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New York Times Co  (NYSE:NYT)
Q3 2018 Earnings Conference Call
Nov. 01, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to The New York Times Company's Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Harlan Toplitzky, Executive Director of Investor Relations and Financial Planning and Analysis. Please go ahead.

Harlan Toplitzky -- Executive Director of Investor Relations and Financial Planning and Analysis

Thank you and welcome to The New York Times Company's third quarter 2018 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer; Meredith Kopit Levien, Executive Vice President and Chief Operating 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 and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2017 10-K. 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 Mark Thompson.

Mark Thompson -- President and Chief Executive Officer

Thanks, Harlan. Good morning everyone. This was an encouraging quarter for The New York Times. Strong growth in digital subscriptions saw us achieve some important new milestones. We now have more than 3 million digital subscriptions and 4 million total subscriptions. With a marked sequential improvement in our advertising performance with digital ad revenue returning to strong growth while print ad declines moderated during the quarter. As a result of these and other factors, total company revenue grew by 8%. It was the seventh consecutive quarter of revenue growth.

Let me begin with the digital subscriptions story. In the last earnings call, we said that 3Q tends to deliver higher numbers of net new subscribers than 2Q which since the launch of our pay model has typically been the quietest quarter of the year. And so it proved with a slow start to the quarter followed by a very strong late August and September. By the end of the quarter, we had added 143,000 net new subscriptions to our digital news products and an additional 60,000 subscriptions to Cooking and Crosswords for a total of 203,000 net new subscriptions. We attribute these numbers to several factors. The seasonal boost we see every year toward the end of the quarter as much of the world goes back to school after the summer, a suddenly electrifying news environment with events that played The Times strengths by the cabinet hearings and the blockbuster offered by anonymous. The growing strength of our Cooking product, which has now passed the 120,000 subscription mark and the launch of a multi (inaudible) discounted introductory offer for our main news product in late August. You're going to see us continuing to experiment with in introductory pricing, meet account and porosity, registration and login and bundling through 4Q and into 2019.

We are pleased with our progress so far. But believe we have the scope to accelerate subscriber growth further. We're continuing to spend marketing dollars efficiently and are monitoring subscriber acquisition cost and lifetime value carefully, but we will not hesitate to invest heavily in future growth where it makes sense. Indeed, we've launched the new brand marketing campaigns. The truth is worth it, which includes TV spots this week. We also believe that our successful subscriptions across digital and print is a tribute to the quality and creativity of the journalism produced by our colleagues in the New York Times newsroom and editorial departments and is a validation of our strategy of ramping up investment in journalism.

Agenda setting investigative journalism, outstanding global coverage, striking advances in our coverage of business and tech, a broadening of the voices and perspectives in our opinion pages and groundbreaking new products and podcasts are all paying dividends in audiences' subscriptions and new opportunities for advertisers. And speaking of new audiences, Times journalism is now read in every country on Earth. According to our own data, we have at least one online leader from every member of country of the United Nations including Tuvalu and Antarctica.

Overall subscription revenue including print grew by nearly 5% year-over-year to $258 million and we've also encouraging numbers on the advertising side. We've always expected a stronger second half of 2018 than the first, but are still pleased with growing digital advertising in the quarter by 17%. Our strategy of driving growth with large scale editorial partnerships with the world's leading brands is proving successful. We're also very encouraged by the pipeline heading into 4Q, the biggest advertising quarter of the year. Print advertising declines moderated in the quarter, decreasing by less than 1% year-over-year. As a result, overall advertising revenue increased 7%. Digital advertising represented 47.5% of the total advertising number.

Now Roland will discuss costs in detail in a moment, but I would just note that additional cost including in marketing and in our newsroom, both of which are associated with our digital growth strategy meant that our adjusted operating profit was flat year-over-year at $54 million despite the increase in revenue. We expect investment associated with growth to keep our costs elevated for some time to come as we continue to add new talent and resources to our newsroom and opinion departments, experiment with different marketing tactics at every level of the panel, improve our core digital product and there will be new products and prepare to launch our new TV show, The Weekly.

