New York Times Co (NYT) 2016 Q2 法說會逐字稿

Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to The New York Times Company Q2 2016 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Harlan Toplitzky, Executive Director of Financial Planning and Analysis.

Thank you, and welcome to The New York Times Company's second-quarter 2016 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer; Jim Follo, Executive Vice President and Chief Financial Officer; and Meredith Kopit Levien, Executive Vice President and Chief Revenue Officer.

Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call, and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2015 10-K.

In addition, 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 website at investors.nytco.com.

With that, I will turn the call over to Mark Thompson.

Thanks, Harlan. Good morning, everyone.

We have a thesis that, in an unpredictable and sometimes frightening world, that the demand for truly exceptional journalism, which helps people make sense of what's happening, will only grow and that more and more people will be prepared to pay for it. We plan to meet that demand, not just by continuing to invest in world-class reporting, analysis and contextualization, but by aggressively innovating in the way we tell our stories, especially through new forms of visual and multimedia journalism, and by rapidly pivoting our products and our business model to address fast-changing user behavior and market conditions.

Now all of these themes played out in the second quarter of 2016. First, it's been a truly extraordinary period for news. I want to pay tribute to our newsroom and editorial departments, led by executive editor Dean Baquet and our new editorial page editor James Bennet, respectively. From the Orlando massacre to Brexit to Dallas to Nice to the conventions, they and their colleagues have produced an amazing report day after day; a report that we believe sets The Times apart from even our closest competitors. Everything we do is built on that excellence.

In the quarter, consistent with where we believe consumption is moving, we increased our efforts to make our report more visual with video, virtual reality and live interactive journalism. In the quarter, we produced our 12th and 13th virtual reality films and have done more than 400 livestreams using Facebook Live. This platform allows for two-way communication between our journalists and Facebook users and helps increase audience engagement. Popular livestreams have ranged from breaking news stories, to beautiful nature scenes, to a truly riveting crack-of-dawn discussion of Brexit by our media commentator Jim Rutenberg and yours truly. What each Facebook Live video has in common is an active involvement with our audience.

And, we're being recognized for our achievements. This year, The Times won two significant prizes at the Cannes Lions Advertising Festival. We won the Mobile Grand Prix for our VR app. In presenting this award, the mobile jury president said that our VR efforts were quote, transforming the industry. We also won the Entertainment Grand Prix, for The Displaced, our first virtual reality film, produced in collaboration with VRSE.works. The jury called this a quote, real business driver that has helped catapult the Grey Lady 100 years forward. Just a few days ago, we learned that we have been nominated for no fewer than nine News and Documentary Emmys for the great strides we're making in video.

So how did this play out in business results? Let me start with the digital story before turning to print and then to costs. It was an excellent quarter for audience growth, engagement, and our digital subscription business. In the month of June, we attracted no fewer than 126 million unique users with engagement among non-subscribers up 20 percent year-over-year. Those numbers helped us add 51,000 net paid digital-only subscriptions to our news products in the quarter. That compares with 33,000 in the same quarter last year. We also added 16,000 net paid subscriptions to our Crossword product. Combined, at the end of the quarter, we had 1,424,000 digital-only subscriptions, an increase of more than 25% year-over-year. The acceleration in the number of digital subscriptions makes this not just a growing, but an accelerating revenue stream. Our consumer marketing team has made great progress in understanding and optimizing our conversion funnel, but both they and we believe there is the potential for significant further advances in the coming quarters.

Digital advertising was somewhat lower than we expected for the quarter, down 7% compared to Q2, 2015. We continued to see large year-over-year increases in smartphone, branded content and programmatic, but these were not enough to offset declines in web homepage and other traditional display advertising. In our last earnings call, however, we predicted a much stronger second half to 2016 in digital advertising, and we are indeed already seeing a marked turnaround in July with strong year-over-year growth. We expect Q3 as a whole to show double-digit year-over-year growth in digital advertising as well as in digital subscription revenue.

As we noted in our last earnings call, our digital advertising business is becoming more lumpy, but we are also now seeing a series of large-scale programs roll out and we are confident that our strategy, which is to replace standard desktop display with larger canvas, more integrated formats and a focus on smartphone, branded content, programmatic, video, VR, and other new

forms of storytelling is now paying off.

