, and we're steadily expanding our high-performing ad products across the entirety of our product portfolio, which together give us optimism. Revenue beyond subscriptions and advertising exceeded guidance, driven by a strong quarter for licensing and Wirecutter. We believe the value of Wirecutter's rigorous research-backed recommendations will keep increasing, and we're investing to cover more products in more categories, which should build an even bigger business over time. We remain disciplined on costs and are aggressively reallocating investments to strategic areas. This discipline, together with capable execution resulted in another strong quarter of AOP growth and healthy free cash flow. I'll wrap by reminding you of what we're trying to do every day: build scaled products so valuable to people that they will be sought out, asked for by name, and worthy of direct relationships and daily habits. The combination of our world-class news destination plus market-leading lifestyle products means we have complementary offerings in big spaces, each with multiple growth levers fueling multiple revenue streams. Together, we believe these make our business more resilient and well-positioned for continued value creation. Now let me turn it over to Will for more details on the quarter.

Thanks, Meredith, and good morning, everyone. As Meredith stated, our Q1 financial results demonstrate a strong start to the year and position us to deliver another year of AOP growth, margin expansion, and healthy free cash flow generation. Our portfolio of market-leading news and lifestyle products is working as designed to grow our subscriber base, increase subscriber engagement, and strengthen our multiple revenue streams. As our subscriber base has scaled, we've moderated our overall expense growth driving operating leverage even as we continue to prioritize strategic investments that help position us for long-term value creation. We grew overall revenue in the first quarter by approximately 6% as increasing digital subscription, licensing affiliates, and advertising revenues more than offset ongoing declines in print. Combined with slower-than-expected cost growth, AOP grew by approximately 41% year-over-year and quarterly AOP margin expanded by approximately 320 basis points to 12.8%. Our free cash flow generation continues to be strong, and consistent with our broader expectations for capital allocation, we returned $51 million to shareholders in Q1. This included approximately $32 million in share repurchases and $19 million in dividends. Now I'll discuss the first quarter key results, followed by our financial outlook for the second quarter of 2024. Please note that all comparisons are to the prior year period unless otherwise specified. I'd also like to note that there was one additional day in the first quarter of 2024 compared with the first quarter of 2023 as a result of 2024 being a leap year. I'll start with the discussion of our subscription business. We added approximately 210,000 net new digital subscribers in the quarter, with growth coming from multiple sources across our portfolio of products. As Meredith mentioned, bundled and multiproduct subscribers now make up 43% of our total base along the path to exceeding 50% by the end of next year. Total digital-only ARPU grew 1.9% year-over-year to $9.21 as we continue to step up subscribers from promotional to higher prices and raised prices on tenured, nonbundled subscribers. The promising bundle monetization we're seeing at step-up points combined with the increasing number of bundled subscribers transitioning to higher prices throughout the year suggests a tailwind to ARPU in the back half of the year. Additionally, as Meredith highlighted, we continue to improve the product in our portfolio and are seeing that value reflected in higher levels of subscriber engagement. This pattern is increasing our confidence in the ability to improve monetization through single product pricing over time and is one driver of the modest year-over-year ARPU expansion that we continue to target for the midterm. As a result of both higher digital subscribers and digital-only ARPU in the first quarter, digital-only subscription revenues grew approximately 13% to $293 million, and total subscription revenues grew approximately 8% to $429 million. Both were in line with the guidance we provided last quarter. Now turning to advertising. Total advertising revenue for the quarter was $104 million, a decline of 2.4%. This was slightly better than our guidance of mid-single digits decline as print advertising performed modestly better than expected. Digital advertising results were within our guidance range in the quarter, increasing approximately 3% to $63 million. Other revenues exceeded our guidance, increasing approximately 8% to $61 million as licensing and Wirecutter affiliate revenues continued to be strong drivers of growth in Q1. Adjusted operating costs came in better than our guidance, increasing by 2.2%. Our underlying cost growth in Q1 continued to reflect our discipline of relentlessly reallocating resources to areas of highest impact. We also benefited in Q1 from some unexpectedly favorable compensation and benefit items that helped drive the outperformance relative to our guidance range. Cost of revenue increased approximately 3%, largely due to our continued investment into journalism. Cost of revenue was favorable to our expectations, in part due to timing of content and hiring costs. Sales and marketing costs decreased approximately 3%, largely due to lower subscriber acquisition costs as our products continue to drive the majority of starts organically. Product development costs increased approximately 11% as we continue to strategically invest into the product and technology teams, enabling our digital subscriber growth. Adjusted general and administrative costs were down approximately 4% as we continued to drive efficiencies. I'd also like to note that in the first quarter, we recorded a severance charge of approximately $4 million due to targeted reductions in certain areas of the business. Our steady revenue growth and disciplined cost management in Q1 translated into strong earnings growth as adjusted diluted EPS increased $0.12 to $0.31. EPS growth in Q1 was also aided by higher interest income. Our tax rate in the quarter was approximately 27%, close to our expected ongoing marginal tax rate of approximately 26%. I'll now look ahead to Q2 for the consolidated New York Times Company. Total subscription revenues are expected to increase 6% to 8% compared with the second quarter of 2023. And digital-only subscription revenues are expected to increase 11% to 14%. Overall advertising revenues are expected to increase low single digits while digital advertising revenues are expected to increase high-single digits. As Meredith noted, we're seeing a pickup in ad demand so far in Q2 and are continuing to expand our first-party premium ad products to more surfaces across our product portfolio. Other revenues are expected to be flat to increase low single digits. Adjusted operating costs are expected to increase 4% to 5%, which reflects that we are investing for growth in a disciplined manner and that we don't currently anticipate the unexpectedly favorable comp and benefits cost performance to extend beyond Q1. I'll close by noting that due to our strong Q1 profit performance, we now expect our AOP and earnings growth in 2024 to no longer be back half weighted. With our essential subscription strategy working as designed, we remain on track to achieve our previously stated midterm targets for subscribers, AOP growth, and capital returns. With that, we're happy to take your questions.