It should be clear from my remarks this morning that we have high confidence in our strategy, it is true that intense interest in US politics gave us additional digital momentum in late 2016 and early 2017. We remain determined to cover that story with more authority and more original journalism than any other news provider with the latest test of that coming as soon as next week with the mid-terms. But our strategy and current digital growth does not depend on that or indeed on any single stranded news. It is broadly based, includes a wider range of news and features than any of our competitors, not to mention lifestyle products, audio television and a thriving international business. It is this breadth and our proven ability to extend Times quality to new topics and new media that convinces us, so we can scale our digital business further and faster than anyone else.

But now with the detail of the quarter is Roland.

Roland Caputo -- Executive Vice President and Chief Financial Officer

Thank you, Mark and good morning everyone. As Mark said, this quarter represents encouraging progress for the company. Adjusted diluted earnings per share was $0.15 in the quarter, $0.03 better than the prior year. We reported adjusted operating profit of approximately $54 million in the third quarter, which is flat compared with the same period in 2017. Total subscription revenues increased 4.5% in the quarter with digital only subscription revenue growing 18% in the quarter to $101 million. On the print subscription side, revenues were down due to decline in the number of home delivery subscriptions as well as a continued shift of subscribers moving to less frequent and therefore less expensive delivery packages. Total daily circulation declined 9.9% in the quarter compared with the prior year while Sunday circulation declined 6.7%.

Quarterly ARPU declined less than 1% compared to both the prior year and prior quarter, largely a result of the $1 per week promotion introduced domestically in the last six weeks of the quarter. We expect that the more aggressive promotional offer which yielded strong net subscription additions in the quarter and other promotional test will continue to put downward pressure on ARPU. Total advertising revenue increased 7% compared to the third quarter of 2017, our best overall result in recent memory with digital advertising growing 17% and Print nearly flat. The increase in digital advertising revenue was largely driven by our creative services business and growth in our traditional direct sold advertising on our digital platforms. The relatively strong print advertising result was mainly due to growth in the financial, technology, and telecommunications categories, offset by declines in entertainment and luxury. As you can imagine, we are very pleased with the print numbers in the quarter. However, we do not expect similar results in the fourth quarter. We do see these quarterly results as confirmation that there remains a place for print in a market as total media buy today.

Other revenues grew nearly 50% versus the third quarter in 2017 to $38 million, principally driven by growth in our commercial printing operations from the Newsday suite of products. We are nearly complete with the ramp-up of the Newsday work. Growth in other revenues was also driven by 4.5 additional floors of rental income from our headquarters building. We recently executed a lease on an additional floor and now have signed leases on 5.5 of the seven floors we've made available to our headquarters project and expect to execute leases on the remaining 1.5 floors and begin recording rental income from them in the next few quarters. Affiliate revenue from the product review and recommendations website, Wirecutter also contributed to growth in other revenues.

GAAP operating costs increased 8% while adjusted operating costs increased 10% in the quarter. Cost grew primarily as a result of marketing expenses to promote our brand and products, costs associated with our growing commercial printing business and continued investment in our journalism. The growth in marketing costs, the largest driver of expense growth in the quarter was directly related to the strong net subscription additions we are reporting. In the quarter, we spent into elevated demand unleashed with the introduction of a $1 per week promotional offer, something we had already tested internationally. As a result, we were able to efficiently grow subscription acquisition spend with expected returns that remain well above our internal hurdle rate. As Mark said earlier, you can expect that we will continue to experiment in the coming quarters. We recorded one special item in the quarter and approximately $5 million gain from a pension plan liability adjustment. Our effective tax rate for the quarter was 28.8%.

Moving to the balance sheet, our cash and marketable securities balance increased by $15 million during the quarter, ending at $795 million. Total debt and capital lease obligations, principally related to the sale leaseback of our headquarters building were approximately $253 million.

