THE NEW YORK TIMES COMPANY EXECUTIVE OVERVIEW
We are a global media organization that includes digital and print products and related businesses. OnFebruary 1, 2022 , we acquiredThe Athletic Media Company ("The Athletic"), a global digital subscription-based sports media business. The results of The Athletic have been included in our Condensed Consolidated Financial Statements beginningFebruary 1, 2022 . The Athletic is a separate reportable segment of the Company. As a result, beginning in the first quarter of 2022, we have two reportable segments:The New York Times Group and The Athletic.
We generate revenues principally from subscriptions and advertising. In addition, we generate other revenues primarily consisting of revenues from licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in our headquarters (the "Company Headquarters"), retail commerce, television and film, our live events business and our student subscription sponsorship program.
Our main operating costs are employee-related costs.
In the accompanying analysis of financial information, we present certain information derived from consolidated financial information but not presented in our financial statements prepared in accordance with generally accepted accounting principles inthe United States of America ("GAAP"). We are presenting in this report supplemental non-GAAP financial performance measures that exclude depreciation, amortization, severance, non-operating retirement costs or multiemployer pension plan withdrawal costs, and certain identified special items, as applicable. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read in conjunction with financial information presented on a GAAP basis. For further information and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, see "Non-GAAP Financial Measures." Beginning with the second quarter of 2022, the Company has updated its rounding methodology for subscriptions (including net subscriptions additions), subscribers (including net subscriber additions) and subscriber-related metrics (other than average revenue per subscriber ("ARPU")) and will round to the nearest ten thousand instead of the nearest thousand as it had previously been presenting. The sum of individual metrics may not always equal total amounts indicated due to rounding. Financial Highlights •Operating profit increased 4.2% to$51.0 million in the third quarter of 2022, compared with$49.0 million in the third quarter of 2021. Operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items discussed below under "Non-GAAP Financial Measures" (or "adjusted operating profit," a non-GAAP measure) increased 6.0% to$69.0 million in the third quarter of 2022, compared with$65.1 million in the third quarter of 2021. The increases were primarily attributable to higher digital-only subscription revenues, partially offset by operating losses at The Athletic, as well as higher operating costs atThe New York Times Group . Operating profit margin decreased to 9.3% in the third quarter of 2022, compared with 9.6% in the third quarter of 2021. Adjusted operating profit margin (adjusted operating profit expressed as a percentage of revenues) decreased to 12.6% in the third quarter of 2022, compared with 12.8% in the third quarter of 2021.
•Total revenues increased 7.6% to
•Total subscription revenues increased 11.7% to$382.7 million in the third quarter of 2022 from$342.6 million in the third quarter of 2021. Digital-only subscription revenues increased 22.8% to$243.9 million in the third quarter of 2022 from$198.6 million in the third quarter of 2021. Paid digital-only subscribers totaled approximately 8.59 million with approximately 10.02 million paid digital-only subscriptions at the end of the third quarter of 2022, a net increase of 180,000 digital-only subscribers and 210,000 digital-only subscriptions compared with the end of the second quarter of 2022 and a net increase of 1,010,000 digital-only subscribers and 1,230,000 digital-only subscriptions compared with the end of the third quarter of 2021.
•Total advertising revenues decreased 0.4% to
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•Operating costs increased 9.5% to $503.8 million in the third quarter of 2022
from $460.1 million in the third quarter of 2021. Operating costs before
depreciation, amortization, severance and multiemployer pension plan withdrawal
costs (or "adjusted operating costs," a non-GAAP measure) increased 7.8% to
$478.7 million in the third quarter of 2022 from $444.1 million in the third
quarter of 2021.
•Operating costs that we refer to as "technology costs," consisting of product
development costs as well as components of costs of revenues and general and
administrative costs as described below, increased 20.1% to $92.1 million
compared with $76.7 million in the third quarter of 2021.
•Diluted earnings per share from continuing operations were $0.22 and $0.32 for
the third quarters of 2022 and 2021, respectively. Diluted earnings per share
from continuing operations excluding severance, non-operating retirement costs
and special items discussed below under "Non-GAAP Financial Measures" (or
"adjusted diluted earnings per share," a non-GAAP measure) were $0.21 and $0.23
for the third quarters of 2022 and 2021, respectively.
Current Economic Conditions, Continued Impact of Covid-19 Pandemic
We, and the companies with which we do business, including our advertisers, are subject to risks and uncertainties caused by factors beyond our control, including macroeconomic factors such as inflation (which could materially impact employee-related costs, our main operating cost, as well as the cost of raw materials for our print newspaper), a competitive labor market and evolving workforce expectations (including for unionized employees), supply chain disruptions, and global economic uncertainty and volatility, the war inUkraine and the continued effects of the Covid-19 pandemic. Our employee-related costs have increased in recent years as we have invested in our business and competed for talent. Although we have not seen a significant impact from inflation to our financial results in the first nine months of 2022, if inflation remains at current levels, or increases, for an extended period, our employee-related costs are likely to increase. If we are unable to successfully mitigate the impact of such increased costs, they could adversely affect our profits, margins and/or cash flows. We actively monitor these conditions to remain flexible and to optimize and evolve our business as appropriate; however, the full impact they will have on our business, operations and financial results is uncertain and will depend on numerous evolving factors and future developments. The risks related to our business are further described in the section titled "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 26, 2021 . As a result of the Covid-19 pandemic, the vast majority of our employees worked remotely fromMarch 2020 toSeptember 2022 . During the third quarter of 2022, we transitioned to hybrid work with most of our employees expected to work both from the office and remotely. In preparation for hybrid work, we invested in our Company Headquarters and other offices as well as in technological improvements. 27
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RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
(In thousands) 2022 2021 % Change 2022 2021 % Change
Revenues
Subscription$ 382,672 $ 342,609 11.7 %$ 1,138,270 $ 1,010,910 12.6 % Advertising 110,467 110,887 (0.4) % 344,116 320,777 7.3 % Other 54,541 55,607 (1.9) % 158,399 148,958 6.3 % Total revenues 547,680 509,103 7.6 % 1,640,785 1,480,645 10.8 % Operating costs Cost of revenue (excluding depreciation and amortization) 294,856 256,978 14.7 % 876,804 759,333 15.5 % Sales and marketing 64,732 83,767 (22.7) % 205,089 197,475 3.9 % Product development 50,474 40,638 24.2 % 148,729 119,280 24.7 % General and administrative 71,970 64,418 11.7 % 212,468 183,278 15.9 % Depreciation and amortization 21,760 14,326 51.9 % 61,150 43,529 40.5 % Total operating costs 503,792 460,127 9.5 % 1,504,240 1,302,895 15.5 % Acquisition-related costs - - - 34,712 - * Gain from pension liability adjustment (7,127) - * (7,127) - * Lease termination charge - - - - 3,831 * Operating profit 51,015 48,976 4.2 % 108,960 173,919 (37.4) % Other components of net periodic benefit costs 1,757 2,599 (32.4) % 4,903 7,796
(37.1) %
Interest income and other, net 1,579 28,569 (94.5) % 38,258 31,953 19.7 % Income from continuing operations before income taxes 50,837 74,946 (32.2) % 142,315 198,076 (28.2) % Income tax expense 14,220 20,290 (29.9) % 39,196 47,994 (18.3) % Net income 36,617 54,656 (33.0) % 103,119 150,082 (31.3) % Net income attributable toThe New York Times Company common stockholders$ 36,617 $ 54,656 (33.0) %$ 103,119 $ 150,082 (31.3) %
* Represents a change equal to or in excess of 100% or not meaningful.