Just 2 for me. Meredith, you spoke to very high engagement around your Games product. I wanted to know how you think about translating this to registrations and ultimately to subscriptions or bundle sign-ups? And can you also speak to the opportunity around building more advertising into games? And then for Will, on the adjusted cost in the quarter, growth was nicely below your outlook. Wanted to follow up here on what came in lower? Are there any shifts to remaining quarters to be aware of? You noted some timing benefit? And just given the results in Q1, and the outlook, do you have any updated view on margin for the year?

Thanks for the question, David. I'll start on Games. The first thing to say is we have invested in a product people really love, and we know that they love it because they're deeply engaged. Engagement gives us monetization power over time, both in subscriptions and ads. In terms of the games funnel, people coming into the App Store and downloading the app or finding Games on the web is a very effective entry point for someone just starting their relationship with The Times. They can register, we can sell them a bundled subscription, or they can buy a Games subscription. If they buy that Games subscription, we can harness that direct paying relationship to introduce them to other things. With games, there's lots of surface area to do that. High engagement and the continuous addition of new value can mean we have pricing power that we can exercise because people love the product so much and engage with it frequently. So we've got lots of optimism there. On ads, I would just say, plenty of running room to introduce more ad products within games in a way that is friendly to the concept of free and paid games. One of the areas we'll focus on in the back half of the year is the Games app which is set for a redesign. You'll see some ads there that you haven't seen before, and I believe there's much room for experimentation with ad formats within Games as well.

And David, on costs, we're quite pleased with the overall cost performance in the quarter, which in its core reflects the discipline that we've been discussing for some time. As I said in my remarks, the outperformance relative to our guidance range was also in part due to some unexpectedly low compensation and benefit items in Q1 that we don't expect to extend beyond the quarter. So looking forward, our Q2 guide of 4% to 5% is what to focus on, which we believe reflects investing for growth in a disciplined manner. A couple of step-back points to put the year in context, regarding disciplined growth: we are focused on reallocating our resources to areas of high impact, particularly our differentiated journalism and product and technology. These areas sustainably drive organic subscriber growth based on our strategy. In terms of overall AOP growth and margin expansion, we expect that for the year across strong free cash flow generation. Just a note: due to the strong profit growth we saw in Q1, we no longer expect that growth to be weighted to the back half of the year.

