Q2 2021 New York Times Co Earnings Call
[music].
Good morning, and welcome to the New York Times second quarter, 2021 earnings conference call.
All participants will be in listen only mode and should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then 1 on your telephone keypad to withdraw your question. Please press Star then 2 please note. This event is.
And recorded and I would like to turn the conference over to Heartland took lewicki executive director of Investor Relations and financial planning and analysis. Please go ahead.
Thank you and welcome to the New York Times Company second quarter 2021 earnings conference call on the call today, we have Meredith Kopit, Levien, President and Chief Executive Officer, and Rolling Kabuto, Executive Vice President and Chief Financial Officer.
Before we begin I would like to remind you that management will make forward looking statements. During the course of this call.
These statements are based on our current expectations and assumptions, which may change over time, our actual results could differ materially due to a number of risks and uncertainties that are described in the company's 2020, 10-K, and subsequent SEC filings and given the impact that the COVID-19 pandemic and on our business in 2020.
And will also present certain comparisons of our operating results.
1 to 2019, which we believe in many cases provides useful context for our current year results. In addition, our presentation will include non-GAAP financial measures and we have provided reconciliation to the most comparable GAAP measures and our earnings press release, which is available on our website at investors day and white tea.
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With that I will turn the call over to Meredith.
Yeah.
Thanks, Harlan and good morning.
Okay.
Okay.
Okay.
Okay.
Okay.
Paid subscribers.
And.
Yes.
That's our strategy.
Of the market for paid digital journalism, and our unique opportunity to meet that demand that milestone and followed the second quarter with strong revenue and profit growth.
Net subscription additions and progress on our advancing our underlying margin.
Total subscription revenue grew 16% and the corridor the largest year on year of subscription revenue gain and more than a decade adverts.
Advertising revenues surged compared with the same period last year.
Combined strength and these 2 revenue streams more than offset cost spread and as a result, we recorded $93 million and adjusted operating profit of <unk>.
78% improvement compared to the same quarter in 2020.
We saw moderated growth and net subscription additions and the second quarter, which we expected given that Q2 is traditionally our sources of the year and we were comparing against last year's historic results at the beginning of the Covid crisis, We added 142000 net digital subscriptions.
And with roughly half of news and the balance and cooking and games we.
We continue to expect that our total annual net subscription additions will be in the range of 2019, although that remains difficult to predict with precision.
And advertising performance was better than expected with total revenue up 66% year on year.
With subscriptions and the biggest factor and the gain and advertising.
Nearly 80% year on year and more than 22% over the same period and 2019.
It was also another strong quarter for demonstrating the breadth reach and impact of our journalism with unparalleled coverage of the devastating events and south Florida, the political crisis in Haiti, and still surging pandemic.
Paul It surprises were announced in June and the times was the only news organization to win more than 1 this year co.
Your writer Wesley Morris' 1 of the pullets are for commentary for his urgent and moving essay is exploring the intersection of race and culture and.
And for the seventh time, and our history. The times 1 of the Pulitzer Prize for public service journalism highest honor for our coronavirus coverage. This body of work is the quintessential example of the expansive journalism of the times can uniquely deliver more than 1000 journalists contributed to our.
Corona virus reporting as did many others across the company, including engineers data scientists product designers and product managers.
The work of our data journalism team in particular is worth noting the times launched and around the clock effort to track every known coronavirus case, and the U S and made that data publicly available that coverage continues to fill of vacuum that has helped local governments health care workers.
Businesses and individuals better prepare through each stage of the pandemic and has also brought us new audiences, who rely on and returned to our products repeatedly.
Demonstrating the strength of our journalism across platforms and subject matters in mid July the times was nominated for the Primetime Emmy Award for Best documentary for our film framing Britney Spears. The film ignited intense scrutiny of court ordered conservatorship and continues to.
Resonate with audiences globally, we produced it as part of our New York Times presents series of partnership with FX that was recently extended.
I'll turn now to our underlying revenue drivers in the quarter and share some specifics about the work ahead.
As we've said in prior calls we expect to feel the effects of comparing our results against last year's heightened news cycle for the remainder of the year and we believe that while the new cycle will continue to have significant effects on our subscription growth we are increasing our control over the levers of the model.
