New York Times Co: Form 10-Q for the period ended Sep 30, 2024

EXECUTIVE OVERVIEW

We are a global media organization focused on creating and distributing high-quality news and information that helps our audience understand and engage with the world. We believe that our original, independent and high-quality reporting, storytelling, expertise and journalistic excellence set us apart from other news organizations and are at the heart of what makes our journalism worth paying for.

We generate revenues principally from the sale of subscriptions and advertising. Subscription revenues consist of revenues from standalone and multiproduct bundle subscriptions to our digital products and subscriptions to and single-copy and bulk sales of our print products. Advertising revenue is derived from the sale of our advertising products and services. Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in the New York headquarters building located at 620 Eighth Avenue, New York, New York (the “Company Headquarters”), our live events business, books, television and film, retail commerce and our student subscription sponsorship program.

Our main operating costs are employee-related costs.

In the accompanying analysis of financial information, we present certain information derived from our consolidated financial information but not presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We are presenting in this report supplemental non-GAAP financial performance measures that exclude depreciation, amortization, severance, non-operating retirement costs, and certain identified special items, as applicable. In addition, we present our free cash flow, defined as net cash provided by operating activities less capital expenditures. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures and should be read in conjunction with financial information presented on a GAAP basis. For further information and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, see “— Results of Operations — Non-GAAP Financial Measures.”

The first nine months of 2024 includes an additional day compared with the first nine months of 2023 as a result of 2024 being a leap year.

The Company has two reportable segments: The New York Times Group (“NYTG”) and The Athletic.

Financial Highlights

• The Company added approximately 260,000 net digital-only subscribers compared with the end of the second quarter of 2024, driven largely by bundle and multiproduct subscriber additions as well as other single products subscriber additions. The Company ended the third quarter of 2024 with approximately 11.09 million subscribers to its print and digital products, including approximately 10.47 million digital-only subscribers. Of the 10.47 million digital-only subscribers, approximately 5.12 million were bundle and multiproduct subscribers. Compared with the end of the third quarter of 2023, there was a net increase of 1,060,000 digital-only subscribers.
• Total digital-only average revenue per user (“ARPU”) increased 1.8% year-over-year to $9.45 driven primarily by subscribers graduating from promotional to higher prices and price increases on tenured non-bundled subscribers.
• Operating profit increased 20.7% to $76.7 million in the third quarter of 2024 from $63.6 million in the third quarter of 2023. Adjusted operating profit (“AOP”), defined as operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (a non-GAAP measure discussed below under “Non-GAAP Financial Measures”) increased 16.1% to $104.2 million in the third quarter of 2024 from $89.8 million in the third quarter of 2023. Operating profit margin (operating profit expressed as a percentage of revenues) increased to 12.0% in the third quarter of 2024, compared with 10.6% in the third quarter of 2023. Adjusted operating profit margin, defined as adjusted operating profit expressed as a percentage of revenues (a non-GAAP measure discussed below under “Non-GAAP Financial Measures”), increased to 16.3% in the third quarter of 2024, compared with 15.0% in the third quarter of 2023.
• Total revenues increased 7.0% to $640.2 million in the third quarter of 2024 from $598.3 million in the third quarter of 2023.
• Total subscription revenues increased 8.3% to $453.3 million in the third quarter of 2024 from $418.6 million in the third quarter of 2023. Digital-only subscription revenues increased 14.2% to $322.2 million in the third quarter of 2024 from $282.2 million in the third quarter of 2023.
• Total advertising revenues increased 1.1% to $118.4 million in the third quarter of 2024 from $117.1 million in the third quarter of 2023, due to an increase of 8.8% in digital advertising revenues, partially offset by a decrease of 12.6% in print advertising revenues.
• Other revenue increased 9.3% to $68.5 million in the third quarter of 2024 from $62.7 million in the third quarter of 2023, as a result of higher Wirecutter affiliate referral revenues and higher licensing revenues.
• Operating costs increased 5.4% to $563.5 million in the third quarter of 2024 from $534.8 million in the third quarter of 2023. Adjusted operating costs, defined as operating costs before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (a non-GAAP measure discussed below under “Non-GAAP Financial Measures”), increased 5.4% to $536.0 million in the third quarter of 2024 from $508.6 million in the third quarter of 2023.
• Diluted earnings per share were $0.39 and $0.32 for the third quarters of 2024 and 2023, respectively. Adjusted diluted earnings per share, defined as diluted earnings per share excluding amortization of acquired intangible assets, severance, non-operating retirement costs and special items (a non-GAAP measure discussed below under “Non-GAAP Financial Measures”), were $0.45 and $0.37 for the third quarters of 2024 and 2023, respectively.

Industry Trends, Economic Conditions, Challenges and Risks

We operate in a highly competitive environment that is subject to rapid change. Companies shaping our competitive environment include content providers and distributors, as well as news aggregators, search engines, social media platforms and emerging products and tools powered by generative artificial intelligence. Competition among these companies is robust, and new competitors can quickly emerge. We have designed our strategy to navigate the challenges and take advantage of opportunities presented by this period of transformation in our industry.