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--------------------------------------------------------------------------------Revenues
Subscription Revenues
Subscription revenues consist of revenues from subscriptions to our digital and print products (which include our news product, as well as The Athletic and our Games, Cooking, Audm and Wirecutter products), and single-copy and bulk sales of our print products (which represent less than 5% of these revenues). Subscription revenues are based on both the number of copies of the printed newspaper sold and digital-only subscriptions, and the rates charged to the respective customers. Subscription revenues increased 11.7% in the third quarter and increased 12.6% in the first nine months of 2022 compared with the same prior-year periods, primarily due to the large number of subscribers whose introductory promotional subscriptions have graduated to higher prices, growth in the number of subscribers to the Company's digital-only products, as well as the inclusion of subscription revenue from The Athletic. The increases in digital subscription revenue were slightly offset by a decrease in print subscription revenue. This decrease was primarily attributable to declines in domestic home delivery revenue of 3.3% and 2.7% for the third quarter and first nine months of 2022, respectively, due to a decrease in the number of print subscriptions driven by secular trends, partially offset by an increase in print subscription prices. There is no print subscription revenue generated from The Athletic. The Company ended the third quarter of 2022 with approximately 9.33 million paid subscribers with approximately 10.75 million paid subscriptions across its print and digital products. Of the 9.33 million subscribers, approximately 8.59 million were paid digital-only subscribers with approximately 10.02 million paid digital-only subscriptions. There was a net increase of 180,000 digital-only subscribers and 210,000 digital-only subscriptions compared with the end of the second quarter of 2022. Compared with the end of the third quarter of 2021, there was a net increase of 1,010,000 digital-only subscribers and 1,230,000 digital-only subscriptions, which excludes approximately 1,029,000 subscribers and 1,161,000 subscriptions that were added as a result of the acquisition of The Athletic in the first quarter of 2022. The Company provided the ability to access The Athletic to additional digital bundle subscribers in the third quarter of 2022. Digital-only subscribers with The Athletic increased by 600,000, largely as a result of this action. Print domestic home delivery subscribers totaled approximately 740,000 with 730,000 print subscriptions at the end of the third quarter of 2022, a net decrease of 20,000 subscribers and subscriptions, respectively, compared with the end of the second quarter of 2022 and a net decrease of 60,000 subscribers and subscriptions, respectively, compared with the end of the third quarter of 2021.
The following table summarizes digital and print subscription revenues for the third quarters and first nine months of 2022 and 2021:
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
(In thousands) 2022 2021 % Change 2022 2021 % Change
Digital-only subscription
revenues (1) $ 243,889 $ 198,633 22.8 % $ 709,378 $ 568,378 24.8 %
Print subscription
revenues:
Domestic home delivery
subscription revenues (2) 124,653 128,895 (3.3) % 387,125 398,045 (2.7) %
Single-copy, NYT
International and Other
subscription revenues (3) 14,130 15,081 (6.3) % 41,767 44,487 (6.1) %
Subtotal print
subscription revenues 138,783 143,976 (3.6) % 428,892 442,532 (3.1) %
Total subscription
revenues $ 382,672 $ 342,609 11.7 % $ 1,138,270 $ 1,010,910 12.6 %
(1) Includes revenue from digital-only bundled and standalone subscriptions to the Company's news product, as well as The Athletic and our Games, Cooking,
Audm and Wirecutter products.
(2) Domestic home delivery subscriptions include access to our digital news product, as well as The Athletic and our Games, Cooking and Wirecutter products.
(3) NYT International is the international edition of our print newspaper.
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We offer a digital subscription package (or "bundle") that includes access to
our digital news product as well as The Athletic and our Games, Cooking and
Wirecutter products. We also offer standalone digital subscriptions to our
digital news product, as well as to The Athletic, and our Games, Cooking, Audm
and Wirecutter products. The Company has set out below the number of
digital-only, print and total subscribers to the Company's products as well as
certain additional metrics, including ARPU. A digital-only subscriber is defined
as a subscriber who has subscribed (and provided a valid method of payment) for
the right to access one or more of the Company's digital products.
The following table summarizes digital and print subscribers as of the end of the five most recent fiscal quarters:
For the Quarters Ended
September 25, 2022 June 26, 2022 March 27, 2022 December 26, 2021 September 26, 2021
Digital-only subscribers(1) 8,590 8,410 8,230 6,783 6,546
Print subscribers(2) 740 760 780 795 806
Total subscribers(3) 9,330 9,170 9,010 7,578 7,352
(1) Subscribers with paid digital-only subscriptions to one or more of our news product, The Athletic, or our Games, Cooking and Wirecutter products. Subscribers with a
paid domestic home-delivery print subscription to The New York Times are excluded. The number of digital-only subscribers includes group corporate and group education
subscriptions (which collectively represented approximately 4% of paid digital-only subscriptions as of the third quarter of 2022). The number of group subscribers is
derived using the value of the relevant contract and a discounted subscription rate.
(2) Subscribers with a paid domestic home delivery or mail print subscription to The New York Times , which also includes access to our digital news product, as well as
The Athletic and our Games, Cooking and Wirecutter products, or a paid print subscription to our Book Review or Large Type Weekly products. Book Review, Mail and Large
Type Weekly subscribers are included in the count of subscribers but not subscriptions.
(3) The sum of individual metrics may not always equal total amounts indicated due to rounding.
The following table summarizes supplementary subscriber metrics as of the end of the five most recent fiscal quarters:
For the Quarters Ended
September 25, December 26, September 26,
(In thousands except for ARPU) 2022 June 26, 2022 March 27, 2022 2021 2021
Digital-only subscriber ARPU(1)
$ 9.13 $ 9.60 $ 9.64
Digital-only bundle and
multiproduct subscribers(2) 2,130 1,980 1,835 1,607 1,491
Digital-only subscribers with
News(3) 6,210 6,140 6,101 5,826 5,665
Digital-only subscribers with
The Athletic(4) 2,290 1,690 1,216 - -
(1) "Digital-only subscriber Average Revenue per User" or "Digital-only subscriber ARPU" is calculated by dividing the average monthly digital
subscription revenue (calculated by dividing digital subscription revenue in the quarter by 3.25 to reflect a 28-day billing cycle) in the
measurement period by the average number of digital subscribers during the period.