Let me conclude with our outlook for the fourth quarter of 2018. As a reminder, fiscal 2017 included an extra week and therefore the fourth quarter of 2017 contained 14 weeks as opposed to the 13 weeks in 2018. We disclosed the estimated impact on revenue of this extra week in our fourth quarter 2017 results. However, estimating the cost impact of this extra week is more difficult and therefore we did not disclose this detail. Our earnings press release which we issued earlier this morning includes revenue guidance as compared to Q4 2017 inclusive of this extra week. Now on a comparable 13-week basis, total subscription revenues are expected to increase in the mid single digits compared with the fourth quarter of 2017 with digital only subscription revenue expected to increase in the mid-teens. Overall advertising revenues are expected to be approximately flat compared with the fourth quarter of 2017 and digital advertising is expected to increase in the mid-teens. Other revenues are expected to increase approximately 40% largely due to anticipated growth in our commercial printing operations. On a 13-week 2018 to 14 week 2017 basis, operating costs and adjusted operating costs are expected to increase in the mid single digits compared with the fourth quarter of 2017, as we continue to invest in marketing and our newsroom as well as ramp-up our commercial printing operations.

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

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Alexia Quadrani with JPMorgan. Please go ahead.

Alexia Quadrani -- JPMorgan -- Analyst

Hi. Thank you. Thank you so much. A couple of questions. First on the subscriber growth in the quarter. Thank you for giving us the color about how it picked up in August and kind of ran through September. I'm just trying to get a little bit more information if possible. I'm trying to get a sense of how much were sort of peaked around certain news stories or was it the promotional activity or is it really just the seasonality getting better or if there's any more data you can give us around that to give a sense of how we should think about it trending going forward that would be very helpful.

And then just any commentary on the ARPU rate that we saw in the quarter, is adequate run rate going forward with a heightened promotional activity, maybe it softens a bit more and anything you can say on churn? Thank you so much.

Mark Thompson -- President and Chief Executive Officer

Okay, Meredith, do you want to talk about it?

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yes, I'm happy to. Good morning, Alexia. I think the sort of story of the subscription growth was compounding effect of a number of things, but I think the first and probably most significant driver was the dollar week introductory offer domestically which ran, I think for last six weeks of the quarter, so that had a big impact and I think clearly tapped into a fair amount of otherwise untapped demand at the win around demand curve. But it wasn't the only thing we did. We also experimented with more porosity, so we took meter down to a account of four in September and we've been indicating, we are going to be more dynamic about how we use leader, we did quite a bit more as well in described paid marketing, we were able to do that very efficiently and then we did a bunch of things to optimize the pace well and we also did some things to signal to users of where they were in meter count more aggressively and I think all of that taken together played a big role and I would say, all of those are things that we intend to continue to do.

Mark Thompson -- President and Chief Executive Officer

And if I could add just one thing. I think getting better, significantly better specifically on smartphone conversion.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yeah.

Mark Thompson -- President and Chief Executive Officer

And focusing on smartphone and the background of very strong international performance which continued in the quarter without the same abrupt change in the introductory offers. Those were factors as well within it.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yes.

Roland Caputo -- Executive Vice President and Chief Financial Officer

So, Alexia, I just add to that, although we are not managing to ARPU, we do keep an eye on it. And I'd say that the biggest factor here was, we had a large number of starts as you could see from our great net add number and we did not have a large number of existing subscribers transitioning to full price in the quarter. That said, I think you can see additional pressure on ARPU in 4Q.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Sorry, I was just going to answer the bit you asked about was there any particular story, I think in general, we've been operating in a period now with a heightened news cycle and that is always good and we see spikes when in that news cycle the Times done something that's particularly distinctive. So the anonymous are there, which Mark mentioned had a role in some of the coverage of separation of the border where the Times breaking stories, played a role, but we're getting to a point where those spikes, I think they are hopeful, but they play less outsized world generally.

Mark Thompson -- President and Chief Executive Officer

And if I can just underline that point about spikes where it's Times journalism, whether it would be in investigative journalism, being as anonymous as was in the opinion pages where we have stores which are particularly ours which the time has come up with or whether Times got a key angle do still make a striking difference and it's a great indication of the policy of the editors and alternative to focus heavily and we've also focused additional investment and invested journalism, I think that's paying off straightforwardly in terms of impact and indeed in subscriptions. I also think that the extraordinary process of the renewal and expansion of voice isn't perspectives by James Bennett and his colleagues in the opinion pages. Again, we can feel that paying dividends in spikes but in audience and in impact and fair to say also in subscriptions, when they've got something dramatic to unveil it.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

That's right. And we've just broken a new ad campaign this week, focused on the distinctiveness of that reporting, so there's this thought about the 18-month investigation we did into the Trump family wealth and taxes and there's another spot at that reporting that I mentioned about family separation order.

