New York Times Co (NYT) 2012 Q4 法說會逐字稿

Please stand by.

We are about to begin.

Good day and welcome to The New York Times Company fourth-quarter earnings 2012 conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to your host, Ms. Paula Schwartz.

Please go ahead.

Thank you.

Good morning and welcome to our fourth-quarter and full-year 2012 earnings conference call.

On the call today from our senior management team are Mark Thompson, President and Chief Executive Officer; Jim Follo, Senior Vice President and Chief Financial Officer; and Denise Warren, Senior Vice President and Chief Advertising Officer, The New York Times Media Group and General Manager of NYTimes.com.

All of the comparisons on this conference call will be for the fourth quarter of 2012 to the fourth quarter of 2011, unless otherwise stated.

As we noted in our release earlier this morning, the results for the About Group are reported in discontinued operations for all periods presented.

Our discussion will include forward-looking statementsm and our actual results may differ from those predicted.

Some of the factors that may cause them to differ are included in our 2011 10-K.

Our presentation will include non-GAAP financial measures, and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our corporate website at www.nytco.com under Investor Relations.

In particular, this quarter we will discuss the impact on our revenues of the extra week in our fiscal fourth quarter of 2012.

And now I would like to turn the call over to Mark Thompson.

Thanks, Paula.

As everyone knows, this is my very first earnings call as President and CEO of The New York Times Company, so hello and welcome.

I took this job not just because I have been a devoted user of The New York Times for many years, but because I believe it is one of a handful of global news brands which cannot just survive but can thrive in this digital era.

Since joining the Company in November last year, I've spent a lot of my time meeting my new colleagues across the Company in New York, Boston and Paris.

I've heard first-hand stories of the first chapter of digital, like that brilliant spring 2011 launch of The New York Times pay model, a strategy which continues to deliver.

I've also met with some of our major advertisers both here and internationally, and that's helped me gain a better understanding of their priorities and how we can work together to achieve their goals.

And, of course, I'm looking forward to meeting many of you in the weeks and months ahead.

Before talking a bit about the larger picture, let me briefly address our fourth-quarter results.

As you know, this quarter had the benefit of an extra week compared to the same period in 2011.

Total revenues increased 5% as the continued strong performance in circulation revenues and the effect of that additional week offset weak advertising revenues.

Operating profit was $44 million in the fourth quarter, and excluding depreciation, amortization, severance and special items totaled $125 million, down 2% versus the prior year.

Earnings per share from continuing operations, excluding severance and special items, was $0.32 a share compared to $0.39 in the fourth quarter of 2011.

Now I am currently leading the development of a new strategy for the Company.

The strategy will aim not just to optimize our existing operations, but to leverage our brands above all The New York Times brands and the great strength of our newsrooms to deliver both revenue and profitability growth.

I'll have much more to say to you about that on our next earnings call in April, but let me now give you some preliminary impressions of The New York Times Company.

This is already a very different business from the classic late 20th century American newspaper model.

In 2012, for the first time in our history, The New York Times Company had more revenue from circulation than from advertising.

The success of the digital subscription model with approximately 668,000 paid digital subscribers across the Company at the year-end provides us with a meaningful revenue stream to put alongside the resilience and loyalty of our print subscribers.

We expect that advertising will continue to be a critical component of our business, and we want The New York Times and The Boston Globe and The International Herald Tribune to continue to be amongst the most valued and effective collaborators with advertisers in the US and abroad.

In particular, in recent months, we've worked intensively to develop strategies that we believe will enable the Company's revenues from digital advertising to not just to stabilize but to grow.

Despite a challenging advertising environment, in 2012 The Times Company made significant progress in better positioning itself for this evolving media landscape.

It expanded its digital subscription base, divested of non-core assets and carefully managed expenses, even while it invested in digital operations and in an array of journalistic initiatives.

Highlights included comprehensive coverage of the Presidential campaign, the Summer Olympics, Hurricane Sandy, and the unrest in the Middle East, extensive investigative pieces on national and international issues and the stunning multimedia longform storytelling of snowfall.

In my view, The Times' news report has never been better.

While we expect 2013 will continue to present both secular and cyclical headwinds, as well as increase competition, I believe that we are well positioned to lead to these challenges and capitalize on the opportunities.