We and the companies with which we do business are subject to risks and uncertainties caused by factors beyond our control, including economic, geopolitical and public health conditions. These include economic weakness, instability, uncertainty and volatility, including the potential for a recession; a competitive labor market and evolving workforce expectations, including for unionized employees; inflation; supply chain disruptions; rising interest rates; and political and sociopolitical uncertainties and conflicts. These factors may result in declines and/or volatility in our results.

We believe the macroeconomic environment has had and may in the future have an adverse impact on both digital and print advertising spending. Additionally, we believe that there may be marketer sensitivity to some news topics, impacting overall advertising spend.

On November 4, a union representing certain of our technology employees commenced a work stoppage. Contract negotiations are ongoing. We are closely monitoring any impact to our business and we have prepared for a range of scenarios. Any effects on our business, operations and results will depend on future developments.

The media industry has transitioned from being primarily print focused to digital, resulting in secular declines in both print subscription and print advertising revenues, and we do not expect this trend to reverse. Our printing and distribution costs have been impacted as a result of this transition, and may be further impacted in the future by higher costs including those associated with raw materials, delivery and distribution and outside printing. We actively monitor industry trends, economic conditions, challenges and risks to remain flexible and to optimize and evolve our business as appropriate; however, the full impact they will have on our business, operations and financial results is uncertain and will depend on numerous factors and future developments. The risks related to our business are further described in the section titled “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

RESULTS OF OPERATIONS

The following table presents our consolidated financial results:

(In thousands)

25

Revenues

Subscription Revenues

Subscription revenues consist of revenues from subscriptions to our digital and print products (which include our news product, as well as The Athletic and our Cooking, Games and Wirecutter products), and single-copy and bulk sales of our print products (which represent less than 5% of these revenues). Subscription revenues are based on both the number of digital-only subscriptions and copies of the printed newspaper sold, and the rates charged to the respective customers.

We offer a digital-only bundle that includes access to our digital news product (which includes our news website, NYTimes.com, and mobile and Audio applications), as well as The Athletic and our Cooking, Games and Wirecutter products. Our subscriptions also include standalone digital subscriptions to our digital news product, as well as to The Athletic, and to our Cooking, Games and Wirecutter products.

Subscription revenues increased $34.8 million, or 8.3%, in the third quarter of 2024 compared with the same prior-year period, due to an increase in digital-only subscription revenues of $40.0 million, or 14.2%, partially offset by a decrease in print subscription revenues of $5.2 million, or 3.8%. Digital-only subscription revenues increased primarily due to an increase in bundle and multiproduct revenues of $53.1 million and an increase in other single-product subscription revenues of $8.4 million, partially offset by a decrease in news-only subscription revenues of $21.5 million. Bundle and multiproduct average digital-only subscribers increased 1,440,000, or 40.8%, while bundle and multiproduct ARPU decreased $0.46, or 3.6%. Other single-product average digital-only subscribers increased 630,000, or 24.6%, while other single-product ARPU increased $0.11, or 3.2%. News-only average digital-only subscribers decreased 970,000, or 30.5%, while news-only ARPU increased $1.43, or 14.2%. In calculating average digital-only subscribers for our subscriber categories, we use the monthly average number of digital-only subscribers (calculated as the sum of the number of subscribers in each category at the beginning and end of the month, divided by two). Print subscription revenue decreased primarily due to a decrease in home-delivery subscription revenue, which was driven by a lower number of average print subscribers, reflecting secular trends, partially offset by an increase in domestic home-delivery prices.

Subscription revenues increased $95.9 million, or 7.8%, in the first nine months of 2024 compared with the same prior-year period, due to an increase in digital-only subscription revenues of $108.9 million, or 13.4%, partially offset by a decrease in print subscription revenues of $13.0 million, or 3.1%. Digital-only subscription revenues increased primarily due to an increase in bundle and multiproduct revenues of $141.5 million and an increase in other single-product subscription revenues of $18.9 million, partially offset by a decrease in news-only subscription revenues of $51.5 million. Bundle and multiproduct average digital-only subscribers increased 1,550,000, or 49.6%, while bundle and multiproduct ARPU decreased $1.40, or 10.4%. Other single-product average digital-only subscribers increased 500,000, or 20.1%, while other single-product ARPU was relatively flat. News-only average digital-only subscribers decreased 1,060,000, or 30.7%, while news-only ARPU increased $1.88, or 20.2%. Print subscription revenue decreased primarily due to a decrease in home-delivery subscription revenue, which was driven by a lower number of average print subscribers, reflecting secular trends, partially offset by an increase in domestic home-delivery prices.

The following table summarizes digital and print subscription revenues for the third quarters and first nine months of 2024 and 2023:

(In thousands)

A subscriber is defined as a customer who has subscribed (and provided a valid method of payment) for the right to access one or more of the Company’s products. The Company ended the third quarter of 2024 with approximately 11.09 million subscribers to its print and digital products, including approximately 10.47 million digital-only subscribers.

Compared with the end of the second quarter of 2024, there was a net increase of 260,000 digital-only subscribers. Compared with the end of the third quarter of 2023, there was a net increase of 1,060,000 digital-only subscribers.

Print domestic home-delivery subscribers totaled approximately 620,000 at the end of the third quarter of 2024, a net decrease of 10,000 subscribers compared with the end of the second quarter of 2024 and a net decrease of 60,000 subscribers compared with the end of the third quarter of 2023. Subscribers with a domestic home-delivery print subscription to The New York Times, which includes access to our digital products, are excluded from digital-only subscribers.