Our audience and the second quarter was below the historic highs of 2020, driven largely by declining engagement with the Covid story domestically, but as we saw last quarter. Our average weekly audience was larger and at the same period and 2019 and every prior period for the <unk>.
Second quarter and a row. We were also pleased to see readers and K engaged across a broader range of storylines and they did last year. We view this as a positive leading indicator of future net subscription additions as we have seen that experiencing the breath of our report correlates with pain.
And state, we're leaning into that breadth of both within our core news experience and across our adjacent products like cooking games and wire cutter by experimenting more aggressively with programming to expose more of our audience to the full value of the times.
With sustained strength relative to 2019 and prior years and overall audience and with more than 100 million registered users. We are also experimenting more aggressively and we believe more successfully on our customer journey and access model.
And as our pace of new registrations continues to be healthy we have now begun to focus even more on getting registered users to subscribe and to engage more deeply once they do.
And that experimentation with our access model has given us increasing insight into when our readers of ready to subscribe, which in turn is leading to higher conversion rates.
As a result, our digital monthly net subscription additions have grown each month since Loews and March we believe we have additional room to optimize conversion as we strengthen engagement and key areas like newsletters and our growing body of live experiences.
Last quarter, we noted that the newest cohort of new subscriptions appeared to be retaining slightly less well than in the past, which contributed to a small increase in overall churn.
Q2 domestic news churn was unchanged from the first quarter and remains at a comfortable level, well, we experienced and uptake internationally and non core markets. We believe our churn overall is generally at a healthy level. We also believe that our increased focus on <unk>.
Scriber engagement and on making the subscriber experience clearly superior registered and anonymous experiences will help maintain healthy churn levels.
And we remain confident in our overarching approach to graduating subscribers from promotional prices to step up and full price.
We continued and the last quarter to lay the groundwork for a more strategic bundled subscription offering that has the potential to be more widely appealing and uniquely valuable to millions of people and their daily lives throughout the quarter. We ran tests on our all digital access bundle, which combines new.
Used cooking and games. These tests demonstrated that there is meaningful demand for the bundle and that those who choose it or better and retaining than those who subscribe to only 1 product building on these promising results we plan to do more testing around pricing positioning and marketing of the all digital.
Access bundle and the second half of the year and this fall we plan to launch our paid subscription products per wire cutter and experiment further with all of them both of which over time has the potential to widen the appeal and value of of times bundle.
Given the opportunity, we see and addressable market of at least 100 million people, who are expected to pay for English language journalism and.
And a unique moment and which daily habits for up for grabs we are continuing to invest and the value of our individual products and.
And the broader bundle that includes investing thoughtfully into our news operation to cover the most important stories of our time and to meet more news needs. It means investing into our adjacent products to meet a broader array of life needs as we've done with cookie and games each of which is now closing in.
And on a million subscriptions and it means investing to build the underlying tech product experience and company culture required for us to scale.
We believe these investments will enable us to grow our market share and also to build a larger and more profitable company over time.
I'll turn briefly now to the drivers of advertising growth. Our AD business is no doubt benefiting from an advertising market recovery, but we also believe we're seeing the effect of the groundwork we laid to build competitive advantages. Those advantages include our robust first party data targeting capabilities.
Our large and growing suite of hit podcast and our ability to create unique multiplatform collaborations that help marketers launch new ideas and products and to the world.
Now before I turn things over to Roland Let me share and update on the company's ongoing emphasis on and investment and building out a world class digital product development team and.
As we focus on scaling our strategy of journalism worth paying for our ability to attract develop and retain top talent and areas well beyond journalism is paramount.
This is especially the case and engineering, which is now 1 of our largest business side functions I'm happy to say that later this month will officially welcome our new Chief Technology Officer, Jason simple, who joins us after 5 years and Airbnb and half of dozen years of Facebook during its early days.
And of growth Jason joins our other highly talented times leaders, who are steering our digital product development work to its next phase of growth and with that I'll turn it over to roeland.
Thank you Meredith and good morning.