(2) Subscribers with a digital bundle or paid digital-only subscriptions that include access to two or more of the Company's products,
including through separate standalone subscriptions. This metric was previously called "Total Multiproduct subscribers" and included
subscribers with a print home-delivery subscription. The four quarters prior to the third quarter of 2022 have been recast to reflect this
change.
(3) Subscribers with a paid digital-only subscription that includes the ability to access the Company's digital news product.
(4) Subscribers with a paid digital-only subscription that includes the ability to access The Athletic. This metric was previously called
"Subscribers with The Athletic".
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--------------------------------------------------------------------------------The following table summarizes digital and print subscriptions as of the end of the five most recent fiscal quarters:
For the Quarters Ended
(In thousands) September 25, 2022 June 26, 2022 March 27, 2022 December 26, 2021 September 26, 2021
Digital-only subscriptions (1) 10,020 9,810 9,579 8,005 7,630
Print subscriptions (2) 730 750 770 784 795
Total subscriptions (3) 10,750 10,560 10,349 8,789 8,425
(1) Paid digital-only subscriptions to our news product, as well as The Athletic and our Games, Cooking, Audm and Wirecutter products. Standalone subscriptions to these
products are counted separately and bundle subscriptions are counted as one subscription. The number of paid digital-only subscriptions includes group corporate and
group education subscriptions (which collectively represented approximately 4% of paid digital-only subscriptions as of the third quarter of 2022). The number of group
subscriptions is derived using the value of the relevant contract and a discounted subscription rate.
(2) Paid domestic home-delivery print subscriptions to The New York Times , which also include access to our digital news product, as well as The Athletic and our Games,
Cooking and Wirecutter products. Excludes subscriptions to our Book Review or Large Type Weekly products and subscriptions to The New York Times that are delivered by
mail.
(3) The sum of individual metrics may not always equal total amounts indicated due to rounding.
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-------------------------------------------------------------------------------- We believe that the significant growth over the last several years in subscribers to our products demonstrates the success of our "subscription-first" strategy and the willingness of our readers to pay for high-quality journalism. The Company is increasing its emphasis on subscriber growth rather than growth of total subscriptions. The following charts illustrate the growth in net digital-only subscribers and corresponding subscription revenues as well as the relative stability of our print domestic home delivery subscription products.
[[Image Removed: nyt-20220925_g1.jpg]][[Image Removed: nyt-20220925_g2.jpg]]
(1) Amounts may not add due to rounding. (2) Includes access to some of our digital products. (3) Includes Book Review,Mail and Large Type Weekly subscribers. (4) Print Other includes single-copy,NYT International and other subscription revenues. 32 --------------------------------------------------------------------------------
Advertising Revenues
Advertising revenue is principally from advertisers (such as technology, financial and luxury goods companies) promoting products, services or brands on digital platforms in the form of display ads, audio and video, and in print, in the form of column-inch ads. Advertising revenue is primarily derived from offerings sold directly to marketers by our advertising sales teams. A smaller proportion of our total advertising revenues is generated through programmatic auctions run by third-party ad exchanges. Advertising revenue is primarily determined by the volume (e.g., impressions or column inches), rate and mix of advertisements. Digital advertising includes our core digital advertising business and other digital advertising. Our core digital advertising business includes direct-sold website, mobile application, podcast, email and video advertisements. Advertising revenue from The Athletic is primarily podcast revenue and therefore is reflected in this category. Direct-sold display advertising, a component of core digital advertising, includes offerings on websites and mobile applications sold directly to marketers by our advertising sales teams. We launched direct-sold display advertising at The Athletic in the third quarter. Other digital advertising includes open-market programmatic advertising and creative services fees. Print advertising includes revenue from column-inch ads and classified advertising, as well as preprinted advertising, also known as freestanding inserts. There is no print advertising revenue generated from The Athletic.
The following table summarizes digital and print advertising revenues for the third quarters and first nine months of 2022 and 2021:
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 26,
(In thousands) 2022 2021 % Change September 25, 2022 2021 % Change
Advertising revenues:
Digital $ 70,282 $ 66,981 4.9 % $ 206,588 $ 197,472 4.6 %
Print 40,185 43,906 (8.5) % 137,528 123,305 11.5 %
Total advertising $ 110,467 $ 110,887 (0.4) % $ 344,116 $ 320,777 7.3 %
Digital advertising revenues, which represented 63.6% of total advertising
revenues in the third quarter of 2022, increased $3.3 million , or 4.9%, to $70.3
million compared with $67.0 million in the same prior-year period. The increase
was primarily a result of higher direct-sold advertising at The New York Times
Group and the addition of $2.3 million in advertising revenue from The Athletic,
which more than offset lower revenue from fewer programmatic advertising
impressions; in addition we believe the macroeconomic environment adversely
impacted advertising spend. Core digital advertising revenue increased $8.9
million , which includes $2.3 million from The Athletic, due to growth in
direct-sold display advertising and podcast advertising revenues. Direct-sold
display impressions increased 52%, while the average rate decreased 20%. Other
digital advertising revenue decreased $5.6 million , primarily due to a 34.1%
decrease in open-market programmatic advertising revenue, as well as an 18.2%
decrease in creative services fees. Programmatic impressions decreased by 27%,
while the average rate decreased 8%.
Digital advertising revenues, which represented 60.0% of total advertising
revenues in the first nine months of 2022, increased $9.1 million , or 4.6%, to
$206.6 million compared with $197.5 million in the same prior-year period. The
increase was primarily a result of higher direct-sold advertising at The New
York Times Group and the addition of advertising revenue from The Athletic,
which contributed $6.7 million which more than offset lower revenue from fewer
programmatic advertising impressions; in addition we believe the macroeconomic
environment adversely impacted advertising spend. Core digital advertising
revenue increased $22.2 million , which includes $6.7 million from The Athletic,
due to growth in direct-sold display advertising and podcast advertising
revenues. Direct-sold display impressions increased 32%, while the average rate
decreased 11%. Other digital advertising revenue decreased $13.1 million ,
primarily due to a 26.3% decrease in open-market programmatic advertising
revenue, as well as a 16.8% decrease in creative services fees. Programmatic
impressions decreased by 32%, while the average rate increased 10%.
Print advertising revenues, which represented 36.4% of total advertising
revenues in the third quarter of 2022, decreased $3.7 million , or 8.5%, to $40.2
million compared with $43.9 million in the same prior-year period. The decrease
was primarily in the advocacy and media categories. Print advertising revenue
was impacted by secular trends and in addition we believe the macroeconomic
environment adversely impacted advertising spend.
Print advertising revenues, which represented 40.0% of total advertising
revenues in the first nine months of 2022, increased $14.2 million , or 11.5%, to
$137.5 million compared with $123.3 million in the same prior-year period. The
increase was primarily in the entertainment and luxury categories, which were
more severely impacted by the Covid-19 pandemic in the first nine months of
2021. The increase was partially offset by secular trends and in addition we
believe the macroeconomic environment adversely impacted advertising spend.