I just had a very simple question. Would you mind summarizing some of the promotions that you've done on the digital side, how those promotions have changed? And what you're looking for as those promotions roll off? What are some of the key metrics you guys are going to be looking for to measure success?

Sure. I mean overall, our promotional strategy is all about maximizing the lifetime value of our subscriber base. We're modeling this very carefully. Generally, our promotions bring the vast majority of our bundled subscribers on a dollar a week and then step them up over time to higher prices, driven by a lot of data science measuring various inputs. What we're looking for at those step-up moments is retention and monetization. We've been very pleased with what we're seeing on both fronts as we have an increasing number of bundled subscribers coming in throughout the year.

Meredith, I wanted to ask you to talk in a little more detail about the underlying trends in digital advertising. Maybe you could break down the growth that you had and expect in Q2 by volume versus price because it looks like you're going to have a higher growth rate against tougher comps. Can you help us understand the variance in quarterly performance? Are there any comps coming up that are getting easier for you in terms of volume or price?

Yes. I think the most important thing to say is just what I said in my prepared remarks, which is that demand is picking up in Q2, and you see that in the guidance. We're rolling out more ad supply continuously for the rest of the year, bringing high-performing ad products to places where we see a lot of marketer demand growing, such as the games app and sports. By high-performing ad products, I mean premium canvases with first-party data. We're still in a process of extending this to other parts of the portfolio. The pickup in demand and the broad appeal of The Times gives us optimism in the ad business. I should also mention that the ads are effective. Those premium canvases and first-party data perform well within a publisher's ad offering, so we have a lot of confidence in them.

Would it be fair to say that the high-performing ads, the ones you referred to, have much higher CPMs than the display ads that you called out in the release?

The core of the digital ad business we’ve been talking about for years is premium ad canvases. We have an ad unit called Flex Frame, which is a large canvas unit that can do a lot of things. Targeting with our first-party data is the business's core, and that tends to be a high CPM business in the context of the publishing industry.

Just following up on the bundle graduation question. Can you help us think through the cadence of the wave of eligible cohorts that are coming up with graduation? Will, you mentioned some greater back-half opportunity on ARPU; is it right to interpret your comment as the year-over-year growth on subscriber ARPU should pick up in speed in the second half?

A couple of points there. The cohorts are just getting bigger through the year. We don't guide on ARPU specifically, but there are a couple of things giving us confidence in the modest year-over-year growth target we have for digital-only ARPU. The positive experience we’ve seen on the bundle step-ups in retention and monetization is one driver. The other is the increasing engagement that Meredith has highlighted. As we've found, higher engagement leads to more opportunities for pricing and monetization over time. With those factors, we feel good about the ARPU trajectory.

I was struck by the sales and marketing costs being down in the quarter. In your comment, you noted that organic traffic is driving more of the growth. Is that something you think will benefit 2024 for the rest of the year? I have a follow-up.

I think we've always experienced and continue to expect the vast majority of our subscribers to come in organically. The sales and marketing line can fluctuate for various reasons, such as how much media we put into the quarter. We're very ROI-focused, and we consider leaning in when subscriber acquisition costs that are particularly attractive arise. Overall, you can expect this line to fluctuate quarter by quarter. However, we continue to expect leverage on this line over time.

Did you have a follow-up?

On Page 17 of the press release, you've got this content licensing item, very small, $563,000. Is that, a, new? And b, is that an add-back to adjusted EBITDA?

What that represents is essentially intercompany licensing between New York Times and The Athletic for the use of athletic content at The Times. It's an expense to NYT and revenue to The Athletic. For the consolidated company, it doesn't have an impact. We can follow up to make sure we’re talking about the same thing.

Thank you all for joining us this morning. We look forward to talking to you again next quarter.

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