New York Times Co Q2 FY2025 Earnings Call

Thank you and welcome to The New York Times Company's Second Quarter 2025 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 2024 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 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. We had a great second quarter across the board, and our strategy continues to work as designed. Our world-class news coverage and diverse portfolio of lifestyle products in big spaces are continuing to attract large audiences who engage deeply. We grew all of our major revenue lines: subscription, advertising, affiliate and licensing, with real running room ahead. And we're generating significant free cash flow, which, combined with a strong balance sheet means we can keep investing in the unparalleled journalism and best-in-class product experiences that enable our leadership and underpin enduring advantages. Our results so far this year demonstrate that we're well positioned to keep delivering revenue and profit growth for the long term. Now let me share a few highlights from the quarter. We have 230,000 net new digital subscribers, bringing our total subscriber base to approximately 11.9 million. That puts us further along the path to our next milestone of 15 million. This quarter, we crossed the threshold of having at least 50% of our subscribers on the bundle or multiple products, which is important because those subscribers engage more, stay longer, and pay more over time. Digital subscription revenue increased by over 15% in the quarter as more and more users experienced our world-class news leverage and the significant value we continue to add across our portfolio. We saw strong and consistent engagement across the enterprise, giving us confidence in our ARPU trajectory. That high engagement is the result of executing well against our priorities for the year. As a reminder, those priorities are to expertly and ambitiously cover the most important news, make our reporting more accessible to more people by expanding in video and audio, and make each of our products more valuable with new content, shows, features, games, and other enhancements. All of that is intended to drive a larger engaged audience for The Times, including a larger pool of engaged prospects. Our video expansion is worth highlighting here because it represents an important and ambitious approach to how we reach and engage people. The expertise and global presence of our newsroom combined with increasing online video consumption create a big opportunity for The Times to capture a greater share of attention. We believe our efforts in this area can make watching The Times as natural and compelling an experience as reading and listening. To that end, we're rapidly scaling video across three categories in the different user needs and moments. First, we're producing substantially more news videos that bring people into the major stories of the day, often by putting our reporters in front of the camera to explain and humanize their work. Second, we're producing more full-length shows, including video versions of podcasts like the Ezra Klein Show and Ross Douthat's Interesting Times, and also Wesley Morris' weekly take on culture. Third, we're using video much more extensively to enhance the experience across our lifestyle products, including sports highlights from major leagues on The Athletic and new video franchises on cooking. While we're still early in these efforts, they are already showing promise in building our presence and brand equity on video-first platforms and creating a more compelling and engaging experience on our own sites and apps. Turning to advertising, we had a really strong quarter with digital advertising growing nearly 19% and total advertising growing more than 12%. This performance reflects how our strategy to create a larger, more durable digital ad business is working. That entails having a portfolio of compelling brands in spaces with broad marketer appeal, particularly sports and games, a large engaged audience that marketers can target effectively and a growing supply of high-performing ad products across the range of formats. Licensing and affiliate revenues also grew in the quarter. We signed a multiyear deal with Amazon in Q2 that marks our first agreement with generative AI at the center. It's a deal that will bring Times journalism and recipes and The Athletic's sports coverage to wider audiences across Amazon's products, services, and proprietary foundation models. This reflects our long-standing openness to enter into commercial partnerships where there is fair value exchange and control over how our intellectual property is used. At Wirecutter, we continue to see growth, particularly in expansion areas like gifts, apparel, and beauty. Finally, we maintained cost discipline in the quarter while strategically investing in our journalism and product experiences, which are the source of our long-term advantage. I'll close with a few thoughts on our path ahead in the context of the current media environment. First and most importantly, we're confident that we're well positioned to continue to grow despite the moves of big tech companies which are leading to less and less traffic for publishers. That's because we see large and persistent demand for what we do and are becoming more differentiated in meeting that demand. It's also because our top priority has been for a long time now to build direct engaged relationships with millions more people who seek us out, form a habit, and make room for our coverage and products in their lives. Every engaged audience member is valuable to us. As we become more essential in their lives, they power all of our revenue streams: subscription, advertising, licensing, and affiliates. All of that means we're confident that continued execution against our strategy will deliver even more value to even more people and result in a larger and more profitable business. With that, I'll turn it over to Will for more details on the quarter.

