Q2 2020 New York Times Co Earnings Call

Good morning, and welcome to the New York Times Company's second quarter Twentytwenty earnings Conference call. All participants will be what's the only know should you need assistance. Please take only conference specialist pressing the star keep published by zero.

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Please note. This event is being recorded I would not want to turn the conference over to Harlan Toplitzky Vice President Investor Relations. Please go ahead.

Thank you and welcome to the New York Times Company second quarter 2020, <unk> 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 Rolling Koodo exit Executive Vice President and Chief financial.

Oh 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 2019 10-K as updated in subsequent quarterly reports on form 10-Q. In addition, our presentation.

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 <unk> investors Dot and why T. C. O M dot com with that I will turn the call over to Mark Thompson.

So in college and good morning, everyone.

Good morning, and good bye because as everyone of them lower let's move on now this not just my 30 [laughter] quarterly earnings call is chief executive.

Times, but also my last.

Americans takes the held in just a few weeks time.

Which is great news for the company and its shareholders. She's a unique talent I will be a bold brilliant CEO.

But one of the changes it's going to bring it to the language towards exact you could use on these cool.

It's like would lumpiness.

Rather find express it would useful in so many context, but never more so than when applied to advertising.

No I tried God knows I've tried to coach Meritas in the use of the word lumpiness, but frankly its hopeless it turns out but unless you spent decades steeped in true gnarly on a bubble British Lumpiness you just called pronounce it would they need conviction.

Both the needless to say isn't lost cools.

So no more lumpiness in the noble Queens English for tool.

From elements were going to be in America.

To paraphrase George the third in Hamilton, Good luck with that.

But I do want to thank all of your particularly all analysts for your engagement and capacity to me over the past eight years.

You'll testing of the company strategy and performance that's helped us improve both.

And it's someone new to the public markets when I arrived in 2012 I'd love to look.

Oh, So hope you'll forgive me before I hand over to American doesn't tell the story over the course.

If I say, but it's a source of some point to me, but my last full quarter C. O. The times was not only our best ever for new digital subscriptions for the quarter in which total digital revenue exceeded print for the first time.

That was just taken its can coming not because we've been slower than others to execute all digital strategy quite the contrary.

Because all great print platform has remained resilient.

But it's clearly a watershed moment in the transformation of the times.

In revenue now as everything else, we have a difficult first company.

I would look back from here.

The story of the Neo cons over this period is partly a complex all the new digital tactics, new skills, you structures and processes.

But it's also very simple story of a shared belief across the organization in the valley Unparallel a great journalism.

The packaging in selling its important to cool. So we've made great strides in both.

But the secret sauce is the journalism itself.

It's the critical element in the virtuous circle of audience engagement subscription a long term loyal retention.

And it's also the point up in New York Times.

That's why we've invested in it so consistently in recent years.

Nothing Gratifies me more about money is that the company than the fight, but in such in such a difficult lumen per journalism as a whole Oh Nizam is so strong and that's a time when the public needs great journalism modem ever they can rely on the New York times.

Let me hand over now to Meredith, whose play such a major part in all these successes and who I believe will take this company to even greater heights to take you through the quarter nerds.

Thank you Mark.

You have even been ineffectual at work in your particular, you English likes the common time, yeah early succeeded and leaving the company or better and found that so I'd be happy Oh, I get Collie, let me say where immensely grateful.

For your inspired and easy to shift over the past.

You, let us every major CASM a transformation to become a double digital first subscription first company and then doing.

Raise the ambition not just like [laughter] journalism actually.

How many total digital revenue ever take print in your last quarter is a perfect punctuation to your incredible.

Okay, and Dr., having just right that she said that it had one of the most transformative wrong.

But she executive in moderated time and I.

He could not be more great [laughter], a strong partnership and getting to work with you and you learn from much of it.

Now I'll have more to say in the coming quarters, but you can largely expect that went ahead and executing a strategy that has guided us over the past five years.

He couldn't do anything bad news from a product and our brand.

Oh, Sydney continuing to increase.

And.

Our product Yep.

Journalism and the way that keep that's fine and you look we experienced.

[laughter] Phentermine engine.

[laughter] plenty of work still ahead to build the good class product and tech operation to enable about.

It means investing you know people.

Oh, hey to attract and retain the top talent, it's all about major discipline and ensuring that the time.

Platelet count that people can do their best work that you see anything an acting ambitious about diversity and inclusion changes at the time, but like what we look forward, Bob and there's a workplace that field [laughter] worthy Oh about column.