While subscription and unit growth was modest in the quarter substantial growth and both subscription and advertising revenues, which were a result of fundamental strength and the underlying business delivered strong financial results, especially when compared with the new results from the second quarter of 2020.
Adjusted diluted earnings per share was 36 months and the quarter issues and higher than the prior year.
We reported adjusted operating profit of approximately $93 million higher than the same period of 2020 by $41 million and higher than 2019 by $37 million, which is an important comparison point given the impact of the pandemic had from our 2020 results.
We added 77000, net new subscriptions to our core digital news product and 65000 net new subscriptions to our Standalone digital products for a total of 142000 net new digital only subscriptions.
As of the end of the quarter, we had approximately 930000 game subscription and approximately 830000 <unk> subscriptions.
And international share of total new subscriptions remained at 18% as of the end of the quarter.
Total subscription revenue increased 15, 7% and the core of.
<unk> said this was the highest rate of subscription revenue growth well over a decade with digital only subscription revenue growing more than 30% to $190 million.
Digital only subscription revenue grew as a result of of the large number of new subscriptions, we have added in the past year.
Continued strength and retention of the dollar per week promotional subscriptions from graduated to higher prices and fire.
And the positive impact from our digital subscription price increase which began late in the first quarter of 2012.
Digital news subscription are proof of the quarter increased approximately 1 percentage point compared to the prior year and nearly 5 percentage points compared to the prior quarter.
Mark the first quarter with a positive year over year results from 2013.
This improvement was primarily a result of subscription of graduating from an introductory price to either full price or an intermediate step up price and the quarter.
Well as the continued benefit from price increases on our more tenured full price subscription.
All true related solely to domestic new subscriptions increased approximately 1.5 percentage points versus the prior year and nearly 5 percentage points versus the prior quarter.
We continue to expect to demonstrate pricing power throughout 2021 as the impact from subscriptions, graduating from discounted promotion and the price increase from 10, New digital subscription continues to provide a tailwind to digital and our crews throughout the year.
First of subscription revenue increased more than 1% and home delivery revenue benefited from the first quarter price increase which more than offset declines and subscription volume.
Total daily circulation declined 4.5% and the quarter compared with prior year, while Sunday circulation declined approximately 1%, which represents a significant improvement and the recent trend following the steep declines experienced and the result of widespread business closures and the decrease and Canadian travel as a result of the pending.
As compared with 2019 print subscription revenue declined 5.5% of single copy of international bulk sales copy decline, while revenue from domestic home delivery subscription from flat.
Total advertising revenue increased more than 66% and the quarter as digital advertising grew nearly 80% while print advertising increased by 48% largely as a result of the impact of the comparisons of weak advertising revenues and the second quarter of 2020 caused by reduced advertising spending during the.
COVID-19 pandemic.
Digital advertising was also buoyed by our proprietary first party targeted AD products and expanded audio product portfolio.
Versus 2019 digital advertising grew 22% as a result of higher direct sold advertising, including traditional display and audio.
Second quarter digital advertising revenue exceeded the guidance. We gave in early may largely as a result of better than expected performance from larger technology and financial services advertisers spending heavily on our targeted and audio products.
Meanwhile, print advertising decreased 48% of compared with 2020, primarily driven by growth and the luxury media technology and entertainment categories.
Despite this impressive level of year on year growth print advertising revenue lagged 2019 by 33%.
Other revenues increased nearly 9% compared with the prior year to $47 million, primarily as a result of an increase and wire cutter affiliate were sold.
It's worth noting that midway through the second quarter, we began printing the wall Street Journal Barrons and the New York Post out of our college point production facility significantly increase and utilization of the company's only owned printing plant.
Adjusted operating costs were higher in the quarter by approximately 15% of compared with 2020, and 6.5% higher and 2019.
Cost of revenue increased approximately 9% as a result of growth and the number of newsroom gain cooking and audio employees.
Other costs associated with audio content.
Higher incentive compensation accrual and higher subscribers servicing and digital content delivery costs.
This was partially offset by lower print production and distribution expenses.
Sales and marketing costs decreased approximately 35% driven primarily by higher <unk> expenses, which has been reduced dramatically last year and life of the historically strong organic subscription demand experienced in the early months of the COVID-19 pandemic.