Thanks, Meredith, and good morning, everyone. As Meredith described, our 2025 second quarter results demonstrate another strong quarter for subscriber growth, revenue growth, AOP growth, margin expansion, and free cash flow generation. The continued strength of our audience and subscriber engagement in the quarter helped power healthy growth across our multiple revenue streams. We also continue to operate efficiently while making disciplined investments aimed at further differentiating our high-quality journalism and digital products. Year-over-year, revenue grew nearly 10%, AOP grew by approximately 28%, and AOP margin expanded by approximately 280 basis points. We generated approximately $193 million of free cash flow in the first half of the year, which reflects our capital-efficient model. Over that same period, we returned approximately $134 million to shareholders, consisting of approximately $83 million in share repurchases and approximately $52 million in dividends. This is consistent with our capital allocation strategy of returning at least 50% of free cash flow to our shareholders over the midterm. Now I'll discuss the second quarter's key results, followed by our financial outlook for the third quarter of 2025. Please note that all comparisons are to the prior year period unless otherwise specified. I'll start with our subscription business. We added approximately 230,000 net new digital subscribers in the quarter, bringing our total subscriber count to approximately 11.9 million. Driver growth came from multiple products across our portfolio, particularly from growth in bundle and multiproduct subscribers. I'll also note that we are in the early stages of rolling out our new family plan subscription offering. Total digital-only ARPU grew 3.2% to $9.64 as we stepped up subscribers from promotional to higher prices and raised prices on certain tenured subscribers. We continue to be encouraged by the results we're seeing at pricing step-up points and are also pleased with the strong engagement we are seeing as we continue to add value to our products. As a result, we remain confident in our ARPU trajectory. With both higher digital subscribers and higher digital-only ARPU in the second quarter, digital-only subscription revenues grew approximately 15% to $350 million. Total subscription revenues grew approximately 10% to $481 million, which was in line with the guidance we provided for the quarter. Now turning to advertising. Total advertising revenues for the quarter were $134 million, an increase of approximately 12%, which is higher than the guidance we provided for the quarter. Digital advertising revenues also came in above the guidance we provided, increasing approximately 19% to $94 million. Digital advertising revenues increased primarily due to new advertising supply in areas of strong marketer demand. Affiliate, licensing, and other revenues increased approximately 6% in the quarter to $70 million as licensing and Wirecutter affiliate revenues continued to perform well. Adjusted operating costs grew 6.1%, this was just above the 5% to 6% guidance range that we provided last quarter. Adjusted diluted EPS in Q2 increased $0.13 to $0.58, primarily driven by higher operating profit and higher interest income. I'll now look ahead to Q3. We expect digital-only subscription revenues to increase 13% to 16%, and total subscription revenues are expected to increase 8% to 10%. We expect digital advertising revenues to increase low double digits and total advertising revenues to increase low to mid-single digits. Affiliate licensing and other revenues are expected to increase high single digits. Adjusted operating costs are expected to increase 5% to 6%. We intend to continue operating efficiently while making disciplined investments in our high-quality journalism and digital product experiences that add value for our audiences. I would also like to note that we expect to have only one reportable segment as of next quarter. In summary, our essential subscription strategy is working as designed. With a valued product portfolio, multiple revenue streams, significant free cash flow generation and a strong balance sheet, we believe we are well positioned to navigate a dynamic market environment. We continue to expect healthy growth in revenues in AOP, margin expansion, and strong free cash flow generation for the full year. With that, we're happy to take your questions.

Meredith, on advertising, the result was really standout for The Times compared to other digital platforms. I just want to see if you could expand on the acceleration here? What are the key factors driving this in terms of your own tech enhancements?