Now, let me talk about the quota.

There's been an extraordinary period blog protest again, it's violent racial in Japan.

Tens of millions I didn't really critical division.

He could be Ben as election day here and a pandemic I continue to average the country did all times' journalism, how readers and describe it would make sense today.

Our ongoing investment in R&D engine has enabled our national that actually across the nation to chronically events on the ground you can make how much <unk>. It is visual an investigative journalism to tell the story of how the virus spun out of control I don't reporting is amazingly underscored.

Staggering human.

Racial disparity and the tragic impact, particularly on health care and essentially workers.

At times has a long history of journalism.

Great and America from club that pioneering work I'm, a couple of like minimum Nike fixed fees to last year's Pulitzer Prize, winning 16 19 projects. It's the downloaded an additional 10 million huh.

[laughter] protest began in the U.S. after the death of George Kuwait The way, we put it on me its protest show takes Oh Arsenal.

Seven times journalism, and Bobby everything from visual investigation to audio photography and of course, that's making work.

This exceptional journalism that has continued to yield they got.

In the second quarter due to an average of 130 million U.S. readers monthly according to Comscore.

Well the audience gains moderated somewhat from the first quarter surge Hey, Joe represented 32% increase at the same period last year.

The gains in Oregon, and I'm pleased to ability to engage we do and turn them into subscribers led to its second consecutive quarter of historic numbers.

Total net digital subscription ambition.

Q2 was our best quarter ever it's 493000 net additions to our core news product and 176002 or other digital products totaled 669000 net.

Digital subscription.

Leaders are responding to that Brett and the depth of our offering the second quarter represent our largest number subscription additions, we see two our cooking and crossword product as well to coordinate.

We ended the quarter marked the first full year about registration based customer journey and not core against product New journey, it's been effective in its own right and driving growth and it in an important foundation for ongoing engagement and conversion optimization.

Also continue to experiment more aggressively and successfully used product innovation.

Judgment, including further expansion of our lives.

These initiatives are positively impacting profitability in the quarter digital subscription revenue grew by 30% driven by the rapid growth in subscription additions promotional subscription graduated into higher prices.

Since the benefit we saw from our digital pricing.

At the end of Q2, the times had 5.7 million total digital only subscription and 6.5 million total subscription well on the path to 10 million.

We're making steady progress on the levers and drivers that subscription that'd be and usually have market conditions, a clearly amplifying their effect.

We do not give forward guidance on subscription because the numbers are generally difficult to bring that that's particularly true at that moment.

He said on last call you don't expect exceptional peaks of audience.

Mmm underground Vivus story last forever, but we also know we're about to enter the crucial last month of a presidential election.

It's also worth noting.

And our strategy and our plan to increase the percentage of start from organic measure versus marketing over time, the more pronounced in.

And I like the last two quarters when part a reflection of usually when market conditions. You can therefore, it backs that will return to more paid marketing in the back happened here as we find a cushion opportunity to do.

Oh, it's also an advertising well substantially all right here it was somewhat better than expected, we're continuing to evolve our AD organization to reflect an acceleration of underlying trend and maybe even further into our strategy I'm drawing competitive strength.

Value from our brand adient indirect relationship.

No in the second quarter that had the consequence of reducing the overall size of our Hmm and closing I understand the wind marketing services business. They did so entirely to depart future add but that's not.

That's teacher will be increasingly driven by differentiated digital ad products, including fewer but larger format.

Actually better targeting of our audience.

Pardon me data in private before but it.

Insights for marketers about what audiences are interested in and audio.

We expect that our large print and traditional display advertising, but that's the continued to be under pressure.

Well the AD business will go on very important to the company economic and profitability is unlikely to be it didnt growth driver in the near term.

We discontinued providing time content to Apple news at the end of second quarter decision is consistent with the core principle adopted and how we engage with the platforms equality news publication must be named differentiated from other sources that end customer relationship data.

Belong to publisher and not the original creator content must be sufficiently compensated for its work there other important ways, we'll continue to partner with Apple through a variety of their products beyond the Apple news.

Last month, we acquired serial production company that produces a groundbreaking syriana podcast.

Also entered into an ongoing created some strategic alliance [laughter] Medicare like a radio program that transformed big opera among other things itself, but American like podcasts advertising beginning next year.

As we had said in previous calls we're big believers in the power of audio and empower the audio can have gotten deeper connections with our audience and we're committed to bring that no. It's the best audio journalism in the world.