Alexia Quadrani -- JPMorgan -- Analyst

And it sounds like given the huge success you've had on the marketing side, which is working because you're smart at it and you're obviously trying different ways that are continuing to be quite successful, should we assume that in the guidance for 4Q for the elevated expense growth that the bulk of that increase is, it sounds like it's going to be marketing having another incremental spend around the CP partial payment product, but it sounds like it's mostly marketing?

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yeah. I think you can assume we're going to keep spending more on marketing because we're finding ways to do it efficiently and I think we have a fair amount of commitment in there.

Mark Thompson -- President and Chief Executive Officer

I want to say though Alexia, we're really focused, I mean, we do not think we've optimized either the user experience of the Times in terms of how the products, the digital products work as much as we could and because of that, we believe there are way ways we can change and develop both that user experience and also as Meredith is presenting that that kind of the way in which the customer journey plays out, which can significantly improve our performance. But this is cost which doesn't has work -- the cost doesn't grow the same rate as the scaling. So it's potentially a very efficient way of making a relatively small amount of investment and increasing and improving the efficiency of the product and engaging and converting audiences. So although in Q4 that you are going to see continued elevated marketing spend, we're working hard on figuring out ways of making the product more effective and more sticky which do not include as it were scaling cost with scaling audiences.

Alexia Quadrani -- JPMorgan -- Analyst

Thank you so much.

Operator

The next question comes from Doug Arthur with Huber Research Partners. Please go ahead.

Douglas Arthur -- Huber Research Partners -- Analyst

Yeah, thanks. Couple of questions. I'm wondering if you can sort of provide some breakdown on the production cost increase in the quarter. You normally break at newsprint, you didn't do that this quarter. I'm kind of trying to get a sense for how much of the almost 10% increase was related to the commercial printing project as well? So that's question one.

Roland Caputo -- Executive Vice President and Chief Financial Officer

Sure. So actually the production costs are split across a couple areas, one of which is the commercial printing, which as you know, includes both the cost of newsprint which we passed through to the client and the cost of our people in the production center, but also we've got cost that fall into the production lines that are in news and editorial, so that's continuing the theme of investing in our journalism. Those are the two, I think the two biggest areas contributing to the increase in the production costs in the quarter.

Douglas Arthur -- Huber Research Partners -- Analyst

Yeah. I know it's a small item, but what was your newsprint cost up in the quarter?

Roland Caputo -- Executive Vice President and Chief Financial Officer

I will get that for you. About 4 million bucks.

Douglas Arthur -- Huber Research Partners -- Analyst

Okay. And the second question kind of bigger picture. Mark, you sort of evade some hints recently about a more aggressive capital return to shareholders either dividend or buyback. I know the sale leaseback date is a ways out, but any comments on that at this point?

Mark Thompson -- President and Chief Executive Officer

No, not really. I mean, what I've said in the past is, this is an item which is always on our agenda. It's certainly on our agenda at the moment. When we got something to say, we'll do that, but nothing to add except for the fact that we do not believe to repeat that not believe the right level of leverage for the company. Zero, we absolutely believe in the efficient use of the balance sheet. As you can see we are in the broader sense willing to invest judiciously to try and accelerate our digital growth. We're very happy with the companies, the small companies we bought recently. We continue to look at whether there are potential tuck-in investments that help us execute our strategy more effectively. We're not expecting any strategic while we're looking at that and obviously we're looking at the implications of the medium-term impact of some of the cash positives (inaudible) will be in the lower tax profile of the company, the retirement of debt and the -- although it doesn't happen until the latter part of 2019, the change in status of our issue with this building with our execution of the right to buy back the building and if the building to go back into full ownership. So all of those factors as well as the track of the business are in our minds when we bought them to say we'll tell you.

Douglas Arthur -- Huber Research Partners -- Analyst

Okay. And then a one final detailed question, I noticed in the discussion on liquidity that you set aside or have set aside $68 million of securities as collateral for letters of credit for the leasing, can you explain that?