We increasingly see the ad business likely resembling the consumer business. We are in big spaces with truly broad marketer appeal, particularly in lifestyle spaces like games and sports in addition to news, although the whole portfolio is really working for advertising. We've got a really big engaged audience across the portfolio that can be effectively targeted at scale with first-party data that we've spent years building. With our AI tool Brand Match, we have a very wide suite of high-performing ad products. In particular, just in recent months, we added more ad products that can be executed more quickly and easily for marketers, which has really helped during times of uncertainty in the market. We are continuing to roll out new ad supply across the portfolio. All of that together allows us to be a real option for marketers who are looking for high-quality brand association, high reach, and high impact. I would just say it feels like we have a lot of running room ahead on all that.

Okay. And then on the Amazon licensing deal, can you just speak to what you found appealing in terms of extending your editorial content to these platforms? What is it about the agreement, particularly concerning compensation or guardrails, that made you comfortable licensing your content in this way?

Yes. Great question. I would say the deal is consistent with our sort of long-held principles about how we work with big tech companies and platforms. It provides a fair value exchange in a way that feels sustainable, gives us control over how our work is used, and is consistent with our long-term strategy, which is about The Times being essential to more people. More broadly, the deal reinforces our principle that our journalism and everything we do are worth paying for, and our intellectual property should be valued as such.

Great, thanks, David. Operator, we'll take our next question.

I just had two quick questions. You guys are making great progress on your goal towards 15 million subscribers, but I still get a lot of investors that just think you're not going to hit that. So it sounds like you remain confident. Is there any update on the timing when you expect to reach 15 million?

I'm happy to take that one. I'll just start by saying 15 million by 2027 remains very much our aim, and we continue to see a real path to getting there. Let me give you a view of that path and the levers. As both Will and I said in our prepared remarks, we continue to see persistent demand for everything we do. We've got a master brand and then sub-brands that people trust and love. All those brands now represent a level of quality and rigor that's well understood. We have world-class news coverage and leading products in really big spaces with a lot of running room, and our differentiation in those spaces is only getting more pronounced. I reiterated our priorities for this year, which hang from our long-term strategy. Those priorities are about making those products and that coverage more accessible to people and more valuable to people. The most important thing to say is that our audience of registered users with The Times is growing, and we have a lot of opportunity to call them back to us, drive them to action, and ultimately convert them.

Well, the only other question I got from investors concerns the Amazon AI deal. Was that included in your guidance?

I'll take that. Yes, it is included in our guidance. I'll just give a little more color on how to think about that. We don't break out revenue by deal. We can say that the Amazon agreement was operational as of the end of May. As reflected in our guidance, we are showing an acceleration in the affiliate, licensing, and other revenue line in Q3 to high single digits from what was 6% in Q2. This will be the first full quarter with that Amazon agreement, which is playing a role in that line. Just remember that with affiliate, licensing, and other revenue, it has a lot of moving parts that can create some lumpiness. We certainly expect that overall line to be a growth driver, and Amazon is contributing to that.

Thanks, Jason. Operator, let's take our next question.

You guys hit your target for 50% of the base being bundled this quarter. Can you reflect on the progress you've made with the bundle strategy to date and share some thoughts on where you think adoption of the bundle can go from here? I'm also curious to hear about this new family plan subscription that you talked about.

Yes. Great. Why don't I start on the bundle? Will, you can add color on the family plan. I'm really happy with our achievement of the 50% because bundled subscribers engage more, they stay longer, and they pay more over time. You see that the LTV of bundled subscribers is very strong. You can see that in the fact that bundle ARPU was up this quarter. We regard the bundle as incredibly focused on continuing to be a primary catalyst for our growth. We don't expect everyone to choose the bundle, but every subscriber has value to us. We are getting better at driving bundle starts from single products. As for the family plan, Will, you should talk about that.

Yes. We're excited about the family subscription, as Meredith just said. As I mentioned in my remarks, we're in the early stages of rolling it out, but I'll provide a little more context. Our family subscription is a single subscription representing two subscribers, one billed subscriber and then one additional subscriber to reflect up to three additional entitlements. We're excited about its potential to help us in a few ways; it can continue to penetrate that large addressable market, strengthen subscriber retention, and improve monetization over the long term. We believe it's a natural way for people to experience all the products across The Times.