Launch the daily in 2017.

Quickly become the most listened to news on cap in the country. Our goal to continue to expand our audio offering and to chart, an ambitious course for high quality immersive audio journalism.

We also accelerated our progress and bringing the time to new audiences.

I'm in TV that past corridor in the last month.

We premiered father soldiers Stein, our first feature documentary on Netflix directed by times for the quarter left to do this and catching on horn.

And the we have been replaced by the New York Times, 'cause then on FX and who the new monthly documentary series.

Also it now 69 <unk> project partnership.

Why isn't it.

When free and the coal Hana Gen, which would be adapted into a limited food brand design studios.

I'll close by thanking tightens employees around the world, they're extraordinary work and extending into trying time and once again. Thank you Mark Oh that he's done in the meantime company and with that I'll turn it over to go and.

Thank you Meredith and good morning, I'd also like to take a moment to acknowledge mark upcoming departure and the thank him for his partnership over the past eight years.

Well I will surely Miss working with Mark I'm equally excited by the prospect of continuing to work closely with Meredith in her new role.

As I said last quarter, although we expect short term results to be negatively affected by a decline in advertising.

Our subscription business, which represented nearly three fourths of our revenue in the second quarter provides a source of strength and resilience through a recurring revenue stream that we expect to grow further as we continue to excel at our core mission.

Adjusted diluted earnings per share was 18 cents in the quarter, one cents higher than the prior year.

We reported adjusted operating profit of approximately $52 million in the second quarter, which is approximately $3 million lower than the same period in 2019.

Total subscription revenues increased approximately 8.5% mcwhorter with digital only subscription revenue growing nearly 30% to $146 million.

This represents a further acceleration in the sequential rate quarterly growth.

Largely as a result, the large number of new subscriptions, we have added in the past year.

Strength in retention of the dollar per week promotional subscriptions were passed the year long promotional period and have graduated to higher prices.

The impact from our first ever digital digital subscription price increase which began late in the first quarter.

Quarterly digital news subscription ARPU declined approximately 11% compared to the prior year and approximately 3% compared to the prior quarter consistent with the race or decline we reported for the first quarter of 2020.

For both sequential and year over year ARPU trends. The historically large number of newly acquired subscriptions, mostly on the dollar per week promotion domestically and deeper promotional rate in many areas outside of the U.S. more than offset the benefit from subscriptions, graduating from the introductory promotion to either step.

For full price as well as the benefit from price increases on our more tenured full price subscriptions.

Our current related solely to domestic new subscriptions declined 8.5 person in the quarter versus prior year and 1.4% versus the prior quarter.

We continue to expect strong.

In addition, largely at the one dollar per week promotion as well as growth in international subscriptions, which monetize at a lower rate than our domestic ones to continue to weigh on ARPU in the third quarter.

International subscriptions continue to make up approximately 18% of our digital only new subscriptions at quarter end.

On the print subscription side revenues were down 6.7% largely due to a decline in single copy and international bulk sales as many sales outlets were close throughout much of the quarter.

Revenue from domestic home delivery print subscriptions were flat in the quarter as a home delivery price increases implemented early in the year offset year over year subscription declines.

Total daily circulation declined nearly 20% in the quarter compared with prior year or Sunday circulation declined 9.7%.

The closure of hotels universities and other outlets as a result of stay at home orders across the country contributed approximately seven percentage points to the daily decline and three percentage points to Sunday.

While the loss or Starbucks as a distribution outlet in August of 2019 contributed approximately two percentage points to the decline.

Total advertising revenues declined approximately 44% mcwhorter as both digital and print were severely impacted by lower marker demand during the pandemic.

Digital advertising declined approximately 32% in the quarter compared with the prior year somewhat better than the guidance. We gave on our first quarter earnings call largely as a result in higher levels of spending from a technology category.

Print advertising declined approximately 55% across most categories with entertainment and luxury hit hardest.

Other revenues declined approximately 5% compared with the prior year to $43 million, primarily as a result of the conclusion of the first season of the weekly television series as well as lower revenues from live events and commercial printing. These declines were partially offset by licensing revenue related to Facebook news.

The increase in a three referral revenue from worker.

Adjusted operating cost decreased 8% in the quarter significantly lower than the guidance. We had originally issued as we attempted to partially offset lower expected advertising and other revenues as a result at a pandemic.

Cost of revenue decreased approximately 6% as lower print production and distribution costs, an advertiser servicing costs more than offset higher digital content delivery in journalism costs.