Roland Caputo -- Executive Vice President and Chief Financial Officer

Yeah. As we sign and execute leases there's letters of credit on both sides having to do with building out the space and whatnot. So those will go away when we execute the transaction next fourth quarter on the lease sale back.

Douglas Arthur -- Huber Research Partners -- Analyst

So that's sort of a temporary hold on the security?

Roland Caputo -- Executive Vice President and Chief Financial Officer

Correct, that's correct.

Douglas Arthur -- Huber Research Partners -- Analyst

Okay, thank you.

Operator

The next question comes from Craig Huber with Huber Research Partners. Please go ahead.

Craig Huber -- Huber Research Partners -- Analyst

Hi, I got a few questions. First, what quarter just be specific I think you might have just said this when do you expect to get out of the sale leaseback, did you say fourth quarter next year?

Roland Caputo -- Executive Vice President and Chief Financial Officer

Yes, fourth quarter of '19.

Craig Huber -- Huber Research Partners -- Analyst

And then I'm just also trying to just understand all issue here, but sort of the it get us to Board's mentality, the family's mentality about not wanting to buy back stock and just accumulate cash here. Obviously the stocks have gone up here quite well over the last year plus here and stuff and now you got the -- MDS problem here that you start buying back stock at a much higher level because you waited so long. And what was it that puts the mentality of waiting so long, I mean, I assume for you guys prospective, you're still very confident, I've listened to you several times here about the direction of the payrolls and then stuff, but why did the delay here if you want to return cash, if you want much higher stock price now, your dividend is very small, just what's the sort of game plan on that front, please look at that question a lot for investors. Thank you.

Mark Thompson -- President and Chief Executive Officer

Craig, I'm not sure I can help beyond my previous remarks. I'm familiar with all the points you make. You've heard me say the balance sheet profile of the company and it's free cash flow generation and likely free cash flow generation very much in our minds. Of course, we discuss the balance sheet regularly with our Board. I've been Chief Executive for very nearly six years now and there has not been a single example of a definitive opinion or any hint of disagreement between the trustees of the The Adolph Ochs family trust and the Board which has a majority of independent directors on the issue of capital return and balance sheet. We talked about those groups people regularly about this issue, it's much in our minds. We do not believe that as there a leverage and that freedom and it is the right level of leverage for this company nor do we believe in endlessly accreting cash with no good reason to do so. When we have got something more and something tangible to say about that, our (inaudible) will be the very first to here, we're among the first.

Roland Caputo -- Executive Vice President and Chief Financial Officer

Yes, I think you'll find that we did buy back about $85 million worth of stock a few years ago. So it's not that we would never do that. But if you want to go in the rearview mirror having a conservative balance sheet served us well during the period with the industry in transition and quite frankly often transition.

Craig Huber -- Huber Research Partners -- Analyst

I definitely recall that for many years ago when all sudden investors pushed you guys back last decade and before to buy back a lot of stock at much, much higher prices, it can't be very unfortunate, I'm sure that's all came in with family and stuff. My other question here on the cost front, as we think about your cost guidance for the fourth quarter and if you take out what you think your incremental spend will be on the marketing side and this new contract on the commercial printing side, what should we sort of think of the underlying rest of the cost, are they sort of flat year-over-year basis?

Roland Caputo -- Executive Vice President and Chief Financial Officer

I mean those are I'd say two of the major drivers. We also want to keep investing in our newsroom. So I would not go so far as to say flat because we have some other areas that makes sense to invest in and that supports our digital growth like our product and design area, our tech area and obviously our journalism. That said, those are the two that you mentioned the commercial printing ramp-up and the marketing are our two largest growth areas of spend for Q4.

Craig Huber -- Huber Research Partners -- Analyst

And then also just some extra clarity here, the $163 million for total production costs in dollars, would you mind just breaking that down that the wages and benefits and other line like issue, so the raw materials is up $4 million, but the other in dollars please rather than have to wait for the 10-Q that's possible?

Roland Caputo -- Executive Vice President and Chief Financial Officer

So the comp and benefits is about $95 million, $96 million of the $163 million.