Thanks, Ben. Operator, let's take our next question, please.

Meredith, on your earlier point about your larger user base, you've mentioned traffic headwinds related to AI overviews in the past. Can you talk about whether you've seen these trends intensify in recent months and what you're doing differently to drive that top of funnel health that you mentioned as a priority?

Yes. Happy to do that, Thomas. We see two things as being true. At the same time, the tech companies are making moves that continue to result in less traffic for publishers. Products like ChatGPT and Google's AI overviews now are playing a significant role in that. We have spent many years executing on the strategy of building coverage and products that are worthy of direct relationships and daily habits and our success at that has made us resilient in a dynamic ecosystem. I'm confident that we'll continue to demonstrate that resilience as we execute on our strategy and all the priorities I talked about.

Okay, great. More in the weeds, the length of bundled promotional pricing varies at times in terms of the offer provided to consumers, sometimes it's six months, sometimes it's a year. Anything noteworthy concerning your selling strategy and your approach to acclimating consumers towards valuing the bundle? Should we expect the cadence of eligible price graduations to build through the year and into the next?

Thomas, I'll take that. We've talked about this in the past. The shortest thing I'll say is that we don't have any change to our approach here. Our business as usual has been a 6-month promotion with a 12-month promotional opportunity. It's a system that ensures we're tackling the whole demand curve and engaging people with the bundle. We like all our subscribers, but we regard our bundled subscribers a bit more as that is our primary product that we're trying to get people on. Once we get them on, we're doing everything we can to engage them as quickly and deeply as possible across as many products as possible. That's no change to our strategy, and we're pleased about the performance at the step-up moments, graduation to higher prices.

Thank you, Thomas. Operator, let's take our next question, please.

I just wanted to follow up on the AI licensing opportunities as we try to better understand the implications for the company and the industry. Can you elaborate on why Amazon was the right partner for you? Should we think of this deal as the first of perhaps more to come, now that you've set a tangible set of guardrails for others to adapt? Concerning the financial impact, the affiliate licensing and other revenue line is a bit lumpy, but it's encouraging to see the expected acceleration from 6% in the second quarter to high single digits in the third quarter. Should we consider the implied Q3 contributions to remain largely steady as you move forward, or are there escalators or other factors that could change the financial contributions? Anything you could share would be helpful.

I'll start on the first part of the question, then Will can take the second part. We continue to be open to doing the right kinds of deals. Our approach to licensing is grounded in three principles: Is it consistent with our long-term strategy to be more essential to more people? Do we see fair value exchange in a way that feels sustainable? And do we have control over how our content is used? We have a track record of doing deals with big tech companies when the terms are right. We also believe that enforcing our rights is important to ensuring a sustainable path for fair value exchange over the long term. So we're very open to it and pleased with this deal. Looking forward to more. Will, you should comment on the second part.

On the second part, I appreciate the question. We've said everything about the terms of the deal already that we're prepared to say. I gave my previous response on how that's impacted Q2 and the guidance for Q3. I don't have anything more to add.

Thanks, Kutgun. Operator, we have time for one last question or one last analyst to ask a question. Go ahead.

Meredith, can you be a little bit more specific in terms of this traffic question on what you consider direct organic traffic? How do you define that?

I would say, it's a great question. We think of direct as people seeking us out, asking for us by name, behaving in a way that reflects they have made room for us in their lives and that they have a habit with us. The Times has been on a long journey to drive more of that. That's a huge underpinning of our essential subscription strategy, which we're three years into. You can trace it back to 2015, 2016, when we said the most important things we can do to propel the business were to be essential in more people's lives and have that reflected in a direct relationship in a daily habit. Ensuring we have products that have sufficient gravity is really important. We've got 150 million registered users and counting, and we have extraordinary apps like our core news app and also our games app, cooking app, The Athletic app, and I think those apps present a big opportunity to continue to build direct relationships.

This concludes our question-and-answer session. I would like to turn the conference back over to Anthony DiClemente for any closing remarks. Great. That's it. We really appreciate your participation. Thanks for joining us this morning, and we'll see you next quarter.

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