We report three mutually exclusive digital-only subscriber categories: bundle and multiproduct, news-only and other single-product, which collectively sum to total digital-only subscribers, as well as the average revenue per user for each of these categories.

The following table sets forth subscribers as of the end of the five most recent fiscal quarters:

(In thousands)

The following table sets forth the subset of subscribers above who have a paid digital-only standalone subscription or a bundle subscription that includes the ability to access The Athletic as of the end of the five most recent fiscal quarters. The Company plans to discontinue reporting this metric after the fourth quarter of 2024. Digital-only subscribers with The Athletic will continue to be included in our reported bundle and multiproduct and other single-product subscriber categories.

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“Average revenue per user” or “ARPU,” a metric we calculate to track the revenue generation of our digital subscriber base, represents the average revenue per digital subscriber over a 28-day billing cycle during the applicable quarter. The following table sets forth ARPU metrics relating to the above digital-only subscriber categories for the five most recent fiscal quarters:

Total digital-only ARPU was $9.45 for the third quarter of 2024, an increase of 1.8% compared with the third quarter of 2023. The year-over-year increase was driven primarily by subscribers graduating from promotional to higher prices and price increases on tenured non-bundled subscribers.

Advertising Revenues

Advertising revenue is principally from advertisers (such as technology, financial and luxury goods companies) promoting products, services or brands on digital platforms in the form of display ads, audio and video ads, in print in the form of column-inch ads and at live events. Advertising revenue is primarily derived from offerings sold directly to marketers by our advertising sales teams. A smaller proportion of our total advertising revenues is generated through open-market programmatic auctions run by third-party ad exchanges. Advertising revenue is primarily determined by the volume (e.g., impressions or column inches), rate and mix of advertisements. Digital advertising includes our core digital advertising business and other digital advertising. Our core digital advertising business includes direct-sold website, mobile application, podcast, email and video advertisements (including direct-sold programmatic advertising). Direct-sold display advertising, a component of core digital advertising, includes offerings on websites and mobile applications sold directly to marketers by our advertising sales teams. Other digital advertising includes open-market programmatic advertising and creative services fees. NYTG has revenue from all categories discussed above. The Athletic has revenue from direct-sold display advertising, podcast, email and video advertisements (including direct-sold programmatic advertising) and open-market programmatic advertising. Print advertising includes revenue from column-inch ads and classified advertising, as well as preprinted advertising, also known as freestanding inserts. There is no print advertising revenue generated from The Athletic, which does not have a print product.

The following table summarizes digital and print advertising revenues for the third quarters and first nine months of 2024 and 2023:

(In thousands)

Digital advertising revenues, which represented 68.9% of total advertising revenues in the third quarter of 2024, increased $6.6 million, or 8.8%, to $81.6 million compared with $75.0 million in the same prior-year period. The increase was primarily a result of higher other digital revenues of $5.2 million and higher core digital advertising of $1.4 million. Other digital advertising revenues increased primarily due to an increase in open-market programmatic revenues largely driven by new advertising supply across our products. Open-market programmatic impressions increased 70%, while the average rate decreased 19%. Core digital advertising revenues increased due to an increase in direct-sold display advertising revenues and revenues from email newsletters. Direct-sold display impressions increased 14%, while the average rate decreased 5%.

Digital advertising revenues, which represented 65.7% of total advertising revenues in the first nine months of 2024, increased $14.1 million, or 6.7%, to $224.2 million compared with $210.1 million in the same prior-year period. The increase was primarily a result of higher other digital revenues of $9.5 million and higher revenues in core digital advertising of $4.6 million. Other digital advertising revenues increased primarily due to an increase in open-market programmatic revenues largely driven by new advertising supply across our products and an increase in creative services as a result of more custom advertising campaigns in 2024. Open-market programmatic impressions increased 50%, while the average rate decreased 21%. Core digital advertising revenues increased due to an increase in direct-sold display advertising revenues. Direct-sold display impressions increased 12%, while the average rate decreased 6%.

Print advertising revenues, which represented 31.1% of total advertising revenues in the third quarter of 2024, decreased $5.3 million, or 12.6%, to $36.8 million compared with $42.1 million in the same prior-year period. The decrease in the third quarter of 2024 was primarily due to a 13.8% decrease in column-inches. Print advertising revenues in 2024 continue to be impacted by secular trends.

Print advertising revenues, which represented 34.3% of total advertising revenues in the first nine months of 2024, decreased $13.9 million, or 10.7%, to $117.1 million compared with $131.0 million in the same prior-year period. The decrease in the first nine months was primarily due to a 10.0% decrease in column-inches. Print advertising revenues in 2024 continue to be impacted by secular trends.

We believe that there may be marketer sensitivity to some news topics, impacting overall advertising spend.

Other Revenues

Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in the Company Headquarters, our live events business, books, television and film, retail commerce and our student subscription sponsorship program.

Other revenues increased $5.8 million, or 9.3% in the third quarter of 2024 compared with the same prior-year period, primarily as a result of growth in Wirecutter affiliate referral revenues of $3.2 million, as well as higher content licensing revenues of $1.7 million, primarily related to an Apple licensing deal, partially offset by lower revenues from a Google commercial agreement.