Sales and marketing costs decreased approximately 36% largely driven by lower media spend which we reduced during initial month of Corona virus pandemic.

The extremely strong news environment and the continued improvement of our digital products proved to be a strong combination and demonstrates that we have become less reliant on acquisition spend as a means to drive subscription growth. However, we do not Q2 marketing spend is representative of future spend given the special circumstances under which we were operator.

In the second quarter.

Continuing with the second quarter results product development costs increased by approximately 22% largely due to growth in the number of employees engaged through digital subscriptions strategic initiatives.

We recorded a $6 million severance expense in the quarter largely as a result of workforce reductions primarily affecting our advertising department.

Our effective tax rate for the second quarter was 19.6%.

On a going forward basis, we continue to expect our tax rate to be approximately 25% on every dollar of marginal income we record with some variability around the quarterly effective rate.

Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $757 million, an increase of $70 million compared with the first quarter.

The company remains debt free with a $250 million revolving line of credit available.

As I said last quarter the consistently conservative approach, we've taken in managing our balance sheet in tandem with the continued strong results produced by our subscription first business has provided us the financial flexibility and confidence to continue pursuing our growth strategy, even as we manage through the economics fall out of the Koeppen 19 crisis.

As Mark noted, we announced the acquisition of Zero productions, which closed last week and including approximately 25 million dollar cash payment at closing.

Let me conclude with our outlook for the third quarter of 2020, which is based on our current knowledge in assumptions it could be impacted by the evolving effects of the pandemic.

Total subscription revenues are expected to increase approximately 10% compared to third quarter 2019, with digital only subscription revenue expected to increase approximately 30%.

Overall advertising revenues are expected to decrease between 35, and 40% compared with the third quarter of 2019 in digital advertising revenues are expected to decrease approximately 20%.

As a reminder September typically plays an outsize role in third quarter advertising revenue, which when combined with uncertainty arising from the Kobin routine pandemic makes this years third quarter, especially difficult to predict.

Other revenues are expected to decrease approximately 10% as licensing revenue from Facebook news is expected to be more than offset by lower revenues from our television series and as a result of a pandemic impact on both commercial printing and our live events business.

Both operating costs and adjusted operating costs are expected to be flat or to decrease in the low single digits compared with the third quarter 2019, as we pull back on non essential spending while continuing to invest in the drivers of digital subscription growth.

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

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble our roster.

First question comes from Alexia Quadrani of JP Morgan. Please go ahead.

Hi, Thank you very much and that Mark we'll Miss you and your accent. So best of luck ahead.

Thank you.

To add on that just a couple of questions a pretty straightforward can you provide a bit more color on the digital sub growth in the quarter I guess any sense of how that trended you know I just sort of progress you know I, usually I know you don't comment a month to month, but curious given all the volatility and all the news if it would heightened in certain months versus other.

Cars and I guess just on that same point I guess any any color you can give us on terms of engagement and the quarter, you know where it with their people still just very engaged to covert news or is it really broadened out.

Sure I mean.

No it does.

But it was all of its just to say.

We don't disclose very much in this area.

Well not completely obvious point is the major news stories in the has been a very busy period for news, obviously drooling audiences. Both of the unique user level and also in terms of engagement, but Meredith I can you help alexia told them is.

Yeah I mean.

What Mark said it.

Right that we won't comment from quarter to quarter, but it is probably one thing you do the.

Audience fluctuation based on what's what's going to use them, we see that.

Within the quarter, the and and sort of forcing the opposite July eight, though registration based consumer journey and our auto book on engagement has kind of sort of underlying stabilizes back to that so while while audience plays.

Well it takes a driver in the model, it's not the only one and.

No we are focused on registration.

Engagement. It budgets are used to that had sort of the now effect.

I'm going any thoughts when you may resume the tenure price increases I know you put a pause on nature and the crisis here.

And I'm getting a signal that may sound could be better. So I picked up my fun my colleagues to let me know.

If that's not working we I'm getting a thumbs up from Highlands. So we paused 'em, we did we get a big big chunk, Yeah set the price increase and then we paused when it when code that hit I'm, just because we felt like given what was going on it.

The right thing to do what we what was there on that price increase this fall to a smaller but still substantial cohort.

And then just lastly, a quick question on your investments in sort of the TV side as well as in the audio sort of the podcasting any any really comments you'd given terms what the returns are like and maybe the TV video first is the audio mean doesn't make sense to put you know more of an incremental dollar and one versus the other.