With the sale of the Regional Media and About Groups in 2012, we have sharpened the focus on our core brands and will look to better leverage them in new products markets and endeavors.

With this backdrop, I would like to share with you some of my initial thoughts on our business and priorities for the coming year.

First, from what I've been seeing, I believe the Company can operate even more efficiently, and we've already taken steps to accelerate decision-making and to better execute in certain areas of the business.

I have launched extensive renewable company processes and the overall structure of the business.

While we believe that some cost cutting is both inevitable and necessary as we reshape our business, what is more critical is to better position our organization to innovation and growth, an important priority for me as we begin this process.

At the same time, we will work hard to maintain a sizable and robust newsgathering operation capable of continuing our tradition of excellent journalism, one which now more than ever sets us apart.

Together with our CDM management team, I've also been looking at a variety of opportunities to better leverage The Times brand and its newsroom to create new products and services.

The key areas in which we're focusing, including expanding our portfolio of pay digital products, growing our international footprint to exploit the strong global resilience of The New York Times brand, developing a more strategic video capability, building on our mobile initiatives and expanding our conference and event business.

With regard to videos, you may have seen we just hired a General Manager of Video Production who will play a key role in realizing our strategic ambitions to grow our video content, both documentaries and features, across all of our platforms.

While most of our recent efforts have been on digital transformation, we re also investing in our print products.

Last month, for example, we rolled out a redesign of the various features sections of the paper from Science Times to Thursday Styles.

And we are also delighted that our reimagined teen magazine, which debuts on February 17 under new editor Deborah Needleman, with new features, columns and publication schedule.

Turning to liquidity, together with the Board, we've been evaluating our financial position and the outlook for our business to determine an ongoing capital allocation strategy.

In addition to steady cash flows from operations, our balance sheet was further strengthened by last year's asset sales, and we ended 2012 with $955 million in cash.

Now we acknowledge that there has been a significant and, indeed, understandable focus on our cash position and capital allocation plans and particularly on the question of returning cash in the form of a dividend.

In addressing this question, we have to consider a number of factors.

One, continuing uncertainty in some operating revenues, notably print advertising combined with broader economic uncertainty.

Two, our levels of debt and underfunded pension obligations, notwithstanding the steps we have already taken to deleverage and reduce our pension exposure.

And three, the fact that we are currently engaged in the strategic review, which is not yet complete, but which is likely to require investment to grow the revenues and profits of the Company.

On this last point, in evaluating uses of our cash, I do not foresee a significant acquisition in the short or medium term.

Although if the opportunity arises, we may consider tuck-in acquisitions of properties that are in line with our strategy and accelerate our growth in key digital segments.

I do foresee the need to invest in the digital growth of The New York Times digital products and services at home and abroad.

Our priority is to define and rollout that growth strategy, to return to sustainable revenue and profitability growth and look for opportunities to further deleverage and derisk our balance sheet.

We certainly do not rule out a restoration of the dividend once we have made progress on these topics, but we believe that for the present it is in the best interest of the Company to maintain a conservative balance sheet.

We do not believe, therefore, that this is the appropriate time to restore a dividend.

Now, as I have said, I will have more to share with you regarding our strategy in April, and I look forward to discussing our initiatives for growth and increasing shareholder value on our next earnings conference call.

But for now, I would like to turn the call over to Jim Follo.

Thank you, Mark, and good morning, everyone.

As Mark referenced, because our fiscal calendar both the fourth quarter and the year have an additional week for purposes of our results, my comments that address revenues will exclude the impact of the extra week.

Costs are a bit more difficult to break down on a week by week basis because some expenses will rise with the longer month while others remain constant.

Our fourth-quarter performance reflects the steady build of the circulation side of our business, balanced by the ongoing challenges facing the advertising side.

Double-digit growth in Times digital subscriptions, combined with last year's price increases managed to largely offset the continued softness in our advertising business resulting in total revenues declining about 1% in the fourth quarter, excluding the additional week.

Diluted earnings per share, excluding severance and special items, decreased to $0.32 in the fourth quarter from $0.39 in the prior year period, due principally to higher effective tax rate after exclusion of severance and special items in the 2012 quarter.

We have included a table in the press release that provides greater visibility on this topic.

Circulation revenues rose 9% for the Company and 11% for The Times Media Group in the quarter, excluding the extra week, with our digital subscription revenue stream contributing most significantly to that increase.