Other revenues increased $13.3 million, or 7.3% in the first nine months of 2024 compared with the same prior-year period, primarily as a result of growth in Wirecutter affiliate referral revenues of $10.0 million, as well as higher content licensing revenues of $9.3 million, primarily related to an Apple licensing deal, partially offset by lower books, television and film revenues of $7.5 million.

Digital other revenues, which consist primarily of Wirecutter affiliate referral revenue and digital licensing revenues, totaled $43.6 million and $37.2 million in the third quarters of 2024 and 2023, respectively, and $121.6 million and $101.3 million in the first nine months of 2024 and 2023, respectively.

Building rental revenue from the leasing of floors in the Company Headquarters totaled $6.6 million and $6.8 million in the third quarters of 2024 and 2023, respectively, and $19.9 million and $20.5 million in the first nine months of 2024 and 2023, respectively.

Operating Costs

Operating costs were as follows:

(In thousands)

Cost of Revenue (excluding depreciation and amortization)

Cost of revenue includes all costs related to content creation, subscriber and advertiser servicing, and print production and distribution as well as infrastructure costs related to delivering digital content, which include all cloud and cloud-related costs as well as compensation for employees that enhance and maintain that infrastructure.

Cost of revenue in the third quarter of 2024 increased $20.7 million, or 6.7%, compared with the same prior-year period. The increase was largely due to higher journalism costs of $14.5 million, higher subscriber servicing costs of $3.9 million, higher digital content delivery costs of $2.6 million and higher advertising servicing costs of $1.4 million, partially offset by lower print production and distribution costs of $1.7 million. The increase in journalism costs was largely due to higher compensation and benefits, which was driven by merit increases in compensation, growth in the number of employees who work in our newsrooms, the timing of benefits accruals and higher incentive compensation. The increase in subscriber servicing costs was largely due to higher third-party commissions due to an increase in subscriptions and higher compensation and benefits and incentive compensation, partially offset by lower customer care costs. The increase in digital content delivery costs was largely due to higher cloud computing costs. The increase in advertising servicing costs was largely due to an increase in costs to fulfill advertising contracts and higher creative services fees. The decrease in print production and distribution costs was primarily due to lower newsprint pricing and fewer print copies produced.

Cost of revenue in the first nine months of 2024 increased $43.6 million, or 4.7%, compared with the same prior-year period. The increase was largely due to higher journalism costs of $36.3 million, higher advertising servicing costs of $4.8 million, higher subscriber servicing costs of $3.8 million and higher digital content delivery of $3.8 million, partially offset by lower print production and distribution costs of $5.1 million. The increase in journalism costs was largely due to higher compensation and benefits, which was driven by merit increases in compensation, growth in the number of employees who work in our newsrooms, the timing of benefits accruals and higher incentive compensation, partially offset by lower content creation costs as a result of fewer television episodes in 2024. The increase in advertising servicing costs was largely due to an increase in costs to fulfill advertising contracts and higher creative services fees. The increase in subscriber servicing was largely due to higher commissions and higher credit card processing fees due to an increase in subscriptions, partially offset by lower customer care costs. The increase in digital content delivery costs was largely due to higher cloud related costs and higher compensation and benefits driven by higher incentive compensation. The decrease in print production and distribution costs was primarily due to lower newsprint pricing and fewer print copies produced as well as lower benefit costs, partially offset by higher distribution and outside printing costs.

Sales and Marketing

Sales and marketing includes costs related to the Company’s subscription and brand marketing efforts as well as advertising sales costs.

Sales and marketing costs in the third quarter of 2024 increased $6.5 million, or 10.4%, compared with the same prior-year period. The increase was due to higher marketing costs of $5.0 million and higher sales costs of $1.5 million. The increase in marketing costs was primarily due to higher subscriber acquisition spending. The increase in sales costs was primarily due to higher compensation and benefits largely driven by growth in the number of employees.

Sales and marketing costs in the first nine months of 2024 increased $3.7 million, or 1.9%, compared with the same prior-year period. The increase was due to higher sales costs of $6.3 million, partially offset by lower marketing costs of $2.6 million. The increase in sales costs was primarily due to higher compensation and benefits largely driven by growth in the number of employees. The decrease in marketing costs was primarily due to lower compensation and benefits costs driven by fewer employees.

Media expenses, a component of sales and marketing costs that represents the cost to promote our subscription business, increased 33.8% to $35.0 million in the third quarter of 2024 from $26.1 million in the third quarter of 2023, and increased 7.5% to $92.4 million in the first nine months of 2024 from $85.9 million in the first nine months of 2023. The increase in the third quarter of 2024 was largely a result of higher subscriber acquisition spending. The increase in the first nine months of 2024 was largely a result of higher subscriber acquisition spending, partially offset by lower brand spend.

Product Development

Product development includes costs associated with the Company’s investment in developing and enhancing new and existing product technology, including engineering, product development and data insights. All product development costs are technology costs.

Product development costs in the third quarter of 2024 increased $3.6 million, or 6.3%, compared with the same prior-year period. The increase in the third quarter of 2024 was largely due to higher compensation and benefits expenses of $2.4 million driven by the timing of benefits accruals, incentive compensation and growth in the number of employees, as well as higher outside services costs of $0.8 million.