Yeah.

I would say you know, we've got and as I said in my remarks, we've got really big ambitions for audio journalism and for what the times can do it audio, particularly now that we've got you know.

Sort of triple threat of the daily and serial production and a new partnership. This American lives I mean, we that's aren't the only thing we've we've just.

Karen Swisher is me it'd be podcast here as well, it's I think you can expect to see us.

Continue to invest in audio for a number three cents and and I would say in contrast on on TV and film I'm very pleased with what we're doing there, but I would say it it's less than economic driver and more about how we.

Yep Times' journalism to more audience is that how we get more people to connect with our brand.

Thank you very much.

The next question comes from can on like it's that's far of Barclays. Please go ahead.

Thank you Mark obviously, congratulations on a fantastic than they are.

And I guess it begs the question now than other companies doing phenomenally well and as you highlighted its you know the trends over the last four quarters have accelerated significantly her question I guess it begs the question off why now.

From a timing perspective.

Yeah, good though.

Question, Kevin I mean, I told the board when I arrived in 2012 I feel the.

No between five and it will went well between five and eight years was about right as a run from my point of view.

I'd like to.

The big fresh strategic puzzles work on them to work through it.

And I think I mean, one of the really important things to this company. It's a long transition. This is what many is to go is fantastic momentum and I think the idea that from time to time.

You bring.

Leaders with fresh ideas and a new kinda energy to apply to the puzzle intrinsically makes sense and I think you've probably seen a bit like a relay race, we've been trying to make sure that the next Brahma is up to speed and running at full pedaled by the time they beat the button policies.

Meritas, although obviously made has done a lot of so.

He's going to bring freshly emphasis fresh ideas I mean, I've had eight years to plateau my ideas are OK Google.

Im satisfied with the way things have gone, but I'm I'm a believer the you you maintain momentum.

By now in most of the key jobs changes from time time to time and by the same so closely it means that extends our dinner what is gonna be yet, but I can also apply myself to a two a big new a a juicy strategic problem or Sousa problems in other places. So to me. This is one of.

The healthy ways of keeping the momentum of the given company going, especially when you youre in the middle of such a gigantic transition.

Thank you might have been all the best and better that from your perspective, you know in them the strategic priorities, obviously that automotive areas that have been growth opportunities you highlighted broadcasting and video as potential areas for expansion.

But when you think about this I guess that you know to.

<unk> strategic questions that you would probably be working cool and beneath them. One of the distribution strategy you have the choice of using services like Spotify or who are you know the legacy TV networks for distribution.

Or given the brand of New York Times, you yourself can be an aggregator.

An aggregate of in general have seen a lot more value creation over the last few years when it comes to digital business models. So it would be great could get your cards on how you think your newer businesses from a distribution strategy perspective cord envelope.

And the in terms of the content cost et cetera, and broadcast you've made some investments.

But on the video side Youve relied more on partnerships in order for in order to defray the production costs.

Is there a cell phone models hook content going forward, where you could essentially you somewhat investment dollars huh.

I'm, probably going to have to have you clarify. The lastly, the question. Let me let me try but the first two I would say in in general you can as I said in my remarks, you can expect us to continue at least broadly with with the strategic themes. We've been out for for five years now one one of those.

As big he is is we really believe in the power of you times be a destination as being something that people come to directly and then asked for by me and at the same time E.

Very conscious of the fact that we operate in a broader ecosystem and in many cases habits informed based on some of the biggest players in that ecosystem and I think a lot of that in let's say audio or in film and TV kind of fun needs to be.

What what distribution will look like but you can expect will take the ones that we've had so far which has been really powerful aspect of our business that we've been focused on our own destination and I'll say in the audio space, It's not clear yet you know what a destination is.

In many cases, the daily which is a program is a destination, it's it's and in of itself something that people ask for by name that they come to every day in and it's.

Distribution channel for Us to watch other great work into the World and you could imagine the same up serial production or any other podcast that we're doing as I say now say large audiences. So long winded way to say I'm, we've learned a lot about what it needs to be and build a destination.

I work in it continued to be very focused on doing that on on being something that people come to directly and ask for by name, but we also you know operate within with that healthy sense of reality that there are some very big players you guys system, who are very important.

Ted to drive Inox funnel, Google Facebook and others and indicate some are used business Apple Spotify and.

Others in the case of audio and you see based on what we've done in television that there are places, where we assume that the best way to build an audience for Times' journalism times content is been other distribution outlets and that's why we had a first major foray into wages.