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--------------------------------------------------------------------------------Other Revenues
Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in the Company Headquarters, retail commerce, television and film, our live events business and our student subscription sponsorship program. Other revenues decreased 1.9% in the third quarter of 2022 compared with the same prior-year period, primarily as a result of lower licensing revenue, which was partially offset by higher Wirecutter affiliate referral revenues. Other revenues increased 6.3% in the first nine months of 2022 compared with the same prior-year period, primarily as a result of higher commercial printing revenue as we began printing several News Corporation publications in mid-2021 and several other smaller publications in 2022 in ourCollege Point, N.Y. , printing and distribution facility, higher Wirecutter affiliate referral revenues mainly due to Wirecutter's presence on our core news website (NYTimes.com ) homepage resulting in increased views, and higher live events revenue due to more in-person events. Building rental revenue from the leasing of floors in the Company Headquarters totaled$7.2 million and$7.0 million in the third quarters of 2022 and 2021, respectively, and$21.5 million and$20.0 million in the first nine months of 2022 and 2021, respectively. Operating Costs
Operating costs were as follows:
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
(In thousands) 2022 2021 % Change 2022 2021 % Change
Operating costs:
Cost of revenue (excluding
depreciation and
amortization) (1) $ 294,856 $ 256,978 14.7 % $ 876,804 $ 759,333 15.5 %
Sales and marketing 64,732 83,767 (22.7) % 205,089 197,475 3.9 %
Product development (1) 50,474 40,638 24.2 % 148,729 119,280 24.7 %
General and administrative
(1) 71,970 64,418 11.7 % 212,468 183,278 15.9 %
Depreciation and amortization
(2) 21,760 14,326 51.9 % 61,150 43,529 40.5 %
Total operating costs $ 503,792 $ 460,127 9.5 % $ 1,504,240 $ 1,302,895 15.5 %
(1)Technology costs, which include product development costs and certain components of cost of revenue and general and administrative costs as described below,
increased 20.1% to $92.1 million compared with $76.7 million in the third quarter of 2021 and increased 22.0% to $272.4 million compared with $223.3 million in
the first nine months of 2021.
(2) Includes amortization of intangible assets related to our acquisitions of approximately $7 million and $19 million for the quarter and nine months ended
September 25, 2022 , respectively.
Cost of Revenue (excluding depreciation and amortization)
Cost of revenue includes all costs related to content creation, subscriber and advertiser servicing, and print production and distribution as well as infrastructure costs related to delivering digital content, which include all cloud and cloud-related costs as well as compensation for employees that enhance and maintain that infrastructure. Cost of revenue increased in the third quarter of 2022 by$37.9 million , or 14.7%, compared with the third quarter of 2021. The increase is largely due to higher journalism costs of$24.6 million , higher subscriber servicing costs of$6.2 million , higher digital content delivery costs of$3.7 million , higher print production and distribution costs of$2.1 million and higher advertising servicing costs of$1.3 million . The increase in journalism costs was largely due to the inclusion of$16.8 million in journalism costs from The Athletic as well as growth in the number of employees who work inThe New York Times Group newsroom. The increase in subscriber servicing costs was primarily due to the inclusion of$2.5 million of subscriber servicing costs from The Athletic and higher credit card processing fees and third-party commissions due to increased subscriptions. The increase in digital content delivery costs was primarily due to higher cloud-related costs, as well as higher compensation and benefits. The increase in print production and distribution costs was largely due to an increase in newsprint pricing and increased commercial printing activity. Advertising servicing costs increased primarily due to an increase in live events. Technology costs in Cost of revenue, which include costs related to content delivery and subscriber technology, increased 18.1% to$25.4 million compared with$21.5 million in the third quarter of 2021. Cost of revenue increased in the first nine months of 2022 by$117.5 million , or 15.5%, compared with the first nine months of 2021. The increase is largely due to higher journalism costs of$77.7 million , higher subscriber servicing costs of$19.1 million , higher print production and distribution costs of$10.5 million , higher digital content delivery costs of$7.1 34 -------------------------------------------------------------------------------- million and higher advertising servicing costs of$3.1 million . The increase in journalism costs was largely driven by the inclusion of$45.9 million in journalism costs from The Athletic, as well as growth in the number of employees who work inThe New York Times Group newsroom and on our Games, Cooking, Audm and Wirecutter products. The increase in subscriber servicing costs was primarily due to the inclusion of$5.7 million in subscriber servicing costs from The Athletic, as well as higher credit card processing fees and third-party commissions due to increased subscriptions. The increase in print production and distribution costs was largely due to an increase in newsprint pricing and fuel costs and increased commercial printing activity. The increase in digital content delivery costs was primarily due to higher cloud-related costs, as well as higher compensation and benefits. Advertising servicing costs increased primarily due to an increase in live events. Technology costs in Cost of revenue, which include costs related to content delivery and subscriber technology, increased 16.0% to$75.6 million compared with$64.9 million in the first nine months of 2021.
Sales and Marketing
Sales and marketing includes costs related to the Company's marketing efforts as well as advertising sales costs. Media expenses is a component of Sales and marketing costs that represents the cost to promote our subscription business.
Sales and marketing costs in the third quarter of 2022 decreased by$19.0 million , or 22.7%, compared with the third quarter of 2021. The decrease is primarily due to lower media expenses atThe New York Times Group , partially offset by$7.4 million in sales and marketing costs from The Athletic and growth in the number of sales and marketing employees. Sales and marketing costs in the first nine months of 2022 increased by$7.6 million , or 3.9%, compared with the first nine months of 2021, largely due to the inclusion of$15.1 million in sales and marketing costs from The Athletic, as well as growth in the number of sales and marketing employees, partially offset by lower media expenses atThe New York Times Group . Media expenses decreased 44.7% to$30.6 million in the third quarter of 2022 from$55.3 million in the third quarter of 2021. Media expenses decreased 10.3% to$107.9 million in the first nine months of 2022 from$120.2 million in the first nine months of 2021. In each case, the decreases were the result of lower brand marketing expenses atThe New York Times Group , partially offset by the inclusion of The Athletic. Product Development
Product development includes costs associated with the Company's investment in developing and enhancing new and existing product technology, including engineering, product development and data insights. All product development costs are technology costs.
Product development costs in the third quarter of 2022 increased by$9.8 million , or 24.2%, compared with the third quarter of 2021. Product development costs in the first nine months of 2022 increased by$29.4 million , or 24.7%, compared with the first nine months of 2021. The increases in each period were largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives, as well as the inclusion of product development costs from The Athletic of$4.2 million in the third quarter of 2022 and$10.4 million in the first nine months of 2022.
General and Administrative Costs
General and administrative costs include general management, corporate enterprise technology, building operations, unallocated overhead costs, severance and multiemployer pension plan withdrawal costs.
