The New York Times Company First Quarter 2021 Earnings Conference Call May 5, 2021

Harlan Toplitzky

Thank you, and welcome to The New York Times Company’s first quarter 2021 earnings conference call.

On the call today, we have: ● Meredith Kopit Levien, president and chief executive officer and ● Roland Caputo, 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 our 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 2020 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.

With that, I will turn the call over to Meredith Kopit Levien.

Meredith Kopit Levien

Thanks, Harlan, and good morning.

The Times finished the first quarter with more than 7.8 million paid subscriptions across our digital and print products, more than 100 million registered users, and an average weekly audience of 76 million readers. That foundation — plus our unmatched journalistic breadth and a market of at least 100 million people who are expected to pay for English-language journalism — grounds our conviction that we can substantially and profitably scale paid subscriptions over time.

Our strong financial results in the first quarter demonstrate the success of our strategy and the promise of our large and growing digital subscription business. We recorded adjusted operating profit of 68 million dollars, an improvement of more than 50 percent compared to the first quarter of 2020. Digital subscription revenue increased 38 percent in the quarter, and we added 301,000 net new digital subscriptions across News, Cooking, Games and Audm.

1 Our first quarter results also reflect a real improvement in digital advertising. That improvement was driven by a brisk market, and our work last year on refining the competitiveness of our offering and the margin profile of our business. Digital advertising growth over Q1 in both 2020 and 2019 demonstrates the advantage of our subscription-first strategy to our advertising business.

In our last earnings call, I noted that fluctuations in the news cycle can lead to considerable variability in net digital subscription additions from quarter to quarter. In February and March, our audiences declined from their historic highs last year, and we saw fewer net subscription additions in the latter part of the quarter.

We expect moderated growth to continue through the second quarter, traditionally our softest of the year. With lower forecasted second quarter performance, we now expect annual total net subscription additions to be in the range of our 2019 performance, which, prior to 2020, was our best year for net additions.

There is no doubt that the news cycles of the last five years, capped by last year’s tumultuous presidential election, racial reckoning, and the Covid-19 pandemic, created unprecedented demand for Times journalism and therefore accelerated subscription growth. At the same time, with each passing quarter we’ve improved many aspects of our underlying model.

While we don't know which storylines will drive the next big news cycle, we do know that the size of our newsroom, its range of expertise, and our continued investment in meeting more needs position us to capture that demand, whatever its source.

In the last few months, the breadth and reach of our journalism was on full display. While a group of data journalists in one part of our newsroom continued to update the world’s most comprehensive Covid case tracker, our Parenting team captured the ethos of what it feels like to be a mother right now with their breakout multimedia feature, The Primal Scream. Our metro reporters led the coverage of the multiple scandals rocking Albany, while our long-time beat reporter covering Premier League Football broke the news of the Super League that wasn’t. And our feature-length documentary, Framing Britney Spears, which aired on FX and Hulu, had a huge cultural impact.

The world is getting no less complex, and the need for understanding will only grow. Outstanding journalism that helps people understand the world is central to our model, and will continue to be the primary draw for the majority of our audiences and paying customers.

But it won’t be the only draw. Ten million people a week now come to The Times for needs beyond news — seeking recipes, puzzles and shopping advice. Taken individually, NYT Games and NYT Cooking are among the largest journalism-backed subscription services in America, and our plans for expanding our subscription portfolio through Wirecutter and Audm reflect our deeply-held belief that The Times can play an even bigger role in the lives of tens of millions more people. Combined with the differential value and demand advantages of our core news product, we believe these offerings should enable The Times to become a

2 larger and more profitable business as we scale.

I’ll turn now to our underlying subscription drivers in the quarter, and some specifics about our work ahead.

While total audience, registered readers on site, and subscriber engagement are somewhat lower this year than last, these metrics are all higher than 2019. We now have a significant base of people who read The Times every day -- a base that is substantially larger than before the pandemic. This is a result of our continued strength in news, the shift we made almost two years ago to a registration-based model, and the fact that we acquired so many new registered users in 2020.

Many of those registered users are now interacting with us in new ways, which point to our opportunities for growth. For example, we saw a meaningful uptick in the range of storylines that drove user engagement in the first quarter, a positive development given the strong correlation we’ve described in the past between experiencing the breadth of our report and subscribing.

Our live coverage, with which we’ve been experimenting aggressively since late 2019, now plays a significant role ensuring strength at the top of our funnel, as well as repeat engagement. Ten million readers came to The Times for coverage of Derek Chauvin's trial, with our live experience driving much of that readership. More than a third of our registered users and subscribers engage with this coverage on a weekly basis, with that number expected to increase thanks to a steady rollout of new innovations.