When compared to 2019 sales and marketing costs decreased 14% as a result of lower advertising sales costs, partially attributable to a work force reduction that we've enacted and the second quarter of 2020 as well as lower media expenses.
Media expenses, and 2021 was 14% lower than in 2019.
Worth, noting that third quarter 2020 media expenses were also significantly favorable compared with 2019, which will make for another difficult comparison from the third quarter of 2021.
Product development cost increased by approximately 28% largely due to growth and the number of engineers employed and of higher incentive compensation accruals and we had recorded from the second quarter of 2020.
I will again reiterate that we plan to continue and head count in this area over the foreseeable future as we expect to continue leaning into investments and product development as well as and our core news and Standalone products to drive growth.
General and administrative costs increased by 6% and when you control for severance and multi employer pension withdrawal obligation costs G&A costs would have increased by 19% largely due to increased head count and support of employee growth and other areas higher outside services and of higher incentive compensation accruals.
Our second quarter core cost growth came in at the low end of the guidance we issued on our first quarter call in early may and largely as a result of slower than expected hiring for our growth initiatives and a tight labor market.
We had 1 special item and the quarter and nearly $4 million charge, resulting from the early termination of 1 of our tenants leases and our headquarters building as we add space accommodate growing head count to support our growth initiatives.
Our effective tax rate for the second quarter was approximately 25% as.
And as we've said previously and we expect our tax rate to be approximately 27% from every dollar of marginal income and the court with significant variability around the quarterly effective rate.
Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $947 million and increased $56 million compared to the first quarter of 2021.
The company remains debt free with a $250 million of the bottom line of credit available.
Now, let me conclude with our outlook for the third quarter of 2021.
Total subscription revenues are expected to increase of approximately 13% to 15% compared with the third quarter of 2020 with digital only subscription revenue expected to increase approximately 25% to 30%.
Overall advertising revenues are expected to increase of approximately 30 to 35 per cent compared to third quarter of 2020 and digital advertising revenues are expected to increase approximately 40% to 45%.
Other revenues are expected to increase of approximately 5%.
Both operating costs and adjusted operating costs are expected to increase of approximately 18% to 20% compared with the third quarter of 2020, as we continue investment into the drivers of digital subscription growth and comp against another quarter of low spending last year as a result of actions taken during the first year of the pandemic.
And with that we'd be happy to open it up for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2 at.
And at this time, we will pause momentarily to assemble our roster.
Our first question comes from Whats at least here sorry of from Ken and bulk research. Please go ahead.
Hello.
Sure lineup and Oh, yes, sorry, Kevin.
And of technical differences Meredith I wanted to ask you this compared to how you felt about your net add guidance for the full year on the last quarter call are you feeling more confident or less confident and.
And if so why and if you if it doesn't change of the level of of your confidence and what would change that.
Thanks, and thanks for that badly.
I would say it's unchanged.
I'll reiterate what I said in the in the prepared remarks, which is R. R.
Our outlook at this point is and.
And that we continue to believe we'll finish in terms of of net additions broadly and the range of of 2019 and I shared in the prepared remarks that and we.
We did see and have seen improvement since March.
And in terms of net additions so that gives us confidence I'd say, we believe and.
We are continuing to improve our control of the levers of the model even more of a new cycle continues to have effects of there. There is plenty of runway that we believe can help us.
Keep keep optimizing for conversion of our.
And our ability.
To use our meter and more sophisticated ways and more dynamic ways is getting better we've got.
Lots of engagement around live experiences of newsletters.
Superior to 2019, and and we think there's opportunity there to apply our customer journey and access model, a little bit more and more deliberately and as I said in the prepared remarks, we have had been testing our bundle and those tests are quite promising and so on.
All of that gives us.
You know the confidence that we're on track for what we've suggested so far but you know it.
It remains hard to predict precisely.
Thank you very much.
Yeah.
The next question comes from Craig Huber from Huber Research Partners. Please go ahead.
Yes, hi, good morning.
Can you talk a little bit about the use of the $1 of week promotion from 52 weeks. It seems like you guys are being more aggressive with that.