General and administrative costs in the third quarter of 2022 increased by$7.6 million , or 11.7%, compared with the third quarter of 2021. The increase is primarily due to the inclusion of$2.2 million in general and administrative costs from The Athletic, higher severance expense, growth in the number of employees, and higher building operations and maintenance costs. Technology costs in general and administrative, which include costs related to enterprise technology and information security, increased 11.4% to$16.2 million compared with$14.5 million in the third quarter of 2021. General and administrative costs in the first nine months of 2022 increased by$29.2 million , or 15.9%, compared with the first nine months of 2021. The increase is primarily due to growth in the number of employees, the inclusion of$6.9 million in general and administrative costs from The Athletic, higher building operations and maintenance costs, as well as higher severance expense. Technology costs in general and administrative, which include costs related to enterprise technology and information security, increased 23.1% to$48.1 million compared with$39.1 million in the first nine months of 2021. 35 --------------------------------------------------------------------------------
Depreciation and Amortization
Depreciation and amortization costs in the third quarter and first nine months of 2022 increased$7.4 million , or 51.9%, and$17.6 million , or 40.5%, respectively, compared with the same prior-year periods. The increase is due to The Athletic intangible assets amortization of approximately$6.8 million and$18.2 million in the third quarter and first nine months of 2022, respectively, and higher equipment depreciation, partially offset by lower depreciation of software assets. See Notes 5 and 7 of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the estimated aggregate amortization expense resulting from The Athletic acquisition and other items, respectively. Segment Information OnFebruary 1, 2022 , we acquired The Athletic, and the results of The Athletic have been included in our Condensed Consolidated Financial Statements beginningFebruary 1, 2022 . Beginning in the first quarter of 2022, we have two reportable segments:The New York Times Group and The Athletic. Management, including our President and Chief Executive Officer (who is our Chief Operating Decision Maker), uses adjusted operating profit by segment (as defined below) in assessing performance and allocating resources. We include in our presentation revenues and adjusted operating costs (as defined below) to arrive at adjusted operating profit by segment. See "Non-GAAP Financial Measures" below for more information on adjusted operating costs and adjusted operating profit. Subscription revenue from our digital subscription package (or "bundle") is allocated toThe New York Times Group and The Athletic. We allocate revenue first to our digital news product based on its list price and then the remaining bundle revenue is allocated to the other products in the bundle, including The Athletic, based on their relative list price. The direct variable expenses associated with the bundle, which include credit card fees, third party fees and sales taxes, are allocated toThe New York Times Group and The Athletic based on a historical actual percentage of these costs to bundle revenue. For the Quarters Ended For the Nine Months Ended September 25, September 26, (In thousands) 2022 2021 % Change September 25, 2022 September 26, 2021 % Change Revenues The New York Times Group$ 523,570 $ 509,103 2.8 %$ 1,584,970 $ 1,480,645 7.0 % The Athletic 24,110 - * 55,815 - * Total revenues$ 547,680 $ 509,103 7.6 %$ 1,640,785 $ 1,480,645 10.8 % Adjusted operating costs The New York Times Group$ 445,020 $ 444,050 0.2 %$ 1,349,880 $ 1,254,582 7.6 % The Athletic 33,683 - * 84,806 - * Total adjusted operating costs$ 478,703 $ 444,050 7.8 %$ 1,434,686 $ 1,254,582 14.4 % Adjusted operating profit The New York Times Group$ 78,550 $ 65,053 20.7 % $ 235,090 $ 226,063 4.0 % The Athletic (9,573) - * (28,991) - * Total adjusted operating profit$ 68,977 $ 65,053 6.0 % $ 206,099 $ 226,063 (8.8) % Adjusted operating profit margin % -New York Times Group 15.0 % 12.8 % 220 bps 14.8 % 15.3 % (50) bps * Represents a change equal to or in excess of 100% or not meaningful. 36 --------------------------------------------------------------------------------
Revenues detail by segment
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
(In thousands) 2022 2021 % Change 2022 2021 % Change
The New York Times Group
Subscription $ 360,997 $ 342,609 5.4 % $ 1,089,218 $ 1,010,910 7.7 %
Advertising 108,134 110,887 (2.5) % 337,455 320,777 5.2 %
Other 54,439 55,607 (2.1) % 158,297 148,958 6.3 %
Total $ 523,570 $ 509,103 2.8 % $ 1,584,970 $ 1,480,645 7.0 %
The Athletic
Subscription $ 21,675 $ - * $ 49,052 $ - *
Advertising 2,333 - * 6,661 - *
Other 102 - * 102 - *
Total $ 24,110 $ - * $ 55,815 $ - *
The New York Times Company
Subscription $ 382,672 $ 342,609 11.7 % $ 1,138,270 $ 1,010,910 12.6 %
Advertising 110,467 110,887 (0.4) % 344,116 320,777 7.3 %
Other 54,541 55,607 (1.9) % 158,399 148,958 6.3 %
Total $ 547,680 $ 509,103 7.6 % $ 1,640,785 $ 1,480,645 10.8 %
* Represents a change equal to or in excess of 100% or not meaningful.
37
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Adjusted operating costs (operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs) details by segment
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
(In thousands) 2022 2021 % Change 2022 2021 % Change
The New York Times Group
Cost of revenue (excluding
depreciation and
amortization) $ 274,945 $ 256,978 7.0 % $ 824,405 $ 759,333 8.6 %
Sales and marketing 57,326 83,767 (31.6) % 189,970 197,475 (3.8) %
Product development 46,273 40,638 13.9 % 138,225 119,280 15.9 %
Adjusted general and
administrative (1) 66,476 62,667 6.1 % 197,280 178,494 10.5 %
Total $ 445,020 $ 444,050 0.2 % $ 1,349,880 $ 1,254,582 7.6 %
The Athletic
Cost of revenue (excluding
depreciation and
amortization) $ 19,911 $ - * $ 52,399 $ - *
Sales and marketing 7,406 - * 15,119 - *
Product development 4,201 - * 10,504 - *
Adjusted general and
administrative (2) 2,165 - * 6,784 - *
Total $ 33,683 $ - * $ 84,806 $ - *
The New York Times Company
Cost of revenue (excluding
depreciation and
amortization) $ 294,856 $ 256,978 14.7 % $ 876,804 $ 759,333 15.5 %
Sales and marketing 64,732 83,767 (22.7) % 205,089 197,475 3.9 %
Product development 50,474 40,638 24.2 % 148,729 119,280 24.7 %
Adjusted general and
administrative (1) 68,641 62,667 9.5 % 204,064 178,494 14.3 %
Total $ 478,703 $ 444,050 7.8 % $ 1,434,686 $ 1,254,582 14.4 %
(1) Excludes severance of $2.0 million and $4.5 million for the quarter and nine months ended September 25, 2022 , respectively, and multiemployer pension
withdrawal costs of $1.3 million and $3.7 million for the quarter and nine months ended September 25, 2022 , respectively. Excludes severance of $0.5 million
and $0.9 million for the quarter and nine months ended September 26, 2021 , respectively, and multiemployer pension withdrawal costs of $1.3 million and $3.9
million for the quarter and nine months ended September 26, 2021 , respectively.