Circulation revenues also benefited from the price increases at The Times and The Globe in early 2012.

The Times also implemented another home delivery price increase at the beginning of 2013.

And The Times continues to benefit from improved retention rates for home delivery circulation, following the launch of our digital subscriptions, despite those price increases.

Further demonstrating the value readers place on digital access, which is provided for free to all Times print subscribers, we continue to see growth in The Times Sunday home delivery circulation, which rose slightly in the most recent ABC reporting period for the six months ended September 30 and the third consecutive increase.

Sunday home delivery volume also increased in the fourth quarter by about 1%.

Against the backdrop of positive developments for circulation revenue, the advertising landscape is still challenging.

Advertising revenue continues to be affected by ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace.

To that point, in the fourth quarter, print advertising revenues decreased 10%, and digital advertising revenues were down 2%, both excluding the additional week.

Rounding out our results for the quarter and including the additional week, operating expenses before depreciation, amortization and severance increased 7%.

On a GAAP basis, costs were up were 6%, driven mainly by the additional week, and we reported an operating profit of $44 million.

Excluding depreciation, amortization, severance and special items, operating profit was $125 million in the fourth quarter.

Now let me provide more depth on our fourth-quarter results.

Excluding the additional week, total advertising revenues decreased 8% year over year and were down 11% in both October and November and 3% in December.

Print and digital advertising both struggled in October/November, and both saw sequential improvement in December.

Fourth-quarter print advertising revenues decreased in the national, retail and classified categories with national leading the decline.

Digital advertising revenues decreased as higher revenues in the retail category were offset by declines in real estate and recruitment classified categories, as well as in the national category.

Turning to The Times Media Group, total revenues were flat in the quarter, excluding the additional week, with advertising revenues down 8%, circulation revenues up 11% and other revenues roughly flat.

The group's total advertising revenues were lower, excluding the extra week, mainly due to print declines in all three major advertising categories -- national, classified and retail.

Pressure on the overall national ad category, by far the largest category at The Times, making up about 75% of total ad revenues was again responsible for the majority of the group's decline.

The classified and retail categories were also down overall.

Digital advertising revenues for The Times Media Group again trended lower in the quarter due to the combination of the difficult economic climate and the increasingly fragmented landscape.

Digital display advertising continued to experience challenges, including a glut of available ad inventory in the market and the resulting downward price pressure, as well as a shift towards ad exchanges, real-time bidding and other programmatic buying channels.

While such audience targeted approaches have begun to impact premium pricing for advertising environments such as NYTimes.com, we believe The Times Media Group can return to digital growth by focusing more heavily on unique custom ad units, an area where we already stand out, monetizing tablet inventory as our audience on that platform grows, and making significant inroads in video advertising as our content offerings there multiply.

The Times digital strategy remains centered on growing its subscriber base, while also extending its brand to subscribers and nonsubscribers on a wide range of platforms.

At the end of the quarter, The Times Media Group, including subscribers to The Times and the IHT digital packages, had approximately 640,000 paid digital subscribers, up 13% from the end of the third quarter.

The fourth quarter's impressive growth in digital subscriptions was driven largely by a robust news cycle that include the election season and events such as Hurricane Sandy and the Newtown tragedy, as well as by a variety of marketing initiatives.

Subscriber acquisition growth is likely to moderate a bit in the first quarter without such a strong new cycle driving traffic.

Looking at mobile and tablets, in the fourth quarter, The Times experienced very healthy traffic and reader engagement on its apps, particularly for coverage of the presidential campaign.

The Times continued to see growth in (technical difficulty) and mobile through an ever diversified base of advertisers, as well as in terms of traffic, which in December reached 288 million page views across the website and apps, a 55% increase from December 2011.

This is, of course, across a growing array of mobile and tablet platforms.

In December 2012 alone, the largest ad revenue month-to-month for these platforms, The Times saw advertising clients from categories, including studios, transportation, technology, and luxury.

Moving to The New England Media Group, total revenues were down 3% in the fourth quarter, excluding the extra week with advertising revenues down 8% and circulation revenues roughly flat.

Other revenues rose 8% on higher commercial printing revenues, which will (technical difficulty) the cycle against in the second quarter.