We can and week out here versus what maybe what you've done a year of 2 years ago. If you could talk about that and also be curious also to heal of further about churn.
And how you're feeling about that and initiatives.
Versus of 2 years ago, you mentioned all of that but just talk about that.
Yeah.
And good morning, and and happy to answer both of those and enroll and should hit way and with anything I missed.
On a dollar of weak we are continuing to use it aggressively as a way to.
To bring new subscribers and and you can regard our use of it and real confidence in being able to step people up to interim and full price and at the 1 year Mark. So the fact that we continue to use it.
<unk> is a signal that it's really working.
And of half 3 years, and now having sort of tested it and gone through them.
A couple of full cycles now of stepping people upset we use it because it works and I think you can assume where.
And we're going to continue to use that we like what we see there.
On churn all I'll address it in 2 ways and I'll repeat some of what I said in the prepared remarks and <unk>.
As a.
Using step up pricing and bringing people up at the 1 year Mark to interim and full prices, we like what we see there is that from a churn perspective.
And you can regard the fact that we're continuing to use that strategy is as comfort with with what we're seeing more broadly on churn and I'd say, we think our churn is is healthy we're comfortable with where it is we talked in the last quarter about the fact that we've seen.
Net.
A bit of and uptick in churn because of that.
The size.
Size of of the New group that we brought in and they were retaining slightly less well than prior cohorts.
This quarter were stable to that on domestic churn, which we feel good about and I.
And I think it is healthy we saw international pick up a bit this quarter and I would say that is and from what we can tell that's based on our strategy.
And the more aggressive promotional pricing and non core markets, but I'd say, it's all sort of taken together.
And you know and in a range of of.
Comfortable healthy sort of and in line with our expectations and all I mentioned this and then prepared remarks I'll say it again.
We are putting a lot of work and energy now and and more to come into subscriber engagement and really better delineating and value in subscribed state and wheat versus the registry and state of the anonymous state and we thank all of that has the potential.
And to help us and on the retention side.
Follow up note if I could.
And how many people are you expecting to raise prices on potential subscriptions. This calendar year. Please thank you.
Well and I may ask you to to.
Quantify that I'm sure you may have with that yes. So over the course of the whole year, we expect about a little more than a million and a half subs transitioning to higher prices.
From the dollar of week.
And then about 500000 tenured subs, receiving a price increase some of which has already received net price increase and Q1 and Q2 obviously.
Great. Thank you guys.
The next question comes from <unk> Venkatesh War from Barclays. Please go ahead.
Thank you.
So I.
I guess.
Firstly on the operating leverage side, I think 2020 and that so far in 2020.1.
You've seen a reasonable amount of operating leverage and I don't think we've seen that before 2020.
And part of it is just the cadence of cost because I think it's being pushed out a little bit more than what your bids and they haven't disappeared. So I just wanted to understand that trend a little bit better.
Why of costs coming in lower than what you guys have been guiding to for the past few quarters is it just a timing issue or is it conservative openness and should we expect this operating leverage to continue.
And then in terms of mix of subscribers.
And I did it.
And correct me, if I'm wrong, but if I'm reading this commentary correctly, you chunk of inventory seems to indicate that domestic churn of stable versus first quarter, but sequentially International Chu and the tire.
And.
And remember correctly more than 50 per cent of your subs come from outside the U S and in gross additions more than 50% comes from outside the U S.
So if you could just talk about that mix and how that shifted over the last couple of quarters or even during the COVID-19 period, and how you expect that to a book that would probably give us a better sense for what to expect from the subscribers from.
Yeah.
And I'm I'm happy to start with the churn question and then Roland and I May ask you to take the operating leverage question, but on churn.
It is it is not.
Half.
Of our.
Darts are new net additions coming from from international, but it's a lower number than that and new.
But you didn't get the first part of what you were asking right that and domestic churn is stable and as I said in the prepared remarks, it ticked up a bit internationally and and we believe that as a result of the more aggressive.
Promotional pricing, we're using in non core markets, which is still I would say.
Experimental for us and and I think we've got a lot of room to improve their.
And I don't know if you'd add anything to that.
No I think thats exactly right.
I'll take the operating leverage question at this point and.
So.