(2) Excludes $0.2 million of severance for the nine months ended September 25, 2022 .
* Represents a change equal to or in excess of 100% or not meaningful.
The New York Times Group revenues grew 2.8% in the third quarter of 2022 to$523.6 million from$509.1 million in the third quarter of 2021 and grew 7.0% in the first nine months of 2022 to$1.6 billion from$1.5 billion in the first nine months of 2021. Subscription revenues increased 5.4% to$361.0 million from$342.6 million in the third quarter of 2021 and increased 7.7% to$1.1 billion from$1.0 billion in the first nine months of 2021, primarily due to growth in subscription revenues from digital-only products. Advertising revenues decreased 2.5% to$108.1 million from$110.9 million in the third quarter of 2021 due to lower print advertising revenues. Advertising revenues increased 5.2% to$337.5 million from$320.8 million in the first nine months of 2021 primarily due to growth in print advertising.The New York Times Group adjusted operating costs grew 0.2% in the third quarter of 2022 to$445.0 million from$444.1 million in the third quarter of 2021 and grew 7.6% in the first nine months of 2022 to$1.35 billion from$1.25 billion in the first nine months of 2021. The increase in costs in the third quarter and in the first nine months of 2022 was primarily related to growth in the number of employees, partially offset by lower media expenses.The New York Times Group adjusted operating profit increased 20.7% in the third quarter of 2022 to$78.6 million from$65.1 million in the third quarter of 2021 and increased 4.0% in the first nine months of 2022 to$235.1 million from$226.1 million in the first nine months of 2021, as higher revenues more than offset higher costs. 38
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The Athletic
The Athletic revenues in the third quarter and first nine months (from
The Athletic adjusted operating costs totaled$33.7 million and$84.8 million for the third quarter and first nine months (fromFebruary 1, 2022 ) of 2022, respectively, largely from cost of revenue, which was primarily related to journalism costs.
The Athletic adjusted operating loss totaled
NON-OPERATING ITEMS
Other Components of Net Periodic Benefit Costs
See Note 9 of the Notes to the Condensed Consolidated Financial Statements for information regarding other components of net periodic benefit costs.
Interest Income and other, net
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding interest income and other, net.
Income Taxes
See Note 10 of the Notes to the Condensed Consolidated Financial Statements for information regarding income taxes.
NON-GAAP FINANCIAL MEASURES
We have included in this report certain supplemental financial information derived from consolidated financial information but not presented in our financial statements prepared in accordance with GAAP. Specifically, we have referred to the following non-GAAP financial measures in this report:
•diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and the impact of special items (or adjusted diluted earnings per share from continuing operations);
•operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit), and expressed as a percentage of revenues, adjusted operating profit margin; and •operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs).
The special items in 2022 consisted of:
•a
•a$34.2 million gain ($24.9 million or$0.15 per share after tax) in the second quarter related to an agreement to lease and subsequently sell approximately four acres of land at our printing and distribution facility inCollege Point, N.Y. The gain is included in Interest income and other, net in our Condensed Consolidated Statements of Operations; and •a$34.7 million pre-tax charge ($25.4 million or$0.15 per share after tax) in the first quarter related to the acquisition of The Athletic. Acquisition-related costs primarily include expenses paid in connection with the acceleration of The Athletic stock options, and legal, accounting, financial advisory and integration planning expenses.
The special items in 2021 consisted of:
•a$27.2 million gain ($19.8 million or$0.12 per share after tax) in the third quarter related to a non-marketable equity investment transaction. The gain is included in Interest income and other, net in our Condensed Consolidated Statements of Operations; and
•a
We have included these non-GAAP financial measures because management reviews
them on a regular basis and uses them to evaluate and manage the performance of
our operations. We believe that, for the reasons outlined below, these non-GAAP
financial measures provide useful information to investors as a supplement to
reported diluted earnings/(loss) per share from continuing operations, operating
profit/(loss) and operating costs. However, these measures should be evaluated
only in
39
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conjunction with the comparable GAAP financial measures and should not be viewed as alternative or superior measures of GAAP results.
Adjusted diluted earnings per share provides useful information in evaluating the Company's period-to-period performance because it eliminates items that the Company does not consider to be indicative of earnings from ongoing operating activities. Adjusted operating profit and adjusted operating profit margin are useful in evaluating the ongoing performance of the Company's businesses as they exclude the significant non-cash impact of depreciation and amortization as well as items not indicative of ongoing operating activities. Total operating costs include depreciation, amortization, severance and multiemployer pension plan withdrawal costs. Total operating costs, excluding these items, provides investors with helpful supplemental information on the Company's underlying operating costs that is used by management in its financial and operational decision-making. Management considers special items, which may include impairment charges, pension settlement charges, acquisition-related costs and other items that arise from time to time, to be outside the ordinary course of our operations. Management believes that excluding these items provides a better understanding of the underlying trends in the Company's operating performance and allows more accurate comparisons of the Company's operating results to historical performance. In addition, management excludes severance costs, which may fluctuate significantly from quarter to quarter, because it believes these costs do not necessarily reflect expected future operating costs and do not contribute to a meaningful comparison of the Company's operating results to historical performance. Included in our non-GAAP financial measures are non-operating retirement costs which are primarily tied to financial market performance and changes in market interest rates and investment performance. Management considers non-operating retirement costs to be outside the performance of the business and believes that presenting adjusted diluted earnings per share from continuing operations excluding non-operating retirement costs and presenting adjusted operating results excluding multiemployer pension plan withdrawal costs, in addition to the Company's GAAP diluted earnings per share from continuing operations and GAAP operating results, provide increased transparency and a better understanding of the underlying trends in the Company's operating business performance.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are set out in the tables below.
Reconciliation of diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations)
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
2022 2021 % Change 2022 2021 % Change
Diluted earnings per share from
continuing operations $ 0.22 $ 0.32 (31.3) % $ 0.62 $ 0.89 (30.3) %
Add:
Severance 0.01 - * 0.03 0.01 *
Non-operating retirement costs:
Multiemployer pension plan
withdrawal costs 0.01 0.01 - 0.02 0.02 -
Other components of net periodic benefit costs 0.01 0.02 (50.0) % 0.03 0.05 (40.0) % Special items: Acquisition-related costs - - - 0.21 - * Lease termination charge - - - - 0.02 * Gain from non-marketable equity investment - (0.16) * - (0.16) * Land sale - - - (0.20) - * Gain from pension liability adjustment (0.04) - * (0.04) - * Income tax expense of adjustments - 0.04 * (0.01) 0.02 * Adjusted diluted earnings per share from continuing operations(1)$ 0.21 $ 0.23 (8.7) %$ 0.65 $ 0.84 (22.6) %
(1)Amounts may not add due to rounding.