We continued to face fairly tough market conditions in print advertising during the quarter. Although our visibility into September, the most important month in Q3 is limited, we do not expect these print advertising headwinds to moderate in the present quarter. But it's worth pointing out that print advertising only accounted for 23% of total revenue in Q2, 2016, we are in other words, far less reliant on it than we once were. And when we put digital and print advertising revenue together, the substantial gains we expect in the first means that, despite continued pressure on the second, we expect a marked improvement in total advertising in Q3. Jim will spell that out, when he gives his guidance shortly.

Revenues for the Company as a whole were down 3%, while our adjusted operating profit of $54 million represents a 15% decline compared to the same quarter last year. This decline is due in part to that advertising revenue weakness, which as I said, we expect to see moderate in Q3, and in part to the investments we're making in our international business, in visual journalism and in our digital products to deliver Our Path Forward, the strategic roadmap we unveiled last fall. However, we are continuing to bear down on costs. During the quarter, we announced a voluntary buyout program and various other cost savings initiatives are now also underway. We'll have more to say about them and others in future quarters.

And now, I'll turn it over to Jim for a more detailed financial review.

Thanks Mark, and good morning, everyone.

As Mark said, the second quarter reflects a solid digital subscriber growth, but a challenging advertising environment, both in print and traditional digital. Adjusted diluted earnings per share, was $0.11 in the second quarter, compared to $0.13 in the prior year. We reported GAAP operating profit of about $9 million, compared to an operating profit of $38 million for the same period in 2015. Overall, revenues were down 3% in the quarter, with weakness in advertising offsetting circulation and other revenue growth.

Total circulation revenues increased by approximately 3% in the quarter, with digital-only subscription revenue growing strongly, up 15%, to $56 million. As a reminder, beginning in the first quarter of this year, we include revenues from both our core news products and our Crossword product within digital-only subscription revenues. On the print circulation side, revenues were down less than 1% driven by lower single copy revenues. Home delivery revenues increased slightly in the quarter as the home delivery price increase in early 2016 more than offset volume declines. Total daily circulation declined 6% in the quarter, while Sunday circulation declined 4%.

Total advertising revenues were down 12% in the quarter, with print advertising declining 14%, and digital ad revenue declining 7%. As Mark noted earlier, the digital advertising results reflect the changing mix of advertising that we have been experiencing over the last several quarters. In the second quarter, we saw strong growth in mobile, programmatic and creative services revenue, while traditional web display advertising was weak. Mobile revenues continued to grow at a rapid rate versus 2015 and represented approximately 22% of total digital advertising revenue in the quarter. We did record a full quarter of digital advertising revenue from our February acquisition of HelloSociety, however, its contribution was immaterial to the result in the quarter.

Lower print advertising revenue was due to declines in both The New York Times and International New York Times. For The New York Times, luxury, entertainment and retail categories were particularly weak, while the luxury category was primarily responsible for the decline in the International New York Times. On a monthly basis, overall advertising revenues were down 13% in April, down 6% in May and down 15% in June. And finally on the revenue side, other revenues were up 4% in the quarter largely driven by our NYT Live business.

GAAP operating costs decreased 1% in the quarter, while adjusted operating costs remained relatively flat. We continue to keep a sharp focus on our cost base, while investing where necessary to support growth. To that end, our print production and distribution costs were lower in the quarter, while costs grew in both advertising and technology. Non-operating retirement costs were lower, while severance and depreciation and amortization were slightly lower as well. Non-operating retirement costs, which exclude special items, were down in the quarter to $5 million, from $9 million in the prior year, due to a change in the methodology of calculating this discount rate, applied to retirement costs.

To reiterate Mark's comments, we continue to focus efforts on our cost structure and while we expect to experience an increase in operating costs in the second half of 2016 due to targeted investments, we will begin to accelerate reductions to our structural cost base thereafter.

In the quarter, we recorded two charges, which we have been excluding from our pro forma results. First, we incurred a $12 million charge in connection with the streamlining of our international print operations, principally in Paris. We expect to achieve savings related to this effort in the later part of this year, but more fully in 2017. Most of this charge was for severance. Second, we recorded a $12 million charge for a partial withdrawal obligation under a multiemployer pension plan (technical difficulty) approximately $11 million.

