Digital Subscriptions Look Healthy at The New York Times

I took a look today at the 8K filed by The New York Times with the US SEC on February 4, 2016 for the business results of Q4 2015. The New York Times is a content marketing business with a prominent brick and mortar component, and what looks like a growing digital component (online display advertising and subscriptions).

The catalyst prodding my review of these numbers was a a story written by Peter Eavis, which was published today (April 23, 2016) in the online edition of the Times titled “A Bright Side to the Financial Stumbles of Digital Media”. Broadly speaking I found Mr. Eavis’ story hard to follow. Here’s a morsel of opacity: “In fact, everything suggests that news consumers are going to get a product that is much more attuned to how they now find, read and discuss the news.” Just how “they now find, read and discuss the news” is not defined in Mr. Eavis’ story.

But when I took a look at the Q4 2015 8K from the New York Times three things stood out:

1. This is not a business struck by an “outbreak of angst” attributed to Buzzfeed and Mashable by Mr. Eavis. If the non-GAAP highlights presented are credible, The New York Times can legitimately claim over 1M paying digital subscribers, which represents a 20% growth in this revenue segment y/y and a 5% growth from Q3 2015. Profit, in turn grew a smashing 48% y/y to $51.6M from $34.875M in Q4 2014
2. The digital component is not broken out in a separate section of the report. So the report of 53K “net new digital only subscribers” and Mr. Mark Thompson, President & CEO’s claim this achievement represents the “largest number of new subscribers in a quarter in three years” has no clear reference point.
3. GAAP numbers are very hard to find in the report. Are the numbers in the first section of financial data expressed under GAAP? Not noted. While the management report note to the 8K reports “The exhibits include a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures” I could not locate this discussion. Readers are encouraged to search for themselves. The 8K can be downloaded as a PDF file via this link: http://investors.nytco.com/investors/financials/sec-filings/sec-filings-details/default.aspx?FilingId=11148304.

For me, and for anyone following my Twitter page, point 3 should be a very prominent red flag and point of concern. On April 22nd the Times published a story written by Ms. Gretchen Morgansen, “Fantasy Math Is Helping Companies Spin Losses Into Profits” decrying the tolerance of regulatory agencies (think SEC) for “phony-baloney financial reports”. The subject of her story is the trend across public companies to paint business performance metrics in the synthetic glow of non-GAAP financial reporting.

So just how the Times is actually faring given the raging consumer appetite for digital news content is still “up for grabs”.