Product development costs in the first nine months of 2024 increased $15.9 million, or 9.3%, compared with the same prior-year period. The increase in the first nine months of 2024 was largely due to higher compensation and benefits expenses of $11.3 million driven by incentive compensation, merit increases and the timing of benefits accruals, as well as higher outside services costs of $2.6 million.

General and Administrative Costs

General and administrative costs include general management, corporate enterprise technology, building operations, unallocated overhead costs, severance and multiemployer pension plan withdrawal costs.

General and administrative costs in the third quarter of 2024 decreased $5.7 million, or 6.9%, compared with the same prior-year period. The decrease was primarily due to lower severance expense of $2.8 million, lower outside services costs of $2.1 million and lower other expenses of $1.2 million primarily driven by a prior-year period increase in our contingent consideration liability.

General and administrative costs in the first nine months of 2024 decreased $3.3 million, or 1.4%, compared with the same prior-year period. The decrease was primarily due to lower building operations and maintenance expenses of $3.0 million, lower severance expense of $1.3 million and lower outside services costs of $1.2 million, partially offset by higher compensation and benefits of $2.2 million driven by incentive compensation.

Depreciation and Amortization

Depreciation and amortization costs in the third quarter and first nine months of 2024 decreased $0.9 million, or 4.0%, and $2.3 million, or 3.6%, compared with the same prior-year periods. The decrease in both periods was primarily due to lower amortization as a result of fully amortized intangible assets in 2024.

Generative AI Litigation Costs

In the third quarter and first nine months of 2024, the Company recorded $4.6 million and $7.6 million, respectively, of pre-tax litigation-related costs in connection with a lawsuit against Microsoft Corporation and Open AI Inc. and various of its corporate affiliates alleging unlawful and unauthorized copying and use of the Company’s journalism and other content in connection with their development of generative artificial intelligence products (“Generative AI Litigation Costs”). Management determined to report Generative AI Litigation Costs as a special item beginning in the first quarter of 2024 because, unlike other litigation expenses, the Generative AI Litigation Costs arise from a discrete, complex and unusual proceeding and do not, in management’s view, reflect the Company’s ongoing business operational performance. See Note 14 of the Notes to the Condensed Consolidated Financial Statements for additional information.

Impairment Charges

There were no impairment charges in the third quarter or first nine months of 2024.

In the third quarter of 2023, the Company recorded a $2.5 million impairment charge related to an indefinite-lived intangible asset.

In the second quarter of 2023, the Company recorded a $12.7 million impairment charge related to excess leased office space that is being marketed for sublet.

Multiemployer Pension Plan Liability Adjustment

In the third quarter of 2023, the Company recorded a favorable adjustment related to a reduction in its multiemployer pension plan liability of $2.3 million.

Segment Information

We have two reportable segments: NYTG and The Athletic. Management uses adjusted operating profit (loss) by segment in assessing performance and allocating resources. The Company includes in its presentation revenues and adjusted operating costs to arrive at adjusted operating profit (loss) by segment. Adjusted operating costs are defined as operating costs before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items. Adjusted operating profit is defined as operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items. Adjusted operating profit expressed as a percentage of revenues is referred to as adjusted operating profit margin.

Subscription revenues from and expenses associated with our bundle are allocated to NYTG and The Athletic.

We allocate 10% of bundle revenues to The Athletic based on management’s view of The Athletic’s relative value to the bundle, which is derived based on analysis of various metrics, and allocate the remaining bundle revenues to NYTG.

We allocate 10% of product development, marketing and subscriber servicing expenses (including direct variable expenses such as credit card fees, third party fees and sales taxes) associated with the bundle to The Athletic, and the remaining costs are allocated to NYTG, in each case, in line with the revenues allocations.

(In thousands)

33

(In thousands)

34

Adjusted operating costs (operating costs before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items) details by segment

(In thousands)

35

The New York Times Group

NYTG revenues increased 5.7% in the third quarter of 2024 to $596.0 million from $563.9 million in the third quarter of 2023 and increased 4.9% in the first nine months of 2024 to $1,738.6 million from $1,657.2 million in the first nine months of 2023. Subscription revenues increased 7.4% in the third quarter of 2024 to $422.2 million from $392.9 million in the third quarter of 2023 and increased 7.1% in first nine months of 2024 to $1,233.6 million from $1,152.1 million in the first nine months of 2023 due to growth in subscription revenues from digital-only products, partially offset by decreases in print subscription revenues. Advertising revenues increased 0.6% in the third quarter of 2024 to $109.3 million from $108.7 million in the third quarter of 2023 due to higher digital advertising revenues, partially offset by declines in print advertising revenues. Print advertising decreased primarily as a result of a decrease in column-inches. Digital advertising revenues increased primarily as a result of higher revenues from programmatic advertising and creative services. Advertising revenues decreased 1.1% to $319.4 million from $323.1 million in the first nine months of 2024 due to declines in print advertising revenues, partially offset higher digital advertising revenues. Print advertising revenues decreased primarily as a result of a decrease in column-inches. Digital advertising revenues increased primarily as a result of higher revenues from programmatic advertising and creative services. Other revenues increased 3.6% in the third quarter of 2024 to $64.5 million from $62.3 million in the third quarter of 2023 due to higher Wirecutter affiliate referral revenues, partially offset by lower licensing revenues. Other revenues increased 2.0% in the first nine months of 2024 to $185.6 million from $182.0 million in the first nine months of 2023 due to higher Wirecutter affiliate referral revenues, partially offset by lower book, television and film revenues.