Moving to the balance sheet, we grew our cash and marketable securities balance during the quarter, and ended the quarter at $915 million, with debt and capital lease obligations of $434 million. We have a debt maturity due in December and at that time we expect to use approximately $190 million of cash on hand to retire that obligation.

Now, let me conclude with our outlook for the third quarter of 2016. Circulation revenues are expected to increase at a rate similar to the second-quarter trend, driven by the continued benefit of our digital subscription revenue growth, partially offset by slightly

lower print circulation revenues. We expect approximately 55,000 to 60,000 net additional subscriptions to our digital news products and approximately 15,000 net additional subscriptions to our digital Crossword product.

Overall advertising revenues are expected to decrease in the mid-single digits, with double-digit growth in digital advertising. As Mark mentioned, it's worth noting that our visibility into September print advertising is limited, which is not unusual at this point in the quarter. However, since September's print advertising revenue typically represents a disproportionate amount of the third quarter's advertising revenues, any change to that month will likely have an outsized impact on the quarter. Other revenues are expected to increase in the mid to high-single digits. And on the cost side, operating costs are expected to increase in the mid-single digits, which will include severance of approximately $11 million, which I had just mentioned. And third quarter adjusted operating costs are expected to increase in the low to mid-single digits. And finally, we expect non-operating retirement costs to be approximately $5 million in the third quarter.

And with that, we'd be happy to open it up for questions.

(Operator Instructions) Alexia Quadrani, JPMorgan.

Hi. Thank you very much. I know you guys have talked about for a while, expecting better digital advertising growth in the back half of the year, but could you remind us, I guess, what is really the delta? Why still sluggish in the first half, when expecting a stronger growth, particularly you're already starting in Q3?

Sure. Hi, Alexia. I think -- I'll start by saying, if you look at the second quarter, our growth business is the mobile programmatic branded content, were actually collectively larger than our more traditional digital businesses, the standard rotational, adjacent desktop display, direct sold and home page. So I think that's worth nothing. And we do expect those growth businesses and video to grow strongly in the back half of the year as they have in the first half of the year.

I think that, as we've said in prior calls, the character of deals and deal flow have changed pretty significantly. So more bigger deals with a fair amount of complexity that take a while to get into light and we're going to be getting to see a number of those in the second half of the year, so that accounts for some of our optimism there.

I would also say in general, we are seeing a rapid transition in the market for desire for all ads, not just mobile ads, not just branded content ads, but all ads to be more seamlessly integrated into the surrounding experience. And what you'll see from us in the back half of the year is more of that in terms of the character and the nature of our ad units on the desktop. So we have a number of new things that we'll move out there.

And then finally video, which is something that relatively small business for us, but an enormous effort in the first half of this year, you'll begin to see the fruits of that in the second half of the year in terms of increased stream production, increased advertising around that, new shows launching with sponsors and video becoming more central to just the broader mobile and desktop ad product set.

I think it was probably just adding to Levien's mark here that, I mean, it's isn't wishing on a star, it's actually a pipeline, it's the runway we're seeing in July, it's done deals working the way into the system. The one is true and I used the word, well the British word, the lumpy a few minutes ago, it's not just us, it's the counter parties, it's advertising clients and agencies, also adjusting to in our case, that's not for every publisher but our case, much larger, more ambitious, more creatively imaginable deals, which take longer to conclude and take longer to make. What we're seeing, in a sense we're seeing our strategy playing out, I think we think very successfully and we're very optimistic about the second half of the year.

So should we assume that lumpy is just little bit different than volatile in the sense we won't see in actually the month-to-month big decisions that you take?

Yes. Well, everyone didn't want me to use the lumpy, because I thought, nobody would know what it means, and I think they were probably right. What we essentially mean is made up of a smaller number of much larger campaigns, which take a little bit longer to land and longer to make. And well, because of the amount of effort and attention is required by both sides, in the sense they take time to gather pace over the year, rather than volatility as it were in general demand, so it's a change in character. And the fact that it's made up of as were, a smaller number of very large deals, play a disproportionately bigger part in the mix than they used to. Is that fair Meredith?

Exactly right. Exactly right.

(multiple speakers) Thank you. I like the word lumpy. The only other, I think you mentioned it and I must have missed it, you said a percentage of digital ad revenue that's mobile, did do you give us that, I mean, I may have missed it?