Overall, but really nothing has changed and our outlook in terms of operating leverage from when we last spoke so look and longer term, we said, we'd get some this year and we'd expect that.
To drops and more profit over time, so there's not really have a different outlook on that but as far as of this year.
And I think Theres 2 things going on 1 is.
It's a very tight labor market and we've not been able to hire at the pace, we assumed we could.
That's what's driving some of our costs coming in below our guidance and our expectations and therefore that that's dropping to the short term bottom line.
And the other factor is as advertising revenue, which is performing better than we expected this year.
That's a complete short term benefit and not necessarily a longer term benefit. So those 2 things have come together I think to provide a little more bottom line and we expected. This year. So it came a little faster, but I wouldn't read into that that it is really changing our longer term trajectory from from anything else. We have discussed in the past.
Got it and 1 follow up from Meredith, maybe Meredith we've seen some of these headlines around our interest and the athletic.
There's a lot of cash sitting on the balance sheet and it is close to $1 billion sitting on the balance sheet right. Now if you could just maybe talk a bit more about strategic.
Strategic.
And goals with respect of will use of that cash and how you would think about M&A.
And think of capabilities.
And.
And happy to do that I would say in general our preference is to use the strong balance sheet that we have to and.
Invest into our strategy and to maximize the value of our product and we are always.
Open to how.
How we might do that and and we've got them.
And somewhat of a track record of doing it and.
Albeit with with relatively modest in size acquisitions, but you know, we acquired wire and cut or 5 years ago, and we've now talked and.
And a few of these calls about and bigger.
And beginning to experiment with with wire cutter and the bundle and this fall will will and.
We will do that and we acquired autumn so a relatively small scale, but important and all.
Audio subscription audio App, which gives us a place to experiment with subscription audio and last year, we acquired serial productions.
And which we continue to be very very excited about that added to the value. We provide them on the audio and storytelling side. So we are absolutely open to using the balance sheet and frankly prefer.
To use the balance sheet to accelerate our strategy and we will.
Lee evaluate opportunities to do that.
Thank you Bob.
The next question comes from Thomas <unk> from Morgan Stanley. Please go ahead.
Hi, good morning. Thanks.
Realizing it's a little bit early can you share your views on how you're thinking about 2020.2 relative to 2021, given your comments on the new cohort churn that you're working through this year is it right to assume that that dynamic might turned more favorable or more normalized next year as you move through some of the lower quality of new joins that.
And last year.
And then more on the bundling opportunity that you spoke about can you give us some color on what to expect on that rollout is the expectation of that expense of subscriber base or do you think that it comes through and higher ARPA of any help sizing of that would be helpful.
Yeah.
Good morning, Tom and from but both good questions.
I'll start and rolling can add as he sees fit.
I'll, just say on 2020, 2 we're certainly not and are in a position.
In addition to give any kind of a projection, but what I will say is we.
And have been.
We've got a strategy that strategy is working we are deeply confident and.
And it and you can assume that we're going to continue to build on that strategy.
This has been a year and.
And where we are.
Comparing against and sort of once in a lifetime thus far.
Cycle from the prior year and a lot of our work has been to.
To really build resilience in our engagement and in the model EBIT recognizing that there are going to be continued fluctuations in the news cycle and what Youre hearing us talk about today and what you heard us talk about and the last quarter of how we're doing that and bit by bit there per month quarter over quarter.
We get more confident and how we do that so that that's that's the work and I think.
You can you can take that is as much as we can say about the next year more broadly and it relates to the bundle. We just really believe that we've got a big market opportunity. We expect there will be something in new order of at least of 100 million people who will.
Pay for English language journals and through digital subscription.
And we've penetrated that market now we've got <unk>.
$8 million and we just crossed 8 million subscriptions and that's a relatively modest percentage of that market and we really believe that we can meaningfully increase that percentage over time, and I'll say and said this and in prior calls.
And we.
We will do that on the strength of our individual products and we're going to keep investing into our individual products obviously.
And our news product is and will continue to be the main driver of audience and engagement of at least we expect it will and certainly that has been the pattern, thus far but to your broader question, we do think and.
And our tests are showing that the bundle presents an opportunity to to widen the circle of interest in the times and so more and.