Craig Huber -- Huber Research Partners -- Analyst

Okay. We get back into the other from there, OK. And there your few marketing costs that helped drive digital subscriptions, I'll be curious to hear where those best dollars have been spent there last year or so, on keywords versus branding, I mean just where is the best dollars has been spent there?

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

It's a good question. When I started looking after the subscription business we've spent a 100% of our money on direct response and we have pretty dramatically shifted that subscribe half now. So we've increased our spend and also shifted the mix there and I would say, we think of marketing spend in three buckets, there's sort of top of funnel, so the work I just described to drive affinity and willingness to pay, I think television spots, digital video spots, brand outdoor. There is a lot of work going on now in the middle of the funnel and I think we're just getting started at that this and I think this is a very efficient way to spend money where we potentially spend money to get people to download our app, to get them to engage with particular kinds of content that will bring them closer to the gateway or to get them to register and then ultimately log in and make a relationship with us. And we've done a fair amount of -- a breadth of experimentation with that in the last two quarters and particularly in this last quarter, probably we can do it very efficiently. And then just to say both of those buckets make direct response work much more efficiently for us. So I don't know if that answers the question.

Craig Huber -- Huber Research Partners -- Analyst

I appreciate that. If I could just ask one more this new TV show The Weekly ,when will that start and then will we revenues show up in the other revenue line, a boost in cost in the production costs, I mean how this sort of going to play out please?

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

We have not announced the date, but it will start in the early part of next year. And Roland I think you have to answer where the revenue shows up.

Mark Thompson -- President and Chief Executive Officer

I think we're talking with other.

Roland Caputo -- Executive Vice President and Chief Financial Officer

Yes, there's other revenue and production costs. As you know, we've engaged a production company where the lion's share of the expense is going to be made.

Craig Huber -- Huber Research Partners -- Analyst

I think you said in the past, your expecting to be at least breakeven, correct?

Roland Caputo -- Executive Vice President and Chief Financial Officer

Yeah. We think it's going have a big effect on the brand. But as far as the initial flow through on the P&L will be negligible.

Craig Huber -- Huber Research Partners -- Analyst

Okay, good. Thank you for all that.

Operator

The next question comes from Vasily Karasyov of Cannonball Research. Please go ahead.

Vasily Karasyov -- Cannonball Research -- Analyst

Good morning. I would like to ask a follow up question about the subscribers digital on the new subscribers in Q4. So can you talk please a little bit in more detail about puts and takes from Q3 to Q4, because if I look at the previous year I think net adds stayed pretty constant. So are there trends that we should be aware of that would change that either way this year excluding the extra week and the base year? Thank you.

Mark Thompson -- President and Chief Executive Officer

I should say the background to this is that we decided some quarters ago not to guide to net adds not least could we discover the predictive ability on that number was not great and we don't want to mislead anyone. So we don't gave guidance in that ads, but nonetheless, having said that Meredith is going to give any further color on 4Q.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yeah. I think the work that I described at the top to call to Alexia in response to Alexia's question around, spending into heightened demand, the sort of broader application of more aggressive introductory discounts, and conversion optimization will all continue in the fourth quarter, so I would expect to see some more outcomes. We also is more saying in the fourth quarter our Cooking product. We intend to see heightened demand for people Cooking, so we have some optimism there as well.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you very much.

Operator

The next question comes from Kannan Venkateshwar with Barclays. Please go ahead.

Kannan Venkateshwar -- Barclays -- Analyst

Thank you. Just a couple if I could. So first is, when we look at the comments around pricing works is spending kind of a dynamic. Market seems like strategic shift rather than something that's tactical. Is that the fair way to read it. In other words, I mean should we look at the steady state price points on a normalized basis being lower but volumes being much higher and spending to get there maybe lasting for more than just a couple of quarters? And then secondly, if you could give us some color around the profile of these new subs who are coming in post promotions, how would admit it from your cohort?