NYTG adjusted operating costs increased 6.1% in the third quarter of 2024 to $494.5 million from $466.2 million in the third quarter of 2023 and increased 3.7% in the first nine months of 2024 to $1,445.2 million from $1,394.3 million in the first nine months of 2023. The increase in costs in the third quarter of 2024 was primarily related to higher journalism and sales and marketing cost, partially offset by lower general and administrative costs. The increase in costs in the first nine months of 2024 was primarily related to higher journalism, subscriber and advertising servicing, product development and sales and marketing costs, partially offset by lower print production and distribution costs, as well as lower general and administrative costs.

NYTG adjusted operating profit increased 4.0% in the third quarter of 2024 to $101.5 million from $97.7 million in the third quarter of 2023 and increased 11.6% in the first nine months of 2024 to $293.4 million from $262.9 million in the first nine months of 2023. The increase in the third quarter and first nine months of 2024 was primarily as a result of higher digital subscription and digital advertising revenues, partially offset by higher adjusted operating costs and lower print advertising and print subscription revenues.

The Athletic

The Athletic revenues increased 29.8% in the third quarter of 2024 to $44.7 million from $34.4 million in the third quarter of 2023 and increased 32.0% in the first nine months of 2024 to $122.4 million from $92.8 million in the first nine months of 2023. Subscription revenues increased 21.4% in the third quarter of 2024 to $31.1 million from $25.6 million in the third quarter of 2023 and increased 19.7% in the first nine months of 2024 to $88.1 million from $73.6 million in the first nine months of 2023, primarily due to growth in digital-only subscribers with The Athletic. Other revenue increased in the third quarter of 2024 to $4.5 million from $0.4 million in the third quarter of 2023 and increased in the first nine months of 2024 to $12.5 million from $1.1 million in the first nine months of 2023, primarily due to an increase in licensing revenue from an Apple licensing deal. Advertising revenues increased 7.2% in the third quarter of 2024 to $9.0 million from $8.4 million in the third quarter of 2023 due to higher revenues from direct-sold display advertising. Advertising revenues increased 21.0% in the first nine months of 2024 to $21.8 million from $18.0 million in the first nine months of 2023, primarily due to higher revenues from direct-sold display advertising, partially offset by a decrease in podcast advertising.

The Athletic adjusted operating costs decreased 0.6% in the third quarter of 2024 to $42.1 million from $42.3 million in the third quarter of 2023 and increased 9.3% in the first nine months of 2024 to $130.9 million from $119.8 million in the first nine months of 2023. The decrease in costs in the third quarter of 2024 was primarily due to lower sales and marketing costs as some media spend was shifted to NYTG for bundle marketing, partially offset by higher journalism and product development costs. The increase in costs in the first nine months of 2024 was primarily related to higher product development and journalism costs, partially offset by lower sales and marketing costs as some media spend was shifted to NYTG for bundle marketing.

The Athletic adjusted operating profit increased in the third quarter of 2024 to $2.6 million from a loss of $7.9 million in the third quarter of 2023. The increase in the third quarter of 2024 is primarily due to higher subscription and other revenues. The Athletic adjusted operating loss decreased in the first nine months of 2024 to $8.5 million from $27.0 million in the first nine months of 2023. The decrease in the first nine months of 2024 is due to higher revenues, partially offset by higher adjusted operating costs.

NON-OPERATING ITEMS

Other Components of Net Periodic Benefit (Costs)/Income

See Note 9 of the Notes to the Condensed Consolidated Financial Statements for information regarding other components of net periodic benefit (costs)/income.

Interest Income and other, net

See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding interest income and other, net.

Income Taxes

See Note 10 of the Notes to the Condensed Consolidated Financial Statements for information regarding income taxes.

NON-GAAP FINANCIAL MEASURES

We have included in this report certain supplemental financial information derived from consolidated financial information but not presented in our financial statements prepared in accordance with GAAP. Specifically, we have referred to the following non-GAAP financial measures in this report:

• adjusted diluted earnings per share, defined as diluted earnings per share excluding severance, non-operating retirement costs and the impact of special items;
• adjusted operating profit, defined as operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items, and expressed as a percentage of revenues, adjusted operating profit margin;
• adjusted operating costs, defined as operating costs before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items; and
• free cash flow, defined as net cash provided by operating activities less capital expenditures.

The special items in 2024 consisted of:

• $4.6 million of Generative AI Litigation Costs ($3.4 million or $0.03 per share after tax) in the third quarter and $7.6 million ($5.6 million or $0.05 per share after tax) for the first nine months.

The special items in 2023 consisted of:

• A $12.7 million lease-related impairment charge ($9.3 million or $0.06 per share after tax) in the second quarter;
• A $2.5 million charge ($1.8 million or $0.01 per share after tax) related to an impairment of an indefinite-lived intangible asset; and
• A $2.3 million favorable adjustment ($1.7 million or $0.01 per share after tax) related to a reduction in a multiemployer pension plan liability.