To bring more people into a relationship with the New York Times, our tests have shown and also our track record of.
Okay.
Okay.
Okay.
Right.
Okay.
Okay.
Okay.
Yeah.
Okay.
Yeah.
It seems to me.
And they're just having some technical issues.
And do you want to move on to the next question and and.
Yes.
Our next question comes from Doug Arthur from Huber Research. Please go ahead.
Yes.
Yes, Thanks, Harlan and can you hear me.
Yes.
Yes.
Okay, I don't know, if merit and spec or not I I would kind of.
I think she mentioned.
Better engagement true.
Friends towards the end of the second quarter, So I'm kind of interested and how that's carried into the third quarter, obviously, you've got the delta of variance story.
And of concern.
6 months ago wasn't as big of concern.
I'm sort of interested as to whether the traffic numbers to the site.
And engagement.
Celebrated in the third quarter and desert of implications for net adds and that's sort of the first question.
Yeah, Hi, Doug So I mean, what I can say worldwide Merit is getting her tech straightened out.
And we wouldn't comment exactly on a short term trend, but we do see the new news is getting more interesting is I think you've witnessed and what we're seeing though is that engagement while below 2020 still remains.
Ahead of 2019.
And 2019 was was our best year for engage and so it's better than than anything we've seen prior to that.
And.
And we will see how this new cycle plays out.
And we just know it does change over time, it seems that the theme.
From a from a consumer reader perspective that it is getting a little hotter, but that's it just to see how that will that will play out.
Okay, and then just 1 follow up I mean.
You talked you you threw out some numbers on subscriptions for cooking and autumn and.
Games et cetera, I mean that.
That group was up over 40%.
And in the.
Year over year, and the second quarter.
What's the pricing.
Power potential in the non news subscription area.
Yes.
Meredith you back Okay I'm back.
So sorry.
And tired of doing this from my home office.
Gary.
Did you hear the question I did not hear the question Unfortunately power.
For our cooking and games products.
Yeah.
Good question.
I'd say broadly and each of those products closed in on you know, they're there, but it's getting close to 2.1 million subscriptions.
I think we've got very big ambitions for for both of them and I don't rule out pricing power and as part of that I would say we are still in early days with both both products. They both proven product market fit, but I think the number of people for whom they they can.
Be relevant and the that.
The value they provide and in People's Daily lives.
Still our focus so I would say sure I don't rule out pricing power over time, but at this point, we are focused on scaling.
Daily habitual use for both of those products scaling subscriptions and and the role they can play and are in a bundle and I'm, assuming my Wi Fi is okay and you can hear me.
Good.
That's great. Thank you very much.
Yeah.
The next question comes from Alexia <unk> from Jpmorgan. Please go ahead.
Yes.
Hi, Thank you.
A clarification question and then a follow up.
And when you mentioned that the sub growth was improving each month and month to month I think from some from the low as of March or from where you are and March does that is that inclusive of 2 July or is that gesture and the second quarter and then my second question really is on digital advertising Roland and I think you mentioned that.
You are seeing better than expected growth and digital advertising, but it was short and the short term.
Phenomenon and from what you can see if I understood you correctly and I'm just curious of.
And what would give you the confidence in and inching toward of maybe having better visibility or better confidence and longer term digital advertising growth and it sounds like you're gaining some share of wallet and it sounds like you've seen bounce back from financial services. It just doesn't sound like it's just easy comps here.
Yeah.
I'm happy to.
And you want to start.
And can start on the AD question, Yes, So I mean right now we're real happy with the results and.
A lot of it is the market coming back but.
As I mentioned I think.
The advent of the first party targeted products like that's a real breakthrough for us and that and that and selling briskly and we think thats a competitive advantage and within the within the publisher set. So we do think we're grabbing a little bit more market share there and the <unk>.
Same thing with expanding our portfolio of audio products. So given given those 2 things as long as the market is good.
Think of well continue to have some good digital edge.
Results, we don't Kid ourselves that we still know that the platforms are taking most of the dollars and most of the growth. So.
So when I said short term I don't really mean in the quarter I. Just mean, you know kind of as far as the I can see and not not to think about it as a big driver for years to come.