I think Jim said 22%.

Okay, perfect. Thank you very much.

Yes. And as universe growing at rates the Mr. Zuckerberg's little firm would recognize that.

Yes. And probably worth noting that, the growth is all coming from smartphones, a very, very [highly] substantial growth in the smartphone, and we expect that to continue.

Doug Arthur, Huber Research Partners.

Hello? We can't hear. We certainly hear -- we can't hear Doug's question.

We don't think to have Mr. -- no I am sorry, I'm not able to retrieve his line. John Janedis, Jefferies.

Thank you. Good morning. You're in one of those unusual times where you have a tough print and easy digital comp for the next quarter or so, and so I wanted to know on the digital side, can you talk about your ability to shift your traditional display advertisers to mobile? And to what extent there is overlap in digital advertisers? And also, I know you commented on the mobile piece, but what percent is not display at this point?

Very good question. So shift to mobile, I think we've talked about, we're seeing quite a bit of demand in the market for mobile. We are also seeing quite a bit of demand for just better canvases and more seamlessly integrated canvases across the board. So it used to be that we would go to mobile line items from a desktop line item and now very often, we can actually sell those things together. So I mentioned earlier in answer to Alexia's question, in the fall of last year we launched mobile flex frame, which were more seamlessly integrated mobile units with a larger canvas. We're doing the same thing in the second half of this year on the desktop, that marketers will be able to buy the -- essentially across this platform, and we think that's going to be very positive, and we do think that's where the market is going in terms of buying. And you'll have to remind me what the second part of your question was.

I guess, is there -- now as that's growing, is there a some amount of overlap between the traditional display advertiser versus the mobile? And on that point, I guess how much is not display at this point?

Yes. So, good question. So I would say, the overlap is significant, if not it's entirely overlapping, so marketers basically trying to reach our audience and they're doing that, both on mobile and on desktop. We led our ad unit improvements on mobile. Now I'm going back and actually bringing them to the desktop as well. So we do think -- we do have some optimism around desktop because of that and because they trade together for the back half of the year. And then I'll just get back to the point I made before that, the growth businesses collectively, which are mobile and programmatic branded content and video together actually larger than the sum total of what I would call, traditional display or standard rotational desktop display in the first half.

Yes, right. This is -- we've seen that tipping point actually in recent months. So what happened in the first part of 2016 is that's the moment when the new growth digital businesses have grown larger in revenue terms than traditional digital display.

Yeah. Which gives us quite a bit of optimism and particularly because again on the desktop we are going through a reimagination and reinvention of the nature of the ads, making them more like mobile ads.

That's helpful, thanks. And Mark, just to your opening remarks about the value of news, to what extent are you assuming any benefit to circle advertising from the election, just to clarify is September typically say 40% plus of ad dollars for the quarter?

I missed the last part. What was the Last part, I just didn't get the last part of question. (multiple speakers)

In terms of the month-to-month, is September normally about 40% of ad dollars for the calendar of third quarter?

It's actually more than that.

Little bit more than that. Yes. Little bit more than that.

Little bit more than that.

It's about half for print and its less pronounced for digital.

So September is an important month and as we've said, I think we said it every year, I have been doing this job. The tides of the summer months and the summer weeks means that, we get visibility into September to the September print relatively late. What I want to say is, I think that the US presidential cycle is part of what is manifested in extraordinary period for news and realty there have been peaks and falls in that. But we -- the early part of the year was extraordinary newsy, slight low April, May, June. Actually from late June onwards and through July we've seen not just big news here, but in my own country, Brexit and of course some terrible stories, both domestic and international of violence and terrorism so forth. So it's been an extraordinary period. And I would say that the growth we've seen both in unique users we're hitting regular records in terms of unique users in America and around the world.

And the real gains we're making in engagements. So we're seeing metrics. We do think -- we think they're really important to us. The numbers of consumers who come back four times a month, at least on four occasions a month, 14 days a month, come back 10 times a month, and so all of these metrics have been looking very promising. And I do associate that with a very lively new cycles, but obviously one of our task is to make sure that when we get someone who get becomes engaged in The New York Times because there's a big news and when they're following, but we showed the share range of what we do, so we captured them and turn them into our regular engaged customer.