The Times has always had a large number of regular newsletter readers, and our newsletter audience has grown significantly since we began asking users to register. Fifteen million people read a Times newsletter every week, including 5 million who start their day with our flagship newsletter, The Morning. More than 85 percent of our newsletter readers are not yet paying Times subscribers. So, newsletters represent a promising opportunity in our subscription funnel, both to encourage registered users to subscribe and as a source of subscription value.

At nearly 1.7 million subscriptions and counting, Cooking and Games are succeeding as products in their own right, with a lot of runway ahead. What’s particularly encouraging is their ability to enhance The Times’s value in users’ daily lives. In the last few months, we’ve begun to experiment with how we sell our multi-product bundle in new ways. Early tests are promising, and we plan to introduce a more substantial overhaul to how we price and merchandise over time. We expect the bundle to benefit conversion, retention, and long-term monetization.

I’ll turn now to advertising. In the first quarter, we recorded $59 million dollars of digital advertising revenue, a 16 percent increase over the first quarter of 2020 and, encouragingly, a 7 percent increase over the same period in 2019. This is the last quarter that we are comparing against revenues from the marketing services business we’ve now exited, and also

3 from the removal of open market programmatic advertising in our apps, so the actual improvement in digital advertising vs. last year is even stronger.

Our growth in registered users has propelled the rapid expansion of our first-party data products, which are proving effective for marketers while affording our readers privacy from third-party trackers. Demand for these products is strong, driving 20 percent of our digital advertising revenue in the first quarter, compared with less than 10 percent in the same period last year. And, as of the first quarter, we have fully eliminated our reliance on third-party data targeting in direct-sold advertising.

Audio advertising sales also continue to be strong, as total audio listeners grew 30 percent in the quarter vs. last year, driven by the addition of Serial and This American Life to our portfolio. Our productions beyond The Daily, including Sway with Kara Swisher, The Argument with Jane Kosten, and The Ezra Klein Show -- are also performing well with both listeners and advertisers.

Print advertising was still relatively weak in the quarter, and while we expect some categories to recover in the latter half of the year, we do believe that some of the pandemic losses should be regarded as structural.

Based on all of this, plus low comparables in the second quarter and the fact that our digital advertising business is now larger than print, we expect a material acceleration in our ad business in the second quarter.

Before I turn things over to Roland, I want to mention our continued focus on our people and our culture.

I’ve described this next decade in The Times’s business as being about scaling our strategy of journalism worth paying for. To do that, we need a culture that attracts, develops and retains top talent — not just in our newsroom but across all of our disciplines. Our culture has enabled the world’s most admired and influential news report, and it’s also helped create an innovative and thriving digital business. Success from here will require that we nurture the best aspects of that culture, and also evolve it. In both cases, we are making steady progress.

In the last quarter we launched a multi-year plan to build a more diverse, equitable and inclusive New York Times that reflects the global audience we serve and supports our mission and business ambitions. We also continued to advance our underlying tech strategy, which reflects the increasing importance of engineering excellence to our growth. Finally, we’ve begun to define the future of our workplace to offer more flexibility while preserving the kind of physical togetherness that enables much of our team-oriented, creative work. I’m confident that all of this will propel our strategy and growth for years to come.

With that, I’ll turn it over to Roland.

4 Roland Caputo

Thank you, Meredith, and good morning everyone.

Adjusted diluted earnings per share was 26 cents in the quarter, 9 cents higher than the prior year. We reported adjusted operating profit of approximately $68 million dollars, higher than the same period in 2020 by $24 million dollars.

We added 167 thousand net new subscriptions to our core digital news product and 134 thousand net new subscriptions to our standalone digital products, for a total of 301 thousand net new digital-only subscriptions. As of the end of the quarter, we had nearly 900 thousand Games subscriptions and slightly more than 800 thousand Cooking subscriptions. The international share of total news subscriptions remained at 18 percent as of the end of the quarter.

Total subscription revenues increased more than 15 percent in the quarter, with digital-only subscription revenue growing 38 percent to nearly $180 million dollars. The continued acceleration in the rate of year-over-year digital subscription revenue growth, from 18 percent in the first quarter of 2020, to 37 percent by the fourth quarter and now 38 percent in the first quarter of 2021 was a result of three factors:

● First, the large number of new subscriptions we have added in the past year; ● Second, ongoing strength in retention of the $1 dollar-per-week promotional subscriptions who have graduated to higher prices; and, ● Finally, the positive impact from our digital subscription price increase, which began late in the first quarter of 2020.

As you’ll note in the guidance we gave, we expect that rate of growth to slow beginning with the second quarter as we begin to comp against the strong 2020 results.