While total digital advertising revenues increased for the group for the third consecutive quarter, print softness drove a decrease in overall advertising revenues, particularly in the retail category, which declined on an aggregate basis.

While the classified category was down overall, automotive classifieds saw a boost in the quarter with increases on both print and digital sides.

The national category was also down overall for the quarter, despite the fact that national digital advertising saw the largest gain of any category.

Towards digital circulation update, as of the end of the quarter, BostonGlobe.com had approximately 28,000 paid digital subscribers, an 8% increase from the end of the third quarter.

Turning to costs, while we have remained disciplined in our expense management, operating costs rose in the fourth quarter, impacted by the additional week, but also driven by higher promotion costs and benefit expenses and partially offset by lower compensation costs, including stock-based compensation expense and raw material expense.

We will continue to be diligent in trimming expenses, but will also remain prepared to invest where appropriate, especially in light of Mark's arrival and any initiatives he prioritizes.

We should have a better sense of those initiatives on the first-quarter call.

At the end of the fourth quarter, our cash and short-term investments totaled $955 million, growing by more than $340 million from the previous quarter and exceeding total debt for the first time in recent memory by approximately $258 million.

The increase in our cash position is largely attributable to the proceeds from the sale of the About Group at the beginning of the fourth quarter, which totaled $300 million in cash, plus networking capital adjustment of [$17 million].

The sale resulted in an after-tax gain of approximately $62 million, and About Group's results are now included in discontinued operations.

Our cash total also reflects the proceeds from the October distribution of Indeed.com, a search engine for jobs.

We received $167 million for our interests or about $104 million in net after-tax proceeds.

Our overall debt position also improved at the beginning of the fourth quarter as we paid off our $75 million 4.61% notes at maturity, which will result in modestly lower interest expense in 2013.

This benefit was offset in the quarter by a charge related to the termination of our $125 million asset-backed credit facility and a prepayment charge related to the repurchase of a small portion of our 5% notes due in 2015.

Building on what Mark said earlier, there has been a lot of focus lately on our significant cash balance and its potential uses.

But given the continuing challenges facing the advertising environment and a desire to remain maximum flexibility, we feel that maintaining a conservative balance sheet is appropriate at this time.

As we work to rebalance what is now a smaller company in light of our recent divestitures, we'll continue to look for opportunities to further delever and derisk our balance sheet, including potentially through the further reduction of our debt ahead of its maturity.

As we have said, one of our main priorities for cash is managing our pension-related obligations.

To that end, in September we offered certain employees the opportunity to commence their pension benefit now through either a lump sum payment or the start of an immediate monthly annuity.

We made related lump sum settlement payments of approximately $112 million in the fourth quarter and recorded a non-cash settlement charge of approximately $49 million.

The settlement distributions we made with existing pension assets, not with Company cash, and the offer also reduced our underfunded qualified plan balances by about $30 million.

The pension benefit offer supplements the actions we've taken over the past few years to address our pension liabilities.

In connection with The New York Times Newspaper Guild contract ratification in November of 2012, we froze the existing defined pension plan and replaced it with a plan that significantly reduces funding volatility and accordingly balance sheet risk to the Company, and we will continue to look for ways to reduce the size of our pension obligations.

For accounting purposes, on a GAAP basis, based upon preliminary results, the underfunded status of our qualified pension plans at December 30, 2012 was approximately $396 million.

The funded status of our qualified plans was negatively affected by the decline in interest rates, but was more than offset by contributions, the lump sum offer and solid returns on assets.

In January, we made a $57 million contribution to the Guild pension plan.

This is in addition to our $107 million of contributions in the fourth quarter.

With our mandatory contributions nearly met for the next several years and our underfunded GAAP slowly diminishing, we're likely to take a pause in making additional discretionary contributions this year as we watch interest rate changes, but we will continue to evaluate.

Moving to our outlook, in the fourth quarter, overall advertising trends are expected to be similar to the -- (multiple speakers)

In the first quarter actually.

-- in the first quarter were expected to be similar to the fourth-quarter levels on a 13-week basis.

First-quarter circulation revenues are expected to increase in the mid-single digits as we expect to see continued to benefit from our digital subscription initiatives, as well as from the most recent Times price increases.

And in the first quarter, we expect operating costs, excluding severance, to decrease in the low single digits in the same period last year.