But as long as the market is healthy we should be able to grab a good part portion of that.
Yeah, I'll, just tell out of beat and I think we said that's and in the last call. We and we did a lot of work on our AD business over the last couple of years and and particularly last.
Last year to improve the profile of it so that and as it does grow.
It's better growth and I do think that loss, but to roll and point. We we also understand the limitations of the fact that that we're playing in a market that is is largely made by very very large digital digital platforms and so it is certainly a better business and we expect it will continue to be of bedroom.
But 1 for which our expectations are tempered.
On your first question Alexia.
I was pointing specifically in my prepared remarks to the quarters that we've just completed but if you consider them.
And the fact that we've told you we've just crossed another mile marker with with $8 million 8 million subscriptions that gives you some some signals as to how we're feeling now.
Thank you.
Yes.
The next question comes from George and <unk> from Wolfe Research. Please go ahead.
Great. Thanks, Mark.
Can you compare.
Domestic and international subs, meaning do they engage on similar stories and specific to international with a lower <unk>, what does subscriber acquisition cost and lifetime value of the subject like compare it to the U S and longer term do they take into the 20% plus range as a percentage of total.
Yeah good.
Good question generally I would I would say an inner.
International you can regard our our work there is sort of very long term strategy. It's why we are comfortable with the more aggressive promotional pricing, particularly in markets that have not have not been core set of markets that go beyond Canada, UK and Australia.
So and as we sort of reach out and and promote more aggressively beyond the core markets. We see ourselves as is playing a really long game here and I would say domestic is generally.
Head of international and particularly when you get to get to non core markets internationally in terms of.
And in terms of and all the ways, we would sort of measure.
Measure of the health of the base, because we've been doing it longer but we're very comfortable with sort of where where we are internationally and where it fits into our strategy on your question about subscriber acquisition cost I would just point to.
Across the board, so domestically and internationally, we still bring and the lion's share of our starts organically.
And that is true domestically. It is also true internationally and so if you if you sort of process that for the whole, it's it's possible, but yeah and I'm not even sure I could give an accurate answer except to say that.
Most of our starts do still come from.
From from the product engine and not through paid marketing.
And maybe I'm rounding here I think in the past you've talked about and that kind of 50% plus range is that moved around much overtime.
What are you referring to sorry.
Yes.
And this should start to organically versus paid Oh, it's higher than that it's it's some stance. It is higher than that majority of our starts across the board.
Come in and organically.
Okay, and maybe some of them from a retention and just to characterize of the overwhelming majority come in and organically.
Okay.
And then from a retention of perspective, good to hear on the churn side or from for the subs, graduating from the promotional pricing is the proportion of that of subs increasing.
And Trump compared to full price and what you expected or are you finding more of a skew to the lower and to retain of subs.
Well and I'll, let you take that 1.
Yes sure.
No. We've we've got of models, but that does the predicting for 80% of it and actually it's skewed slightly towards going to full price from going to the step up slightly more than 50% and that's been pretty stable.
The last couple of quarters.
Okay, maybe I'll sneak in 1 of more than we're all and thank you.
Can you talk more about Europe, who expectations going forward. It sounds like you expect it to accelerate here.
From here and I know there are puts and takes but are there and they kind of guardrails on magnitude.
Well.
Some of that depends on how many starts come in on the dollar of week. So the more starts to come in and of $1 per week.
Use of effect.
On the ARPA, but our expectation is that youll see positive year.
Year over year for the next couple of quarters.
It would take a very very very very very large.
The influx of dollars per week.
New dollar per week promotion starts to to make that not come true.
I wouldn't expect of sequential should be improving.
But the year over year.
Yeah.
Okay, great. Thank you.
This concludes our question and answer session and I'd like to turn the conference back over to Heartland to of Plisky for any closing remarks.
Okay.
Thanks, Jason before I sign off of I wanted to note that and a few limited instances Meredith remarks may not have been audited audible.
And as is our practice, we posted her prepared remarks, our total prepared remarks on our website at investors <unk> and white tea.
<unk> dot com and.
And thank you for joining us. This morning, we look forward to talking to you again next quarter.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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