New York Times Co (NYT) 2022 Q1 法說會逐字稿

Good morning, and welcome to The New York Times Company's First Quarter 2022 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Harlan Toplitzky, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to The New York Times Company's First Quarter 2022 Earnings Conference Call. On the call today, we have Meredith Kopit Levien, President and Chief Executive Officer; and Roland Caputo, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call. These statements are based on our current expectations and assumptions, which may change over time. Other -- excuse me, our actual results could differ materially due to a number of risks and uncertainties that are described in the Company's 2021 10-K and subsequent SEC filings.

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.

And finally, please note that a copy of the prepared remarks from this morning's call will be posted to our investor website shortly after we conclude. With that, I'll turn the call over to Meredith Kopit Levien.

Thanks, Harlan, and good morning, everyone. Before I begin, let me take a moment to acknowledge the bravery and dedication of our journalists in Ukraine and the surrounding region. Our reporters, photographers and support team have been on the ground since January, well before the war began, and their courageous work is helping people make sense of this tragic and still unfolding conflict. This is precisely the kind of story that The Times is uniquely positioned to cover, and our readers have responded in large numbers and with deep engagement. Our ability to lead on and engage our audience in the biggest and most consequential stories of our time underpins our confidence in the updated strategy we detailed on our last earnings call. That strategy is to become the essential subscription for every English-speaking person seeking to understand and engage with the world.

It's grounded in 3 pillars. First, to build on our leadership in news to be the best news destination in the world; second, to be more valuable to more people by helping them make the most of their lives and passions; and third, to provide a more expansive and connected product experience that helps people engage with everything we have to offer in a way that makes The Times indispensable to their daily lives. With this strategy, we believe we have an opportunity to penetrate a large and growing addressable market to attract, retain and monetize subscribers and drive profitable growth as we progress toward our goal of 15 million subscribers by 2027.

It was easy to see our strategy in action in the first quarter, which was a strong one in terms of net subscriber additions. Overall revenue grew more than 13% in the quarter, with digital subscription revenue up approximately 26% and total advertising up almost 20%. It was our best start to the year in terms of subscriber growth since the launch of the digital pay model in 2011, except for Q1 2020, which was when the pandemic started. We added 387,000 net new digital-only subscribers in the quarter, including new subscribers to The Athletic after the acquisition on February 1. The Times now have 9.1 million total subscribers, with 10.4 million subscriptions, a metric that I'll remind you we are now moving away from as we focus on scaling individual subscriber relationships and begin to more aggressively market our multiproduct digital bundle.

Let me talk now about the quarter's results in terms of the first pillar of our strategy, being the world's best news destination. Reader interest in our coverage of the war in Ukraine contributed to both total audience and the depth and frequency of their engagement. It was an especially strong period for international readers and subscribers. Weekly average international users grew 17% quarter-over-quarter, spurred by our ability to provide around-the-clock coverage. This elevated engagement was first and foremost, a function of the news cycle, but we believe our deliberate investments in our product experience also played a role. Our collection of live news experiences, including text, photos, videos, maps and interactive graphics, was the entry point for many readers and was the most powerful driver of increased subscriber engagement with our news product quarter-over-quarter.

We also saw the impact of our steadily improving targeting capabilities, which helped us connect readers to more topics of interest through personalization of our home screens and through our large and growing portfolio of e-mail newsletters. We now have 19 subscriber-only e-mail newsletters that together reach almost 1/3 of our news subscriber base. We're encouraged by data that shows that subscribers who read at least 1 of these subscriber-only newsletters churn at a lower rate than those who do not. Conversion rates were up twofold over the first quarter of 2021 and largely consistent with the second half of last year, due in large part to continued enhancements to our use of machine learning to determine when to ask nonsubscribers to pay. And we've begun to apply these capabilities to products beyond news, starting with Cooking. More broadly, we believe our continued strength in news conversions demonstrates that we're still in the early days of penetrating a large and growing market.

We do expect there to be significant variability in our subscription results from quarter-to-quarter based on seasonality and changes in the news cycle. But our progress in each of these areas underpins our confidence in the long-term potential of our model and, in particular, our long runway for ongoing optimization.

This brings me to the second pillar of our strategy, becoming more valuable to more people by helping them make the most of their lives and passions. This has long been the idea behind our rich culture and lifestyle report and our fast-growing stand-alone products. And it's the idea behind our acquisition of Wordle, which played an outsized role in the quarter's engagement and subscriber growth. While our news coverage contributed to gains in audience and real strength in subscriber return, Wordle brought an unprecedented tens of millions of new users to The Times. The majority of these incremental users only played Wordle, but weekly average users for non-Wordle games more than doubled in the quarter, which led to our best quarter ever for net subscriber additions to gain. The addition of Wordle to our portfolio has proved incredibly valuable, and we are moving swiftly to leverage its massive audience to introduce Wordle players to our other games, recognizing that its audience may moderate over time.

We closed our acquisition of The Athletic in the quarter and moved quickly to apply our expertise in areas like audience development, subscription funnel optimization and advertising. We're off to a strong start operationally, with several talented Times leaders taking on new roles at The Athletic, helping build out its audience development and advertising teams.