We have included these non-GAAP financial measures because management reviews them on a regular basis and uses them to evaluate and manage the performance of our operations. We believe that, for the reasons outlined below, these non-GAAP financial measures provide useful information to investors as a supplement to reported diluted earnings/(loss) per share, operating profit/(loss) and operating costs. However, these measures should be evaluated only in conjunction with the comparable GAAP financial measures and should not be viewed as alternative or superior measures of GAAP results.

Adjusted diluted earnings per share provides useful information in evaluating the Company’s period-to-period performance because it eliminates items that the Company does not consider to be indicative of earnings from ongoing operating activities. Adjusted operating profit and adjusted operating profit margin are useful in evaluating the ongoing performance of the Company’s businesses as they exclude the significant non-cash impact of depreciation and amortization as well as items not indicative of ongoing operating activities. Total operating costs include depreciation, amortization, severance and multiemployer pension plan withdrawal costs. Total operating costs, excluding these items, provides investors with helpful supplemental information on the Company’s underlying operating costs that is used by management in its financial and operational decision-making.

Management considers special items, which may include impairment charges, pension settlement charges, acquisition-related costs, and beginning in the first quarter of 2024, Generative AI Litigation Costs, as well as other items that arise from time to time, to be outside the ordinary course of our operations. Management believes that excluding these items provides a better understanding of the underlying trends in the Company’s operating performance and allows more accurate comparisons of the Company’s operating results to historical performance. Management determined to report Generative AI Litigation Costs as a special item and thus exclude them beginning in the first quarter of 2024 because, unlike other litigation expenses which are not excluded, the Generative AI Litigation Costs arise from a discrete, complex and unusual proceeding and do not, in management’s view, reflect the Company’s ongoing business operational performance. In addition, management excludes severance costs, which may fluctuate significantly from quarter to quarter, because it believes these costs do not necessarily reflect expected future operating costs and do not contribute to a meaningful comparison of the Company’s operating results to historical performance.

Excluded from our non-GAAP financial measures are non-operating retirement costs which are primarily tied to financial market performance and changes in market interest rates and investment performance. Management considers non-operating retirement costs to be outside the performance of the business and believes that presenting adjusted diluted earnings per share excluding non-operating retirement costs and presenting adjusted operating results excluding multiemployer pension plan withdrawal costs, in addition to the Company’s GAAP diluted earnings per share and GAAP operating results, provide increased transparency and a better understanding of the underlying trends in the Company’s operating business performance.

The Company considers free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. See “Liquidity and Capital Resources — Free Cash Flow” below for more information and a reconciliation of free cash flow to net cash provided by operating activities.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are set out in the tables below.

Reconciliation of diluted earnings per share excluding amortization of acquired intangible assets, severance, non-operating retirement costs and special items (or adjusted diluted earnings per share)

(1) Amounts may not add due to rounding.

* Represents a change equal to or in excess of 100% or not meaningful.

Reconciliation of operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit) and of adjusted operating profit margin

(In thousands)

39

Reconciliation of total operating costs before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating costs)

(In thousands)

40

LIQUIDITY AND CAPITAL RESOURCES

We believe our cash balance and cash provided by operations, in combination with other sources of cash, will be sufficient to meet our financing needs over the next twelve months. As of September 30, 2024, we had cash, cash equivalents and short- and long-term marketable securities of $820.4 million. Our cash and marketable securities balances between December 31, 2023, and September 30, 2024, increased primarily due to cash proceeds from operating activities, partially offset by dividend payments, share repurchases, capital expenditures and share-based compensation withholding tax payments.

We have paid quarterly dividends on the Class A and Class B Common Stock each quarter since late 2013. In February 2024, the Board of Directors approved an increase in the quarterly dividend to $0.13 per share, which was paid in April 2024. In June and September 2024, the Board of Directors declared a quarterly dividend of $0.13 per share on the Class A and Class B Common Stock, which was paid in July and October 2024. We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividends will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant.

In February 2023, the Board of Directors approved a $250.0 million Class A share repurchase program in addition to the existing $150.0 million authorization approved in February 2022. The authorizations provide that shares of Class A Common Stock may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. We expect to repurchase shares to offset the impact of dilution from our equity compensation program and to return capital to our stockholders. There is no expiration date with respect to these authorizations. As of September 30, 2024, repurchases under these authorizations totaled approximately $209.8 million (excluding commissions and excise taxes), fully utilizing the 2022 authorization and leaving approximately $190.2 million under the 2023 authorization. During the nine months ended September 30, 2024, repurchases under these authorizations totaled approximately $60.3 million and we repurchased an additional $7.2 million (excluding commissions and excise taxes) between October 1, 2024 and November 1, 2024, leaving approximately $183.0 million remaining under the 2023 authorization.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. In 2024, we expect a negative impact on our cash from operations of approximately $28 million and our net deferred tax assets to increase by a similar amount as a result of this legislation. The actual impact on 2024 cash from operations will depend on the amount of research and development costs we incur, on whether Congress modifies or repeals this provision, and on whether new guidance and interpretive rules are issued by the U.S. Treasury, among other factors.

Capital Resources

Sources and Uses of Cash

Cash flows provided by/(used in) by category were as follows:

(In thousands)

Operating Activities

Cash from operating activities is generated by cash receipts from subscriptions, advertising sales and other revenue. Operating cash outflows include payments for employee compensation, pension and other benefits, raw materials, marketing expenses and income taxes.