40
--------------------------------------------------------------------------------* Represents a change equal to or in excess of 100% or not meaningful.
Reconciliation of operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating
profit)
For the Quarters Ended For the Nine Months Ended
September 25, September 25,
2022 September 26, 2021 % Change 2022 September 26, 2021 % Change
Operating profit $ 51,015 $ 48,976 4.2 % $ 108,960 $ 173,919 (37.4) %
Add:
Depreciation and amortization 21,760 14,326 51.9 % 61,150 43,529 40.5 % Severance 2,010 476 * 4,670 882 * Multiemployer pension plan withdrawal costs 1,319 1,275 3.5 % 3,734 3,902 (4.3) % Special items: Acquisition-related costs - - - 34,712 - * Lease termination charge - - * - 3,831 * Gain from pension liability adjustment (7,127) - * (7,127) - * Adjusted operating profit$ 68,977 $ 65,053 6.0 %$ 206,099 $ 226,063 (8.8) % Divided by: Revenue 547,680 509,103 7.6 % 1,640,785 1,480,645 10.8 %
Operating profit margin 9.3 % 9.6 % (30) bps 6.6 % 11.7 % (510) bps Adjusted operating profit margin 12.6 % 12.8 % (20) bps 12.6 % 15.3 % (270) bps
* Represents a change equal to or in excess of 100% or not meaningful.
Reconciliation of operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating
costs)
For the Quarters Ended For the Nine Months Ended
September 25, September 26, September 25, September 26,
2022 2021 % Change 2022 2021 % Change
Operating costs $ 503,792 $ 460,127 9.5 % $ 1,504,240 $ 1,302,895 15.5 %
Less:
Depreciation and
amortization 21,760 14,326 51.9 % 61,150 43,529 40.5 %
Severance 2,010 476 * 4,670 882 *
Multiemployer pension plan
withdrawal costs 1,319 1,275 3.5 % 3,734 3,902 (4.3) %
Adjusted operating costs $ 478,703 $ 444,050 7.8 % $ 1,434,686 $ 1,254,582 14.4 %
* Represents a change equal to or in excess of 100% or not meaningful.
41
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Supplementary Information
Beginning with the second quarter of 2022, the Company has updated its rounding methodology for subscriptions (including net subscriptions additions), subscribers (including net subscriber additions) and subscriber-related metrics (other than ARPU) and will round to the nearest ten thousand instead of the nearest thousand as it had previously been presenting.
In addition, starting with the second quarter of 2022, the Company has made a change in its methodology for counting subscribers and subscriptions to The Athletic to exclude free trials (which are primarily long-dated (6-12 months) and given as part of its business development partnerships).
In addition, during the second quarter of 2022, the Company identified certain nonmaterial errors in previously released subscription, subscriber and subscriber-related metrics data for the periods presented below.
As a result, our computation of the number of The Athletic subscribers and subscriptions as of the acquisition date each decreased by 72,000, as reported in our second quarter results.
The below supplementary tables, which were included in our second quarter results, update certain historical disclosures for the first quarters of 2021 and 2022 and the fourth quarter of 2021 to reflect the changes in methodology and the error corrections described above. The adjustments had no impact on the Company's consolidated balance sheets, consolidated statements of comprehensive income (loss) or the consolidated statements of cash flows for any of these periods. The impact of the items noted above on our historical disclosures is as follows:
The following table summarizes the adjustments to digital subscribers as of the end of the first quarters of 2022 and 2021, and fourth quarter of 2021:
First Quarter Fourth Quarter
2022 2022 2021 2021 2021 2021
As Filed Adj Adjusted As Filed Adj Adjusted As Filed Adj Adjusted
Digital-only subscribers(1) 8,328 (98) 8,230 6,101 (18) 6,083 6,840 (57) 6,783
(1) Refer to the corresponding footnotes in the main section of the Results of Operations.
The following table summarizes the adjustments to digital subscriptions as of the end of the first quarter of 2022:
First Quarter 2022
As Filed Adj Adjusted
Digital-only subscriptions(1) 9,620 (41) 9,579
(1) Refer to the corresponding footnotes in the main section of the Results of Operations.
The following table summarizes the adjustments to supplementary subscriber metrics as of the end of the first quarters of 2022 and 2021, and fourth quarter of 2021:
First Quarter Fourth Quarter
2022 2022 2021 2021 2021 2021
As Filed Adj Adjusted As Filed Adj Adjusted As Filed Adj Adjusted
Digital-only
subscriber ARPU (1) $ 9.04 $ 0.09 $ 9.13 $ 9.15 $ 0.03 $ 9.18 $ 9.55 $ 0.05 $ 9.60
Total multiproduct
subscribers (1)(2) 2,569 (3) 2,566 2,100 3 2,103 2,351 - 2,351
Digital-only
subscribers with News
(1) 6,150 (49) 6,101 5,290 (20) 5,270 5,880 (54) 5,826
Subscribers with The
Athletic (1) 1,257 (41) 1,216 - - - - - -
(1) Refer to the corresponding footnotes in the main section of the Results of Operations.
(2) Subscribers with paid subscriptions that include access to two or more of the Company's products, including through separate standalone subscriptions; a digital bundle; or a print
home-delivery subscription (which includes access to our digital news product, as well as The Athletic and our Games, Cooking and Wirecutter products). This metric is currently called
"Digital-only bundle and multiproduct subscribers" and excludes subscribers with a print home-delivery subscription.
42
--------------------------------------------------------------------------------LIQUIDITY AND CAPITAL RESOURCES
We believe our cash balance and cash provided by operations, in combination with other sources of cash, will be sufficient to meet our financing needs over the next twelve months. As ofSeptember 25, 2022 , we had cash, cash equivalents and short- and long-term marketable securities of$468.6 million . Our cash and marketable securities balances betweenDecember 26, 2021 , andSeptember 25, 2022 , decreased primarily due to consideration paid for the acquisition of The Athletic and annual incentive compensation payments made in the first quarter. We have paid quarterly dividends on the Class A and Class B Common Stock each quarter since late 2013. InFebruary 2022 , the Board of Directors approved an increase in the quarterly dividend to$0.09 per share, which was paid inApril 2022 . OnJune 29, 2022 , the Board of Directors declared a quarterly dividend of$0.09 per share on the Class A and Class B Common Stock, which was paid inJuly 2022 . OnSeptember 30, 2022 , the Board of Directors declared a quarterly dividend of$0.09 per share on the Class A and Class B Common Stock, which was paid inOctober 2022 . We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividends will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant. InFebruary 2022 , the Board of Directors approved a$150.0 million Class A Common Stock repurchase program. The authorization provides that Class A shares may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. We expect to repurchase shares primarily to offset the impact of dilution from our equity compensation program, but subject to market conditions and other factors, we may also make opportunistic repurchases to reduce share count. There is no expiration date with respect to this authorization. As ofSeptember 25, 2022 , we had repurchased 2,324,708 shares for approximately$79.8 million (excluding commissions) under this authorization. As ofOctober 28, 2022 , we had repurchased 2,778,380 shares for approximately$93.1 million (excluding commissions) and approximately$56.9 million remained under this authorization. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. Although it is possible thatCongress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance thatCongress will take any action with respect to this provision. If the 2022 effective date remains in place, our initial assessment is that our cash from operations will be negatively impacted by approximately$50 million in 2022 and our net deferred tax assets will increase by a similar amount. The actual impact on fiscal 2022 cash from operations will depend on the amount of research and development costs we incur, on whetherCongress modifies or repeals this provision, and on whether new guidance and interpretive rules are issued by theU.S. Treasury , among other factors.