And with that, we'd be happy to take your questions.

(Operator Instructions) Alexia Quadrani, JPMorgan.

Hi.

Thank you very much and welcome, Mark.

We're happy to have you.

Just a couple of quick questions.

First, on the comments that I think you made about the secular challenges to the advertising growth still, is that -- is there any way to sort of gauge about how far along we are in terms of that share shift, how much of sort of the ad pressure now is secular versus sort of cyclical?

And then my second question is really on the digital sub growth, which in the quarter was obviously very impressive, and I know you mentioned that it's going to not be quite as strong in the first quarter.

But do you guys have an internal goal maybe you can share with us, or where do you think that can ultimately go?

It's Denise.

I'll take both questions.

Let me start first with the advertising one.

I think you know it's kind of difficult for us to determine what the real mix is between both the secular and cyclical impacts.

I think it's fair to say that the last couple of months have had a lot of cyclical uncertainty given the uneven economic recovery and the fiscal cliff, and that has absolutely impacted our results both on print and on digital.

But it is difficult for us to pin it down and sort give you a sort of mathematical answer to that, if you will, if that's what you're looking for.

In terms of our digital subscriptions, we're very pleased with the performance, not only in the quarter but obviously in the year.

I mean just to give you a benchmark, in the first year, so on our first-year anniversary, we had 454,000 digital subscribers, and in the remaining three quarters of 2012, we had added an additional 186,000, which put us on track somewhere in the vicinity of 50% growth for our second year.

And as we have said repeatedly in prior calls that there are several segments of the business that we think still have an opportunity for growth, including the corporate, education, and international markets.

So we definitely believe that we will have solid incremental growth into 2013 and beyond.

We definitely saw in this past quarter an increase in the performance due to the new cycle, as was noted in the remarks.

In addition, if you're looking at the first quarter, Alexia, I'll just remind you that we are comping against the most engaged user program, the anniversary of that which many of the subscribers that came on board did do so in the first quarter of last year.

But that said, we are very, very optimistic about this initiative, and there is a lot of room for growth.

We're working on a growth strategy that is looking at several elements, including premium products, evaluating our pricing structure and several other things as we've noted in the past, including the opportunities in the international market.

Alexia, Mark here.

Thanks for your welcome.

If I can just add, I mean from my point of view coming into the Company, this is a revenue stream which scarcely (technical difficulty) a couple years ago, which has shown strong growth so far.

It's an absolutely key focus of the strategic work we're doing at the moment of how we can develop and expand this new revenue stream.

All right.

Thank you very much.

Doug Arthur, Evercore Partners.

Yes, two quick questions.

Denise, can you just take your comments up north to The Boston Globe and talk a little -- I mean those numbers seem reasonable, but still quite small.

So what's the game plan up there on the digital sub side?

And then, Jim, just to nitpick, the severance charge in the quarter, is that mostly in SG&A or in other costs?

Thanks.

I don't have the exact breakout.

It is spread throughout.

We had some newsroom buyouts that existed, and there is some in G&A.

I'm sorry.

I just don't have the complete breakdown there.

Okay.

And, Jim, are you going to answer The Globe --

Yes, (multiple speakers) The Globe has seen some -- it's kind of steady growth.

We don't see that trajectory changing necessarily, but it has been steady growth.

It is clearly not as impactful to that business as the NYTimes is.

You know, we don't really see that dynamics of that changing.

We see it as an incremental business.

We're trying lots of new things to drive that growth, and it will continue to grow nicely.

But I don't think -- we are not calling for a significant ramp in growth rate there.

Okay.

Thank you.

Craig Huber, Huber Research Partners.

Yes, good morning.

I just have a few housekeeping questions.

The first one, please, can you update us on the daily and Sunday circulation volume percent change year over year for your flagship paper in The Boston Globe?

I believe last quarter it was down 7% and 2% for your flagship, for example.

Yes, so the total units -- I will give you daily and Sunday.

So our total units for NYTimes.com in the fourth quarter is down about 5.7%.

Revenues -- (multiple speakers)

It is definitely for circulation.

(multiple speakers).

Circulation.

I'm sorry.

(multiple speakers)

That's not NYTimes.com.

It's New York Times.

Right.

Sorry, New York Times, negative 5.7%.

