The New York Times Co. Revenue Falls on Weak Advertising Sales

Image source: The New York Times.

The New York Times Co (NYT -0.49%) reported first-quarter results on May 3. The venerable newspaper publisher enjoyed solid growth in digital subscribers, but lower advertising sales weighed on the company's results.

The New York Times results: The raw numbers

Data source: The New York Times Q1 2016 earnings press release.

What happened with The New York Times this quarter?
Total revenue fell 1.2% year over year to $379.5 million, as a 6.8% decline in advertising revenue negated a 2.4% rise in circulation revenue.

Circulation revenue grew as digital subscription sales and a price increase for home delivery of The New York Times more than offset a decline in the number of print copies sold.

The Times added 87,000 paid subscribers to its digital-only subscription products in the first quarter. Digital-only subscribers totaled 1,357,000 at the end of Q1 -- a 23% increase from the prior-year period. That helped to drive a 14.2% year-over-year rise in circulation revenue from digital-only subscription products to $54.2 million.

"The rate at which we are adding digital subscriptions continues to accelerate," said CEO Mark Thompson in a press release.

This quarter, we added 67,000 net digital-only subscriptions to our news products, more quarterly additions than we have had in over three years, a 21 percent increase year-over-year and a real achievement as our pay model reaches its fifth anniversary. We have continued to prioritize deepening the level of engagement of our readers with Times content and this effort, along with the application of new consumer marketing tactics, has led to an increase in new subscribers and improved retention of existing ones.

Still, declining advertising sales remain a challenge for the company. First-quarter print advertising revenue fell 9% to $97.9 million. Digital advertising revenue also weakened, declining 1.3% to $41.8 million.

"We had a more challenging quarter in both print and digital advertising in large part due to conditions impacting the entire advertising marketplace," said Thompson.

Operating costs increased less than 1% to $351.6 million, as lower raw materials costs helped to offset higher compensation costs.

All told, operating profit -- adjusted to exclude depreciation, amortization, severance and retirement costs, and other special items -- fell 13% to $51.5 million. And adjusted EPS from continuing operations -- which was helped somewhat by lower interest expense compared to Q1 2015, as well as a lower outstanding share count due to share buybacks -- declined 9% to $0.10.

Looking forward
In the second quarter, New York Times' management expects total circulation revenue to increase, and total advertising revenue to decrease, at rates similar to that of the first quarter. Additionally, operating costs are projected to increase in the "mid-single digits" on a year-over-year basis as the company streamlines its international print operations and continues to invest in its digital growth initiatives. Thomson added:

We remain confident in our ability to grow our digital advertising revenue in the long term and we are continuing to invest in ad product innovation. Looking ahead into 2016 and as we have previously stated, we will be investing in several areas that we believe will increase revenue and contribute to our successful business transformation, including the investment in international expansion that we announced last month. And, as always, we intend to keep a sharp focus on our cost base.