Capital Resources
Sources and Uses of Cash
Cash flows provided by/(used in) by category were as follows:
For the Nine Months Ended
(In thousands) September 25, 2022 September 26, 2021 % Change
Operating activities $ 85,024 $ 209,557 (59.4) %
Investing activities $ (79,299) $ (129,685) (38.9) %
Financing activities $ (133,239) $ (42,954) 210.2 %
Operating Activities
Cash from operating activities is generated by cash receipts from subscriptions,
advertising sales and other revenue. Operating cash outflows include payments
for employee compensation, pension and other benefits, raw materials, marketing
expenses and income taxes.
Net cash provided by operating activities decreased in the first nine months of
2022 compared with the same prior-year period primarily due to higher cash
payments for incentive compensation, higher cash tax payments due to a provision
in the Tax Cuts and Jobs Act of 2017 deferring the deduction for research and
development expenditures, a payment related to the acceleration of Athletic
stock options in connection with the acquisition, lower net income and lower
cash payments received from prepaid subscriptions, partially offset by higher
cash collections from accounts receivable.
Investing Activities
Cash from investing activities generally includes proceeds from marketable
securities that have matured and the sale of assets, investments or a business.
Cash used in investing activities generally includes purchases of marketable
securities, payments for capital projects and acquisitions of new businesses and
investments.
43
-------------------------------------------------------------------------------- Net cash used in investing activities in the first nine months of 2022 was primarily related to$515.3 million in consideration paid for acquisitions, net of cash acquired, and$27.8 million in capital expenditures payments, partially offset by$463.2 million net maturities of marketable securities.
Financing Activities
Cash from financing activities generally includes borrowings under third-party financing arrangements, the issuance of long-term debt and funds from stock option exercises. Cash used in financing activities generally includes the repayment of amounts outstanding under third-party financing arrangements, the payment of dividends, the payment of long-term debt and finance lease obligations and share-based compensation tax withholding. Net cash used in financing activities in the first nine months of 2022 was primarily related to share repurchases of$79.8 million (excluding commissions), dividend payments of$41.9 million and share-based compensation tax withholding payments of$9.8 million . Restricted Cash
We were required to maintain
Capital Expenditures
Capital expenditures totaled approximately$29 million and$26 million in the first nine months of 2022 and 2021, respectively. The increase in capital expenditures in 2022 was primarily driven by improvements in the Company Headquarters which are intended to address growth in the number of employees and to enhance technologies that support our transition to hybrid work with employees working both from the office and remotely. The cash payments related to capital expenditures totaled approximately$28 million and$24 million in the first nine months of 2022 and 2021, respectively.
Third-Party Financing
InSeptember 2019 , we entered into a$250 million five-year unsecured credit facility (the " 2019 Credit Facility"). OnJuly 27, 2022 , the Company entered into an amendment and restatement of the 2019 Credit Facility that, among other changes, increased the committed amount to$350.0 million and extended the maturity date toJuly 27, 2027 (as amended and restated, the "Credit Facility"). Certain of our domestic subsidiaries have guaranteed our obligations under the Credit Facility. As ofSeptember 25, 2022 , there was approximately$0.6 million in outstanding letters of credit and the remaining committed amount remains available. As ofSeptember 25, 2022 , there were no outstanding borrowings under the Credit Facility and the Company was in compliance with the financial covenants contained in the Credit Facility. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding the Credit Facility.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year endedDecember 26, 2021 . Other than as described in Note 2 of the Notes to the Condensed Consolidated Financial Statements, as ofSeptember 25, 2022 , our critical accounting policies have not changed fromDecember 26, 2021 .
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the section titled "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Terms such as "aim," "anticipate," "believe,"
"confidence," "contemplate," "continue," "conviction," "could," "drive,"
"estimate," "expect," "forecast," "future," "goal," "guidance," "intend,"
"likely," "may," "might," "objective," "opportunity," "optimistic," "outlook,"
"plan," "position," "potential," "predict," "project," "seek," "should,"
"strategy," "target," "will," "would" or similar statements or variations of
such words and other similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such terms. Forward-looking statements are based upon our current expectations,
estimates and assumptions and involve risks and uncertainties that change over
time; actual results could differ materially from those predicted by such
forward-looking statements. These risks and uncertainties include, but are not
limited to: significant competition in all aspects of our business; our ability
to grow the size and profitability of our subscriber base; our dependence on
metrics that are subject to inherent challenges in measurement; our ability to
improve and scale our technical and data infrastructure and respond and adapt to
changes in technology and consumer behavior; numerous factors that affect our
advertising revenues, including economic conditions, market dynamics, evolving
digital advertising trends and the evolution of our strategy; damage to our
brand or reputation; the impact of the Covid-19 pandemic; economic, geopolitical
and other risks associated with the international scope of our business and
foreign operations; our ability to attract and maintain a talented and diverse
workforce; the impact of labor negotiations and agreements; adverse results from
litigation or governmental investigations; risks associated with the acquisition
of The Athletic, including, among others, those related to our ability to
44--------------------------------------------------------------------------------
realize the anticipated benefits of the acquisition, our ability to meet our publicly announced guidance about the impact of the acquisition, and the risks associated with The Athletic's business and operations; the risks and challenges associated with investments we make in new and existing products and services, including The Athletic; risks associated with other acquisitions, divestitures, investments and other transactions; potential effects on our operating flexibility as a result of the nature of significant portions of our expenses; the effects of the size and volatility of our pension plan obligations; liabilities that may result from our participation in multiemployer pension plans; significant disruptions in our newsprint supply chain or newspaper printing and distribution channels or a significant increase in the costs to print and distribute our newspaper; security breaches and other network and information systems disruptions; our ability to comply with laws and regulations, including with respect to privacy, data protection and consumer marketing practices; payment processing risk; defects, delays or interruptions in the cloud-based hosting services we utilize; our ability to protect our intellectual property; claims of intellectual property infringement that we have been, and may be in the future, be subject to; the effects of restrictions on our operations as a result of the terms of our credit facility; our future access to capital markets and other financing options; and the concentration of control of our company due to our dual-class capital structure. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 26, 2021 , and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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