What to Watch When The New York Times Reports on Wednesday

The New York Times (NYT 1.99%) is up nearly 30% year to date thanks to its fast-growing digital subscriber base and the company's expansion into a broad content platform.

In this segment from Industry Focus, the cast dives into key themes investors should follow in the company's upcoming earnings report (due August 8).

A full transcript follows the video.

This video was recorded on July 31, 2018.

Vincent Shen: Our next media company that we're going to cover comes from earnings season activity, and that's The New York Times, ticker NYT. They're expected to report their second quarter 2018 results in early August. Asit, we briefly covered The Times last fall. The stock is up another 25% since that show in October. To kick things off, can you talk about the company's results year to date, and what's on your watch list for this next report?

Asit Sharma: I follow The New York Times every quarter. I'm very interested in their digital-only subscription revenue. If you look at the last quarter The Times reported, they showed an overall revenue increase in subscriptions of 8%. That was driven, of course, by digital subscriptions. Those subs, short for subscriptions, jumped about 26% to just over 95 million. Within that category, their news product digital subs improved by about 24%. This is really driving The Times' growth. It's the theme that we talked about in October. At that point in time, Vince, we were curious, "The Times is up 76% this year, can it continue?" As you pointed out, since that show, up another 25%.

One other thing that I'm looking for this quarter is its Other category of revenue. The Times has, now, a crosswords product, it has a cooking content product. It also has revenue from the Wirecutter, which is a referral site that The Times acquired last year. These comprised a much smaller part of the business. However, they're growing rapidly. I want to call out one of these. If you take crosswords and cooking together, their growth rate is over 60%. It's about $5 million in revenue, not a huge chunk of the total top line, but this foray into content services that are peripheral to news is one of the growth drivers that has investors excited.

I'm going to hand the baton back to you, Vince, but I do want to get into, in this conversation, a little bit later on, is there a potential for this quarter to be a little bit of a jolting call for investors who had it good and have some profits on the table? But, what are you curious about yourself? I think they're reporting the first week of August?

Shen: I'm getting some conflicting dates. Capital IQ says August 8th, I've seen others say August 3rd. Basically, in the next week or so. The thing that you mentioned, in terms of that jolt for shareholders, is definitely on my mind. You have this incredible subscriber growth from the past year, driven a lot by the headlines and news with President Trump. But, management does ultimately expect some of those growth rates to come down based on these tougher year over year comparisons. Keep in mind that the paid, digital-only subscriber base has doubled from early 2016 to early 2018. That's just two years' time, and it's gone from 1.36 million subscribers to 2.78 million.

If you look at these quarterly growth rates from just 2017, the lowest quarter was 41.8% growth. The biggest quarter was 63.4% growth. Huge numbers. Something that's really promising, and I think still encouraging for shareholders and investors to keep in mind, is that the retention is still strong among these post-election editions. The interest that these new customers have -- which happen to be younger, with a higher proportion of women -- they're not falling off after initially subscribing. They're actually coming to reflect the churn rates that are similar to older, loyal subscribers.