We've actually had some growth in revenues given the price increase.

And most of that, a good part of that was single copy, which was down meaningfully more.

On the Sunday side, our units totaled were up, a little bit short of 1%.

On The Globe, total units daily down about 10% and on Sunday down about 6% in the quarter.

And then also your corporate expense, how much was it roughly this time in cash costs?

Was it roughly $10 million in the quarter?

Somewhere in that -- it is about a $40 million run rate for the year.

That's about right.

Okay.

And then also another nitpick question for newsprint, what was the percent change in consumption there, please, adjusting for the extra week?

I believe it was about 3% down, you know.

As you know, prices were steady in the quarter.

I will say prices have begun to decline, but that decline has happened and will impact us next year.

But the prices were stable in the quarter with volume down about 3%.

And then also on the advertising pricing side for your print newspapers, I guess it is down about 10% for the revenues.

How much of that was price, please?

Is it about half of it?

No, prices is generally flat, but as you know and as we've discussed many times, you know that's largely a function of the mix.

So it depends on the category, but overall it looks flat.

Okay.

Thank you.

Kannan Venkateshwar, Barclays.

Thank you.

So I just wanted to drill down on the liquidity question a little bit more.

So thanks for the clarity on what you want to do going forward, but you know just looking at your balance sheet, there is about $900 million of cash, and debt is obviously less than that.

So the first question is, do you plan to be debt free at some point?

I mean is that part of a plan?

And then secondly on the building front, is it merely a question of when rather than if that's a possibility at all?

Jim, do you want to -- I just focused on length in my remarks, but (multiple speakers).

We haven't you know we been asked many times about what we think the right debt level is.

As of right now, our views right now, given the volatility in the market and the things that Mark -- particularly in advertising, things that Mark talked about, we think now is a good time to just keep our balance sheet conservative, and as we get better visibility in some of these other areas, our views will change.

We're not here to say we think the business ought to be debt free over a period of time.

We're just suggesting that as of right now we think that would be an appropriate place to be.

Okay.

And is there a liquidity number that you have, and also sorry in the dividend question, is it merely a question of timing?

Well, you heard me, Kannan, you heard me say that there's a number of factors that we're going to look at when doing a strategic review.

I've said I'll say much more about that on the next earnings call.

We'll start implementing that.

So that factor is definitely one of timing.

We're also looking at what I would described as continuing uncertainty in some operating revenue (technical difficulty) related to advertising.

We'll be looking at that over time.

And I thirdly talked about potential further opportunities to further deleverage debt and reduce our pension exposure.

This is something we're going to look at.

It is definitely these are all factors we will look at going forward, but for at least some of them, for example, on certainly operating revenues, it's hard to give a precise timetable.

So yes, it's about timing, but that doesn't mean you can reduce it to a precise timetable.

Okay.

And secondly, from the cost perspective, you've obviously done a good job over the last few quarters in bringing down costs consistently, and you're also guiding to further reductions going forward.

So what exactly -- could you just detail that a little bit in terms of where that's coming from and what the main sources are?

Jim, do you want to take that?

You know, the guidance we gave is in the first quarter, I think it's just broad-based.

You've heard there's been some very public discussion about some of the headcount reductions we've already implemented.

That will obviously benefit us.

You know, we had a number of issues that pressured costs negatively that we've cycled past.

We talked about some of the spending we did against the election and the Olympics; that's behind us.

We're going to begin to cycle through some of the commercial work up in New England.

That will be behind us.

So, you know, so once those are behind us, there's nothing that really sticks out as a significant headwind.

So I think the core business, we will continue to see good performance on.

But I'll go back to some of the comments we made earlier.

I think we will be in a better position in the first quarter as we firm up some of the strategic initiatives to give more detailed guidance as to what costs look like going forward.

But, you know, we will be prepared where we see fit to be able to invest and grow the business, and that will have to be part of the equation.

Okay.

And one last question, which is on the international business.

I mean, you made a comment saying you're looking at expanding The New York Times brand internationally.

Could you just detail that out in terms of what that involves and which parts of the world you're looking at?

We are in the middle of looking at international strategy.

I certainly expect to have more to say in April in international strategy.

Clearly, a part of that work is looking at the world and deciding which markets offer us the best opportunities.

But what's interesting is the very extensive use of NYTimes.com outside the US.