Ah television with FX, and who is the distribution partners and I think we've learned a lot on that will continue in that partnership with new production I'm not sure I understood. The last couple of questions you have to ask it again.

Yeah, it's mainly around you know the investment strategy for content or is it going to be more on your balance sheet worse or maybe a shared model like you've done with where deal.

I would say you know you Stena now.

Apply a mix of organic development, so cory using our capital to build things that make it doesn't that quite successfully in the game space.

And and then lifestyle cooking product and you've also Tina <unk> is our capital for for inorganic ways and I'll point, we haven't talked a lot about the autumn acquisition, but I'll point out that as an important experiment in Cuba is audiences.

Destination ended up itself, they've just going back to the point I made earlier about but the important destination and subscription but it is also an aggregate or.

Of other audio said its spoken word audio from now a time, but when we acquired Atypically spoken word audio long form it's certainly going from the Atlantic in New York Right Youre magazine and it continues to be that though among other things the other acquisitions if that's great.

And in aggregation of other content.

Got it can I ask one question on subscriptions. If you could just help us think who will be.

Channel shifts in terms of origination and those are the mix shifts.

[noise].

New cycle is obviously important to generate more subs as we've seen over the last couple of workers, but I'm sure that is different consumer behavior. When it comes to check on across different cohorts. So if you could just help us think through how this has evolved over the last maybe three or four years that subscription growth has actually but he said.

In terms of growth contribution from the top of the funnel works at the bottom of the final that'd be helpful. Thanks.

I'll take a crack at it and tell me if I'm actually I'm getting at at your question, then well when they want to come in here as well I would say I mean I set a version of this in my remarks, but you know.

Audience continues to be a very important aspect of Uh huh.

How we think about our final one is audience growth.

That's yeah, that's that the audience 20-F, the last two quarters has been on a very important part of the story and.

In the last call that we you know as we see sort of step function change in audience like I think we see the opportunity crowd and change, but but you know behind that where our new customer journey that we launched a year ago, which is registration based opens up I think.

It sort of new stabilizing function, we bring people when they register.

Much.

More effective that at getting them to come back and reap the age and stimulate litigation that's a really important part of the puzzle. So I think the abroad answer to your question is organic needs I think agent people become more important Reggie model.

So can we get you to come back in and engage through you know newsletter can we can be message you in a more commercial way.

Come back and age or can we get you to download the app.

Matt if you do that.

Likely to to subscribe, so I would say our own organic channels and I'm glad you model become that much more important but what would you may want to.

To the answer.

Cannot do you have a a retention question inside that question I can address that if you'd like yeah.

So yes, that's what was you know if you look at the churn across different cohorts as you have any correct as people have rolled off of promos, great I'm sure that behavior. That's changed so if you could bring him but things. So you know where now 22 months into the first offerings of the dollar away.

Rick.

So nearly two years that retention curve for the folks on a dollar a week.

You could almost sitting right on top of their attention curve at 22 months for the prior offers and at each pointed that curve that it's almost identical to slow the little dips and ended et cetera are almost identical.

When we Peel that back a little bit further the folks who we stepped up to an intermediate price they retain a little bit better than folks we step up to full price and then if we look at more recent cohorts. If we look at the cold and cohorts. So you know back in Q1, you have a massive number.

People subscribing and your curious on how they will retain and while it's still early you could fit that you could sit that curve on top also so you know we're seeing a.

Retention that makes us quite happy no matter, how we split these cohorts.

And we as we've been growing and growing and growing the base. Our overall, our churn numbers have been within one or two tenths of a percent either way.

Entire time for many many many quarters. So the retention story is very good from new cohorts. This is very good for folks who came in on a discount I mean get stepped up and it's also very good for that the tenured folks who got a price increase based price increase last quarter.

That's great.

Thank you so much.

The next question comes from let's see leak always talk of Cannonball Research. Please go ahead.

Thank you. Good morning, I was wondering if a if you would like to to comment on that 10 million subscribers goal, but to your put forward does several says so sometime ago and given how strong the sub base is growing maybe the time timeline for it or they are order of magnitude.

Anything would be one big.

Very interested to hear what you have to say so I'll go that plus I think I think mediscan should should address it well I mean on I announced that go into the earning pool for so for Q4 18. So in February 29 team.

With a with a milestone of of 10 million by 2025.

[laughter] quite a few people other executives on Mckool met low good water Wilco, who was a slightly crazy stuff.