And I think the fact that we're seeing our digital subscription model continuing to grow so strongly, five years into his life, we're seeing better numbers right now than we were seeing a year ago, two year ago there, in terms of conversion and so forth. And we're making gains -- a progressive gains in retention reducing churn, is also do with making sure that the experience they will have when they come to the time is a rich one, which keeps them coming back for more.

Doug Arthur, Huber Research Partners.

Yes. Two questions and I did cut off for a second, so may I have missed this, you may have answered it. But Meredith, the branded content work obviously I assume that's referring -- that's part and parcel of this lumpiness and big project work, how big is -- how big could that become overtime as a percent of total digital? And then I've got a follow-up on print. Thanks.

Sure. Yes. Branded content plays a very big role in more lumpiness. We continue to feel incredibly strong demand for our branded content work and what I would say there is there are three aspects to it and in all three aspects we're seeing strong demand. One is the creative work itself in the content strategy work because of interest, so lots and lots of forthcoming work there, we've already got a lot behind us, and we're known for the quality there and there's quite a bit of demand. We're getting better and better quarter-over-quarter at distribution, so we're seeing increasing amounts of demand for that, that's on our platforms and beyond them. And we are also sort of moving up the supply chain in terms of being able to work on other aspects of marketing services with partners. So all to say, we think it's going to be a very important part of our business going forward and we still see quite a bit of demand optimism for the back half of the year and beyond.

Are there opportunity in terms of growing the funnel? Are there opportunities to make tuck-in acquisitions that could bolster your efforts there?

Sure. We have said, I think publicly and we talk quite a bit internally about the fact that, we see ourselves playing a role in the whole supply chain of marketers' storytelling in that strategy creative distribution and measurements, our acquisition of HelloSociety was around that creative and distribution and we are constantly looking at what other parts of the supply chain we can round out.

Okay. And then just as the print decline, I mean, you talked about the categories that were weak. Is there sort of a major structural price shift going on and are your ad rates too high? Is that mean that, the numbers just -- the rate of decline is accelerating here, so I'm just wondering what new is going on?

Yeah. That's a good question and I'll give a little bit more color around that categories as Jim mentioned, luxury and entertainment. I'll say we saw particular pressure in retail in American fashion, which is tied to retail and live entertainment. And in the first two of those categories, I think you could actually say that, that just relates to sort of general pressure in the world around retail, and kind of changing consumption and what that meant for retail. So there is a fair amount of sort of secular stuff going on in the world on the demand side.

And what I think is fair to say is we've seen periods of steep declines like this before and we've also seen those periods of steep declines be followed by periods of moderation. And while we saw decline in the number of categories, for us luxury is very big, retail is big, they travel together. We have also seen categories that had growth in the quarter and some of that will continue in back half of the year. So telecom was strong, real estate was strong, film was strong and I want to say that, we do still see and we see it because we hear it in the market and our partners see it, a particular and important, a meaningful place for print advertising and we don't think that's going away.

We are certainly always thinking about price. I would say at this point, our strategy have been and will continue to be in the back half of the year, to make strategic investments and making sure that the product continues to have real value to the consumer and therefore real value to the market. And you've seen use over the last year make big investments, last year and half, in things like, Sunday Magazine and Men's Style and you can actually expect to see a couple of additional strategic and focused investments in print in the back half of this year.

Craig Huber, Huber Research Partners.

Oh, thank you. A few housekeeping questions first. Going forward here for digital-only subs, are you guys going to continue to break out the news product versus the crossword puzzles?

Yes. (multiple speakers) Yes, that's the plan.

When you guys talk about digital deals being large and you said this on a few of these conference call now, can you just give us a broad range of what size you're talking about that -- these? Is that a few million dollars each? I mean, how big are these big deals you're talking, roughly range?

So what I'll say is in general more big deals has been a very focus part of our strategy. And those deals rather, than talk in terms of dollars, but I would say, those deals are getting much broader in terms of the aspects of our products set that they touch.

So they can range -- many of these deals include every asset we have, which is the newspaper or magazine, live events, homepages, traditional desktop, mobile branded content, programmatic so -- and HelloSociety. So you can imagine numerous deals that have many of those of things that I've talked about or in some cases, all of them.