Net cash provided by operating activities increased in the first nine months of 2024 compared with the same prior-year period primarily due to higher net income, partially offset by higher tax payments.

Investing Activities

Cash from investing activities generally includes proceeds from marketable securities that have matured and the sale of assets, investments or a business. Cash used in investing activities generally includes purchases of marketable securities, payments for capital projects and acquisitions of new businesses and investments.

Net cash used in investing activities in the first nine months of 2024 was primarily related to $177.6 million in net purchases of marketable securities and capital expenditures of $21.1 million.

Financing Activities

Cash used in financing activities generally includes the payment of dividends, share-based compensation withholding tax payments and share repurchases.

Net cash used in financing activities in the first nine months of 2024 was primarily related to dividend payments of $61.5 million, share repurchases of $60.3 million and share-based compensation tax withholding payments of $21.1 million.

Free Cash Flow

Free cash flow is a non-GAAP financial measure defined as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. In addition, management uses free cash flow to set targets for return of capital to stockholders in the form of dividends and share repurchases.

The following table presents a reconciliation of net cash provided by operating activities to free cash flow:

(In thousands)

Free cash flow in the first nine months of 2024 was $237.7 million compared with $207.6 million in 2023. Free cash flow increased primarily due to higher cash provided by operating activities, as discussed above.

Restricted Cash

We were required to maintain $14.2 million of restricted cash as of September 30, 2024, and $13.7 million as of December 31, 2023, substantially all of which is set aside to collateralize workers’ compensation obligations.

Capital Expenditures

Capital expenditures totaled approximately $22 million and $17 million in the first nine months of 2024 and 2023, respectively. The increase in capital expenditures in 2024 was primarily driven by higher expenditure related to improvements in the Company Headquarters and at our College Point, N.Y., printing and distribution facility. The cash payments related to capital expenditures totaled approximately $21 million and $17 million in the first nine months of 2024 and 2023, respectively.

Revolving Credit Facility

On July 27, 2022, the Company entered into an amendment and restatement of its previous credit facility that, among other changes, increased the committed amount to $350.0 million and extended the maturity date to July 27, 2027 (as amended and restated, the “Credit Facility”). Certain of the Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Credit Facility. Borrowings under the Credit Facility bear interest at specified rates based on our utilization and consolidated leverage ratio. The Credit Facility contains various customary affirmative and negative covenants. In addition, the Company is obligated to pay a quarterly unused commitment fee at an annual rate of 0.20%.

As of September 30, 2024, and December 31, 2023, there were no borrowings and approximately $0.6 million in outstanding letters of credit, with the remaining committed amount available. As of September 30, 2024, the Company was in compliance with the financial covenants contained in the Credit Facility.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2023. Other than as described in Note 2 of the Notes to the Condensed Consolidated Financial Statements, as of September 30, 2024, our critical accounting policies have not changed from December 31, 2023.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Terms such as “aim,” “anticipate,” “believe,” “confidence,” “contemplate,” “continue,” “conviction,” “could,” “drive,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “objective,” “opportunity,” “optimistic,” “outlook,” “plan,” “position,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” or similar statements or variations of such words and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. Forward-looking statements are based upon our current expectations, estimates and assumptions and involve risks and uncertainties that change over time; actual results could differ materially from those predicted by such forward-looking statements. These risks and uncertainties include, but are not limited to: significant competition in all aspects of our business; our ability to grow the size and profitability of our subscriber base; our dependence on user and other metrics that are subject to inherent challenges in measurement; numerous factors that affect our advertising revenues, including market dynamics, evolving digital advertising trends and the evolution of our strategy; damage to our brand or reputation; risks associated with generative artificial intelligence technology; economic, market, geopolitical and public health conditions or other events; risks associated with the international scope of our business and foreign operations; significant disruptions in our newsprint supply chain or newspaper printing and distribution channels or a significant increase in the costs to print and distribute our newspaper; risks associated with environmental, social and governance matters and any related reporting obligations; adverse results from litigation or governmental investigations; risks associated with acquisitions (including The Athletic), divestitures, investments and similar transactions; the risks and challenges associated with investments we make in new and existing products and services; risks associated with attracting and maintaining a talented and diverse workforce; the impact of labor negotiations and agreements; potential limits on our operating flexibility due to the nature of significant portions of our expenses; the effects of the size and volatility of our pension plan obligations; liabilities that may result from our participation in multiemployer pension plans; our ability to improve and scale our technical and data infrastructure; security incidents and other network and information systems disruptions; our ability to comply with laws and regulations with respect to privacy, data protection and consumer marketing and subscription practices; payment processing risk; defects, delays or interruptions in the cloud-based hosting services we utilize; our ability to protect our intellectual property; claims against us of intellectual property infringement; our ability to meet our publicly announced guidance and/or targets; the effects of restrictions on our operations as a result of the terms of our credit facility; our future access to capital markets and other financing options; and the concentration of control of our company due to our dual-class capital structure.

More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Our Annual Report on Form 10-K for the year ended December 31, 2023, details our disclosures about market risk. As of September 30, 2024, there were no material changes in our market risks from December 31, 2023.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of September 30, 2024. Based upon such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to our risk factors as set forth in “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.