Digital news subscription ARPU for the quarter increased approximately 1 percentage point compared to the prior quarter and declined approximately 6 percentage points compared to the prior year, which represents a significant improvement in both trends. This improvement was primarily a result of subscriptions graduating from their introductory price to either full price or an intermediate step-up in the quarter, as well as the continued benefit from price increases on our more tenured, full-price subscriptions. ARPU related solely to domestic news subscriptions increased 1 percent versus the prior quarter and declined approximately 4 percent versus the prior year.

We expect to continue demonstrating pricing power throughout 2021 as the impact from subscriptions graduating from discounted promotions and the price increase on tenured digital subscriptions provides a tailwind to digital news ARPU throughout the year.

On the print subscription side, revenues were down nearly four percent largely due to a decline in single-copy and international bulk sales. Revenue from domestic home delivery

5 print subscriptions grew a half a percent in the quarter as home delivery price increases more than offset year-over-year subscription declines. Total daily circulation declined 12 percent in the quarter compared with prior year, while Sunday circulation declined 2 percent. As a reminder, the first quarter of 2020 was only partially impacted by the pandemic-related business closures, increased levels of remote working and reductions in travel that negatively affect newsstand sales.

Total advertising revenues declined approximately 8-point-five percent in the quarter, as print continued to be severely impacted by reduced spending by advertisers during the pandemic, despite digital advertising’s return to growth. Digital advertising grew approximately 16 percent in the quarter compared with the prior year primarily as a result of higher direct-sold advertising, including traditional display and podcasts, as compared to the weak digital advertising revenues seen in March of last year at the outset of the pandemic. It’s worth noting that this is the last quarter that we are comparing against revenues from the marketing services business we’ve now exited, and also the removal of open market programmatic advertising in our apps. Excluding the nearly $3 million dollars in revenues we earned from these areas in the prior year period, our digital advertising growth rate vs. last year would have been 23 percent.

Our first quarter digital advertising revenue is better than the guidance we gave in early February. This was largely the result of better than expected revenue from technology and media advertisers in targeted ad products and audio.

Meanwhile, print advertising declined approximately 32 percent with entertainment, travel and luxury categories hit hardest.

Other revenues declined 10 percent compared with the prior year, to $47 million dollars, primarily as a result of fewer television episodes, as well as lower revenues from live events, commercial printing and building rental revenue. These declines were partially offset by an increase in Wirecutter affiliate referral revenue.

Adjusted operating costs were higher in the quarter by one-point-four percent.

● Cost of revenue increased approximately three percent as a result of growth in the number of newsroom, Games, Cooking and audio employees; costs in connection with audio content; a higher incentive compensation accrual, versus zero in Q1 2020; and higher subscriber servicing and digital content delivery costs. This was partially offset by lower print production and distribution expenses, lower content costs related to fewer television episodes and lower travel and entertainment costs. ● Sales and marketing costs decreased approximately 18 percent driven by lower media expenses and advertising sales costs. ● Product development costs increased by approximately 26 percent largely due to growth in the number of engineers employed and a higher incentive compensation accrual than we had recorded in the first quarter of 2020. It’s also worth reiterating

6 that we plan to continue adding to headcount in this area over the foreseeable future as we expect to continue leaning into our investments in product development as well as in our core news and standalone journalism to drive growth. ● General and administrative costs increased by 7 percent, largely due to a higher incentive compensation accrual and increased headcount.

Our effective tax rate for the first quarter was 18-point-7 percent, which was lower than the statutory tax rate largely due to a benefit from stock price appreciation on stock-based awards that settled in the quarter. As we’ve said previously, we expect our tax rate to be approximately 27 percent on every dollar of marginal income we record with significant variability around the quarterly effective rate.

Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $891 million dollars, an increase of $9 million dollars compared with the fourth quarter of 2020. The company remains debt-free with a $250 million dollar revolving line of credit available.

Let me conclude with our outlook for the second quarter of 2021:

Total subscription revenues are expected to increase approximately 15 percent compared with the second quarter of 2020, with digital-only subscription revenue expected to increase approximately 30 percent.

Overall advertising revenues are expected to increase approximately 55 to 60 percent compared with the second quarter of 2020 and digital advertising revenues are expected to increase approximately 70 to 75 percent mainly as we compare against a quarter that was severely impacted by the pandemic.

Other revenues are expected to increase in the low single-digits.

Both operating costs and adjusted operating costs are expected to increase in the mid- to high-teens compared with the second quarter of 2020 as we continue investment into the drivers of digital subscription growth and comp against the low spending of the second quarter of last year as a result of actions taken during the early weeks of the pandemic.

And with that, we'd be happy to open it up for questions.

Harlan Toplitzky

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

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