The other thing I would say that we're increasingly focused on to a very positive end, is wrapping marketer programs around our best and most exciting consumer innovations. And I think virtual reality and what we did last year was a great representation of that. The terrific thing about VR was it was a major advancement and innovation to story form. When we launched it, we launched with five films; one major editorial film, through the sub-film and three films from marketers from two partners. And that's a great model for, how we think about putting storytelling innovation, putting journalistic innovation into the market going forward. And what you see with VR and I think this is a good metaphor for, what you'll see kind of across the board with product innovation, is that, you bring marketers in from the beginning, you sort of roll out the innovation, bring new news for the consumer, for advertising all at the same time and then you keep advancing it all at the same time. And you will see that be a big part of our strategy going forward.

All to say that the consumer business and its value proposition, making something work paying for is becoming more and more deep engagement around our product and our storytelling and our story form, becoming more and more also what marketers genuinely want to buy from us. And we think that's a very good thing and a very differentiating thing for The Times.

It's fair to say, that we're doing more deals in $1 million-plus range. And we're doing more multi-million dollar deals than we would've done. And I mean Craig, I think one of the reasons that we're confident we can scale our business is because we have because of our brand and our relationship with advertisers, the chance to engage in really big campaigns. I'm trying to get a branded content, our video business to scale significantly when the average size of the deal is small. I think, it's very difficult and then some of our competitors are finding it hard to scale.

That's right. And I'll add one more thing to that which is to say, duration is changing, and I think that's really important, and ultimately will be very good for us. So marketers are thinking generally more in terms of always on programming, so content programming that lasts beyond a particular piece of content. And if you wrap around the particular innovation, having that be something that is lasting across the year and multiple years. So think less in terms of sort of tactical day-to-day, week-to-week campaigns, which is how the newspaper business on its own tended to trade, and more in terms of long ranging partnerships. And we've been drove hard at work at that for quite some time. I think you're going to see the efforts of that really begin to bear fruit in the second half of the year and then well beyond.

And then also, could you just talk further about the print ad categories? You laid out with the ones that were weak in the second quarter year-over-year, which categories are meaningfully better, that are significant -- meaningfully better trending into third quarter or rest of the year to go, again for print?

Sure. So in the second quarter, I think I said telecom, home and real estate, which often tend to trade together. We're strong and looking forward, maybe Jim, stop me if I'm saying anything I shouldn't, but from a category perspective, we are seeing some strengthened advocacy and we expect to see more as we cycle past the election, and there's a good window of time post-election in the back part of the year, when we think that will dial up. Corporate is a strong category for us. And interestingly, that's a good example of where you're seeing through the messaging tying into big deals. And the jewelry and watch part of luxury is also a strong category for us in the print. So and I think real estate will continue to be strong and you'll see some innovations from us there.

And my final question, if I remember correctly, your guidance for the second quarter on cost, I think, was up low-single digits, obviously the revenues not materialized as well as you had hoped or expected on the ad revenue front, I think costs were down slightly, when everything is all said and done. What did you adjust Jim, on the cost fronts to go from up low-single and maybe down low single? Was it incentive comp, was it leaving the Company, what was the change there, please?

Number of factors and sense of comp matters and that's some factor in it. Hiring has been slower than we had planned. And look, we are mindful of the revenue environment, we adjust our business accordingly, so we did -- by the way, it didn't affect the quarter, but we did quite point out and in the quarter, we announced a voluntary buyout, that will benefit third quarter and beyond. So I would say we're mindful. (inaudible). We've got a lot going on in the business, we've got a lot in the international area where we are investing, I think we might be a little bit slower in getting some of that than we maybe anticipated, but there is clearly a real mindful adjustment to how we think about our costs as the business evolves.

Yeah. And as I was saying Craig, I mean -- and I said this year in the last earnings call as well, I mean, we're taking a good, hard, strategic look at cost. I mean, we want to maintain the quality of what we do [increasingly] where we can, we're investing in our digital business, but we also want to make sure we've got a cost base, which is consistent with growing operating profit over time. So we're taking a hard look this year at cost. And again, it's about to hear more from us on that, about that in the future earnings call.

And we have no other question in the queue at this time, so I'll turn the call back to Harlan Toplitzky.

Thank you for joining us this morning. We look forward to talking to you again next quarter.

This concludes today's conference call. You may now disconnect.