The fact that essentially with minimal marketing activity, the fact that the Company has begun to attract subscribers from outside the US.

So we think that the potential to tap into larger reservoirs of potential users and subscribers is there.

We're doing the work, trying to figure out region by region and country by country where the best opportunities are.

Thank you.

John Janedis, UBS.

Hi, thank you.

Hey, Denise, when we think back to the launch of the paywall, you talked about heavy users as the people you were targeting us.

Now when you look back, where have the paywall subs come from?

Was it those heavy users or a different bucket of uniques, and embedded in the mid-singles guidance, does that assume print subs are down in line with trend?

Okay.

The mid-sub guidance was all about digital subscribers.

So --

I think -- (multiple speakers).

You're referring to the guidance we gave on circulation revenue of mid-single-digit growth.

Is that what you're talking about?

Yes, Jim.

Yes, we're going to see kind of similar print.

We're going to see flattish to a little bit up on revenues.

The New York Times, as we said, raised prices early in the quarter, so we'll see some of that benefit.

We'll see, you know, my guess is we'll see some similar unit trends, so generally contribution on the print side in line and a little bit of a moderating on the growth in the digital subs for all the reasons that Denise spoke about earlier.

To answer your question about where who are the subscribers and where are they coming from, obviously a vast majority of them in the initial days and still continuing come from heavy users of our products and services.

That is still a very robust channel for us.

We still convert a lot of people at the gateway.

We convert a lot of people through using our own marketing channels on NYTimes.com.

But I think as we've discussed, we've got a fairly sophisticated marketing operation and a fairly sophisticated product operation that are trying to leverage all other channels, and we're doing so successfully.

As I think we've noted in the past, we've done a lot of really interesting marketing programs.

Our one-day sales have really generated a lot of activity.

So it is, I think, beyond just the heavy users that we're attracting.

Although I haven't looked at this number, there's still obviously the larger majority of our paying subscribers.

Thanks, Denise.

So maybe a couple of years in, how does digital retention look relative to print retention?

It's very, very good actually, both on one year, and we only have 21 months at this point.

But both of those metrics look very, very healthy versus print, and as you know, we actually have a pretty good print retention number.

We don't disclose those numbers, but they do look extremely good versus the print retention.

Thanks a lot.

Edward Atorino, The Benchmark Company.

Thank you.

I've got a couple of questions.

At some point, do you get worried about the higher circulation price affecting volume somewhere as people either cancel or downgrade, or is the math such that you can still come out ahead by doing that?

Secondly, any plans to raise the price of NYT.com either in the US or put a premium on it elsewhere?

Look, on the print side, we have a history of managing price increases quite well, and I think that comes out very well in our print revenue number being quite stable and slightly growth this year in The New York Times.

So these are relatively -- we think relatively modest price increases that are in the 5% range, and I think we've got a lot of history of doing it and doing it well.

So we think there's still power.

We watch it carefully.

Obviously there's always a tipping point to every issue, but we think there's still -- we still think we are in a good place right now.

Yes, I mean our subscribers are pretty inelastic to our prices.

I think you know as far as the digital price is concerned, it's one of the things we're evaluating alongside many other strategic initiatives in the coming year.

As I alluded to earlier, we're going to look at all of our offerings.

Is there the potential for a premium product?

Is there the potential for an entry-level product?

Do we actually have the right bundle and pricing structures given the convergence of mobile and other platforms?

So it is absolutely something that we will continue to evaluate, but we've made no decisions at this time.

And has there been much difference between, let's say, New York circulation and non-New York circulation as prices have gone up?

Generally not, generally not, no.

If I can just add, Edward, I mean the fundamental, seems to me, building block of future strategy, that we have historically had print subscribers and now have digital subscribers who value, greatly value the products they get from The New York Times and stick with them with a good willingness to pay and with loyalty over long periods of time.

That's been proven over decades in the case of print.

What's very striking about the last 21 months is demonstrating that it's also true of digital, and that's one of the building blocks on which we can build our strategy.

It's been that way for years, yes.

Thank you very much.

At this time, I'll turn the conference back over to Paula Schwartz for any additional or closing remarks.

Thank you for joining our call.

If you have any additional questions, please call us.

Thanks.

That does conclude today's conference.

Thank you for your participation.