18 months later companies clearly close to two thirds the way that already with the with more than five years still to run.

So it looks no I think like a assuming the strategy continues to exist to deliver strong strong gains.

It looks probably looking to underestimate I do want to say about a 10 million. It was always a milestone was no so kind of like a terminal.

Target or a prediction of when the most would plateau, we don't know when it's going to plateau on my own view is that the.

The opportunity. The company has is immense given both the to system before the way of a little competition, but also the attractiveness of products in Mcallen, a virtuous circle that we'd go going in terms of of great journalism and an audience engagement. So.

So.

The answer is I think well. So he is reason is that humans go look a really stretching most of the company now feels that it was it in gross because those either the several million more subscribes to get but to eminently achievable achieve well within the the timetable I said, but Matt did you shouldn't you because youve illiterate as we possibly.

Buttons you own is cool pretty much you should use you talk about as well.

Yeah, I don't have a whole lot to add I think you got most of it Mark I'll just say you know we see the market food subscription journalism to be large yeah. We think it's at least 100 million people happy to have tough globally, and we think the opportunity.

Is big for us and others to participate in that market.

Alright, thank you.

The next question comes from John Olson of Evercore. Please go ahead.

Thank you first Mark I'm going to Miss you good luck and congrats to Meredith. So I've a couple on pricing. So first rolling given all the comments you just made about retention across all these different subscriber price cohorts.

Have you changed the strategy in terms of a number of dollar per week customers, you're stepping up to full price versus intermediate at the one year anniversary not on or on a related no. I think you said in the prepared remarks.

Oh and 8.5%.

In the quarter.

Sure. We can you should we expect that to continue to improve sequentially on a year over year basis, moving forward and then what does that imply for international ARPU in the quarter and just any update on international pricing strategy. Thanks, sorry for all the questions.

You can't see if I can retain all of them. So in terms of the strategy on the step up pricing meaning.

Presumably the person that were asking to move to a step up pricing GE price and knows we are stepping up to a full price. We're still targeting approximately 50 50 on that where where where we're making progress on AI is the amount the percentage that them.

Catalyst picking but at this point, we don't have evidence that we should come off the 50 50.

So that's that's still in place.

Right I did reveal for the first time, the domestic ARPU change versus the international on.

Obviously intentionally to expose the fact that we are discounting pretty heavily internationally, we think thats the right pricing strategy in a lot of countries. It's not it's not one price in all countries, so countries with lower GDP or where a basket of similar goods is price levels, we want to price, we want to price to selling those mark.

Yes.

On the on the domestic side. So yes, the ARPU was down 8.5%, but John the key here is depending on how many new subs, we bring on and we're going to continue to use the dollar we promotion it's been very successful both in bringing on.

New subscribers and and we've been able to step the prices up we prove that also in the last few cycles. So as long as we're bringing on these very large amounts of new subscribers I don't expect ARPU to stabilize quite yet.

Got it alright, thanks and.

Talk soon.

Already.

The next question comes from Craig Huber up Huber Research partners. Please go ahead.

Yes. Good morning, Thanks, Marc I want to say you did a heck of a job lost eight years, what we're going to Miss you and congratulations marathon the new position.

Thanks, Greg. Thank you. Thank you.

My questions.

Mark we wish the number of journalists after the number you have went when you first started the company eight years ago Where's It right now and maybe if meritas could just speak about maybe on a go forward basis I assume you guys want to continue invest in that area.

10 cents a sluggish.

Yes of course, Craig So I haven't got the exact exact number in front of me, but but I want to say that where the about 17 50 at the moment in across newsroom opinion, So 1750 and that's probably.

200, and fits your Sutton moving towards and 50 more than.

Then the one on the double tends to into the time. So we've been a we've been able to move we had in the first couple of years, we had some.

Some buyouts and and lay offs and we've had some sense would you have been about.

Organizational change in shifts, which new leadership themselves the wanted to make too to pivot to that to then you strategy, but obviously, it's encouraging that we've been able to two to build all strings at a time when and this is nothing nothing to be pleased about 70 of a newsrooms, Oh, obviously being depleted but.

Matters will tell you about a about what have you about what's going to happen from my own.

Yes, Oh, I'll say a few things that's the first one to say is on that the single most important driver of what the company's people to do in it its business strategies, particularly subscription strategy glass.

I know this has been the continued investment in the news right any journalists on expansion of format and in putting more reporters more generally when it comes in one place as you can assume that we're going to continue to invest hardly industry.