Mark Thompson -- President and Chief Executive Officer

Okay. I'll talk briefly then. I'm going to hand over to Meredith. The one thing I want to say is, the way I think about what we're trying to do and we're trying to do this internationally, and we've been, somewhat in some cases, including low (inaudible) offers we've done international experiments before doing domestic experiment. So this is something which is playing out in different markets in different ways and we're trying to use different markets to learn things which we do about the other markets. I think what we're trying to do in terms of pricing and bundling is effective exploitation of the demand curve with a focus on because we are getting more confident about pretension about building the number of subscribers, keeping a close eye on aggregate digital revenue growth and a very close eye on the economics of projected lifetime value less subscriber acquisition cost, we're trying to spend intelligently against internal hurdle rates, but trying to explore combinations of price and product which are effective and we believe will be affected in delivering long-term yield as well as growing the subscription number.

So we are very, one of the said focused on products like Cooking and Crosswords because of that potential to be bundled into higher priced offerings to have as it were an upward impact on ARPU whereas obviously lower introductory offers, certainly for the period of the offer have a downward pressure on offer. So I see is we -- our most expensive product is a seven-day delivery of the physical paper, which is over $1,000 outside the New York area. We have a broad range of prices. We are trying to develop a sophisticated and tested approach to multiple bundles, multiple offers and differentiated prices to deliver what in the long-term will be the best possible yield. And so although it is perfectly true but we tried in 3Q and no doubt we'll try and use in 4Q as well, this quite aggressive introductory offer of $1 a week for the news and opinion product. I see that as part of a broader picture experimentation whose aim is to maximize yield and where at times I don't even really want to predict at this stage, what that's ultimately going to tell you about average price.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yeah. I would just add that we're generally getting much better at churn and at managing churn, we've spent a lot of effort at what I would call the edges of churn, so getting good priority moments like transitioned full price and billing issues, involuntary churn saving stops, That has worked well I think in general, the churn performance over the last three years has been quite good and compares quite well to other digital, other much larger digital subscription businesses, but the truth is the real nut to crack on retention and churn is engagement and we are adjusted to beginning of what I would say, we'll work to get people to get even our subscribers to engage with us from the outset of their subscription much more often and for longer periods of time. So that's a long-winded way of saying I think we feel sufficiently confident that if we can bring in someone in on an introductory offer, we can actually turn them into a lasting subscriber.

On the other side of your question, I'll give an answer that Mark alluded to before, but that is that we actually believe that much of the work from here is to make the product itself the combination of customer journey, user experience and the programming that fits within it to make that a much better engine of demand creation and capture. So that beyond paid marketing, beyond introductory offers once someone comes to the times and begins our relationship with us, that relationship is self-propelled, because the product itself does that. And I would say, a great deal of our focus in the coming quarters and frankly in the last quarter has been on that kind of work.

Mark Thompson -- President and Chief Executive Officer

Yeah. This is not necessarily entirely kind of heroic (inaudible) entirely original work, it's about learning intelligent lessons from other people in the market who've done some of these things better than us and and getting where we want to be in terms of just kind of intelligent professional optimization. So some of the I think I hope will be really creative and innovative, but you don't have to believe you don't have to shut your eyes in the magic of some extraordinary unheard of breakthrough to see us getting meaningful improvements through floor optimization.

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Yeah, I'll add two more things. I think you asked about the character of the new subscribers who are coming on. There are two things that we have been trending in this direction, but we're beginning to see in a fairly outsized way, this past quarter we had more women and men subscribe and we also saw the largest pick-up in growth as far as cohorts in people under 24 which I think is pretty interesting. I think that group has real willingness to pay deep interest and news and I think with our new introductory offer, we unlock a lot of demand there.

Kannan Venkateshwar -- Barclays -- Analyst

All right. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.

Harlan Toplitzky -- Executive Director of Investor Relations and Financial Planning and Analysis

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

Operator

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

Duration: 42 minutes

Call participants:

Harlan Toplitzky -- Executive Director of Investor Relations and Financial Planning and Analysis

Mark Thompson -- President and Chief Executive Officer

Roland Caputo -- Executive Vice President and Chief Financial Officer

Alexia Quadrani -- JPMorgan -- Analyst

Meredith Kopit Levien -- Executive Vice President and Chief Operating Officer

Douglas Arthur -- Huber Research Partners -- Analyst

Craig Huber -- Huber Research Partners -- Analyst

Vasily Karasyov -- Cannonball Research -- Analyst

Kannan Venkateshwar -- Barclays -- Analyst

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