NYT's Expanding Revenue Base
New York Times revenues have increased from $1,579 million in 2015 to $1,749 million in 2018, adding $170 million to its revenue base.The company's revenue is expected to continue its rising trend, with total revenue expected to increase by 4.1% to $1,820 million in 2019, which would mark an addition of $241 million to the total revenue base over four years (2015-2019).Higher revenue is expected to be driven by higher subscriptions for the company's digital products, increased commercial printing, and rental revenue, partially offset by lower print advertising revenues.
Subscription, and Affiliate and Rental segments are the primary revenue growth drivers
Subscription revenue has increased over recent years due to double-digit growth in the number of subscriptions to the Company’s digital-only products.We expect revenue to increase in the near term, driven by continued growth in digital subscriptions, and news product and other subscriptions.
Other revenues have seen a healthy growth in recent years which is expected to continue in the near term, driven by growth in the commercial printing operations, affiliate referral revenue associated with the product review and recommendation website, Wirecutter, and revenue from the rental of five and a half additional floors in New York headquarters building.
NYT's margins decreased up to 2017, before rising sharply in 2018. Margins are expected to remain high in 2019
After decreasing in the initial years, net income margin increased sharply in 2018, led by lower depreciation expense, interest cost, tax expense, and gains from joint ventures. Margins are expected to increase further due to cost-reduction efforts of the company and rising revenues.
Net Income Margin
Production cost as a % of revenue faced a lot of volatility over recent years, with cost remaining subdued in 2017 and 2018. The metric is expected to decrease in 2019, led by lower printing expenses and newsprint consumption, partially offset by higher wages and benefits.
Production Cost as % of Revenue
SG&A plus Depreciation as % of revenue largely increased over recent years, due to higher marketing, compensation, and severance cost, before decreasing in 2018 due to lower depreciation expense. The metric is expected to remain flat in 2019.
SG&A + Deprecation as % of Revenue
After making losses in the initial years, NYT recorded gains in the last two years from its joint ventures, which has pushed up its margins. Gains from JVs are expected to continue in 2019 as well.
(Gain)/Loss from Joint Venture as % of Revenue
Interest expense has continuously decreased over recent years due to lower indebtedness. The metric is expected to drop further in the near term with debt expected to drop further in 2019.
Interest Expense as % of Revenue
Effective tax rate fell sharply in 2018 following the implementation of the TCJ Act. The metric is expected to remain subdued due to reduction in the tax rate and absence of major deferred tax expense, unlike 2017.
Effective Tax Rate
Other expenses as a % of revenue decreased sharply due to a drop in pension cost, which, in turn, pushed up profitability. Cost is expected to remain at low levels in 2019 as well.
Other Expenses as % of Revenue
NYT's P/S Multiple has increased over the last four years and is much higher compared to major global peers
NYT's price-to-sales (P/S) multiple has improved from 1.33x in August 2016 to 3.39x in August 2019.In contrast, the company's global peers such as News Corp and Tribune Media have seen their multiple go through a lot of volatility and remain low during these four years.Thus, as of August 2019, NYT commands a much higher multiple compared to its major peers, driven by the company's expanding revenue base, strong balance sheet due to deleveraging, and increase in profitability.Higher multiple and a positive outlook bodes well for NYT's stock and fundamentals.
NYT's P/S Multiple
News Corp P/S Multiple
Tribune Media P/S Multiple
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