<unk>.

Our journalism they probably.

On Oh through two more things about that I think on you know I talked a lot about the product itself as the primary and shouldn't the business and by that I mean, I'm the ability of the journalism could be sufficiently different from free alternatives.

And and quality that people will pay for it and I also the ability to help people find an experience more of it and I would say on the second we still have you know a lot of distance to travel to be really effective at surfacing all that we you know.

All that we already make to people said that they get and it.

Digital environment, particularly in the medical environment. So they they get a stuff that's going to be mess 12. It for them. So I think there's always going to be.

On an important corpus that's times' journalism that everyone who comes the times should see but there's there's still a lot of win for us to get better at surface, saying particular stories particular kinds journalism to match People's interest.

And that that brings me to my third point, which is you can assume will continue to invest hardly any journalism and particularly continue to expand in new formats and as we've talked extensively about on this call.

Audio and to some degree in film and TV, but it's worth saying anything but instead of version of this prior calls that that investment doesnt have to scale with with subscriptions and that's in part because of the second thing I said I think there's still a lot of rent.

Just to get better at surfacing and stuff, we already make the great journalism, we already make until the very very large audience. We have been a lot of the work of driving more subscription. It lies in our ability to do that really effectively.

Appreciate that merit or someone else asking about the daily maybe if you just update us on a number of listeners each week. If you would you ever metric you want to give me now versus say a year ago, and then a longer term strategic question I guess on a daily podcast I'm just curious how much thought of you've given maybe if you think over the next roughly 18 months about store.

During the charge for the daily podcast and I asked that whether you charge for annual basis, but also perhaps maybe included in the news only digital product.

Give me no reason to raise prices down a little on that product, but also helped drive.

The digital subscriber sign ups the news only product to be included in their down the road yourself I mean is or transition you think you can make down the road here surcharge for this product has obviously been for very well received.

Out in the marketplace. Thanks, Yeah, well, let me let me just started on on the audience for the day rate might my thing I can't help but stay has been not easy to do vastly larger than that audience for the paper daily or or Sunday at you know even at its peak.

And most of the listeners today or people, who probably never went the newspapers. So it's really done quite up a job wide audience for the time, bringing bringing people to the brand I think now we're somewhere above three and half million app.

Rich average daily I listen to ship that the daily which is is almost twice where we were you don't go one of the thing that's been particularly remarkable isn't this period the resilience of the daily even doing drinkwine team doing sort of stayed home.

Orders I'm not sure that indicates for listenership to audio in general, particularly because people. These does drive time. So we've been very very pleased to see that and then just just turning to.

The other part of your question.

You know I think the daily has been very very powerful it on it and in a number of ways to the company I have to say, it's it's a really strong and particularly Italy and business.

As as its audio generally at the time then so so we continue to be optimistic about that but as we've said in prior calls.

You know, we we believe some evidence that the daily plays a real well and bringing people into our subscription final one of the great things about it it's not it's essentially a single storey everyday so often we leave people wanting more on that particular story others.

<unk> and said that may come to the time to on to get to get more and we know that people who listen to the day, we feel we able affinity for a brand if you listen to it that we often news one of the ads and the game he adds a direct subscription.

And how does that answer that's no top.

Slashing Middle Middle final work, where we're talking about the brand and how we got about the work that also essentially asking people to subscribe if they like the daily Mezz ads are really really powerful and then as I said in answer to another question. The daily itself, it's a really important distribution mechanism.

For the audio journalism, meaning you know we use that isn't I'm glad kits and other new you podcast into the world and and that's been quite effective will enable to want to number of other important shows that as a result of having the daily and we can do that directly.

Or we can do it by using the daily as promotional space and I think all of that is is useful to us and I'll say very broadly yeah. It would be habits subscription first strategy in a strategy of direct relationships with users to not has served us very very well even against the backdrop.

GAAP of many many free alternatives keep the times, it's what I would say, we don't <unk> out and at some point future. It could be directed part of our subscription business, but what I will say is you know if you look at the nine years into the pay model now.

If you look at our history, we have always had even today have a very wide we layer for our content, which it's usually importantly, I said it version of that's my answer to basketball question, but hugely important to driving business into our ability to make direct relation.

Chips, and it's hard to imagine Mario where daily in some capacity doesn't doesn't play basketball for awhile.

Great. Thank you and the best of luck to embark going forward.

Thanks, so much.

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

Thank you for joining us. This morning, we look forward to talking to you again next quarter.

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

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