Subscriber growth in The Athletic was in line with our expectations following the transaction's execution in early February. In the second half of this year, you can expect us to begin to introduce The Athletic into a broader Times bundle, which is where we see the biggest opportunity for growth. We've also begun to lay the groundwork for introducing an array of advertising products to The Athletic later in the year, and we see a meaningful opportunity to build a substantially larger ad business over the next several years. We are on track with our plan so far and optimistic about the value The Times playbook can bring to The Athletic to drive incremental revenue growth and improve profitability over time.

I've talked so far about the first 2 pillars of our strategy, which involves meeting more news and life needs with world-class content. The third pillar of our strategy is about putting all that content together in a more expanded and connected product experience that helps people engage with more of what we offer, and makes us indispensable in their daily lives independent of the news cycle. While we will continue to sell our products on a stand-alone basis, we believe that, over time, a New York Times bundle of interconnected products will allow us to better penetrate our addressable market of 135 million people and drive more volume and higher ARPU. We've already begun to better connect our products and expose people to more of our breadth by optimizing our programming and promotion on our home page, in e-mail and in our subscriber on-boarding. With this work, we found that while the vast majority of current and new bundled subscribers engage with news, their incremental engagement with non-news products has widened over time, which helps to support healthy retention. We've also begun to increase the promotion of our multiproduct bundle with a series of optimizations to our marketing presentation and to our purchase flow. As a result of these optimizations, bundled subscriber additions in Q1 were the highest ever for a single quarter.

I'll turn now to advertising, where performance in the quarter was on track in terms of total revenue, though digital grew less than expected and print grew more. Digital advertising was above last year's first quarter, but below our expectations, driven mostly by market-wide issues, including lower spend by tech advertisers, some advertisers pulling back on spending with the onset of war in Ukraine and a broader climate of macroeconomic uncertainty. Print advertising, on the other hand, beat expectations, led by entertainment and luxury, offsetting the miss in digital and putting total advertising up 20% over Q1 2021. We believe that our ability to achieve this level of growth in relatively volatile conditions is a testament to our strength at capturing marketer demand with a uniquely diverse ad product set.

As we saw in the first quarter and have long said, we expect that our advertising business will be subject to significant fluctuations, including as a result of macroeconomic conditions. Even so, we continue to believe strongly in the competitive advantages of our ad product set and that the digital advertising business will be a significant contributor to the company's profits for the long term.

To recap, it was a strong start to the first year of our strategy to become the essential subscription, with many signals reaffirming our belief that we are in the early stages of an extraordinary opportunity to win a larger share of a still growing market. Consistent with what we said last quarter, our plan for doing so includes continued measured investment into the opportunity we see ahead, which we believe will strengthen our competitive position and drive attractive long-term growth.

The company's cost growth in the first quarter reflects our continued investment priorities. Growth in the number of employees creating content across our news and lifestyle products and growth in product development to make the delivery of that content even more engaging and habit forming. As we've long said, we won't sacrifice long-term growth in the name of short-term profit. We do expect these investments to drive improvements to our marketing efficiency and we also expect to see benefits over time from our tech investment as our platforms and underlying capabilities continue to improve.

Consistent with the 2022 guidance I provided on our last earnings call, we continue to expect to grow adjusted operating profit in our core business before the impact from The Athletic, but we don't expect that growth to entirely offset the dilutive impact of The Athletic on a consolidated basis.

Before I turn things over to Roland, I want to make note of the executive editor transition that our Chairman and Publisher announced last month. Joe Kahn, who has been Dean Baquet's managing editor for the last 5 years, will become executive editor in June. Joe is a brilliant editor and a sophisticated and principled leader. He's also been among the trailblazers in our Newsroom's digital transformation, and I can tell you that The Times Newsroom will be in very good hands under Joe. I also want to make note of our upcoming Investor Day, now planned for Monday, June 13, where we'll dive more deeply into our strategy and have you hear directly from some of our key business leaders. And with that, over to you, Roland.

Thank you, Meredith, and good morning. As Meredith said, our first quarter subscription results give us real confidence in our ability to execute and deliver on the strategy we laid out for you on our fourth quarter call in February, and we're excited to be able to share more with you at the Company's Investor Day next month. Turning to the quarter, which is our first, including the financial results of The Athletic. Adjusted diluted earnings per share was $0.19, $0.07 lower than the prior year. Amortization of intangible assets associated with our first quarter acquisition of The Athletic, which was not included in the guidance we gave last quarter, reduced adjusted diluted earnings per share by approximately $0.02. We reported adjusted operating profit of approximately $61 million, lower than the same period in 2021 by approximately.

$7 million.

With the acquisition of The Athletic, we have begun reporting our results in 2 segments: The New York Times Group and The Athletic. Adjusted operating profit in The New York Times Group was approximately $68 million in the quarter, relatively flat when compared to the prior year, while The Athletic lost approximately $7 million.

On a consolidated basis, the company added 387,000 net new digital-only subscribers and 382,000 net new digital-only subscriptions in the quarter. The number of digital-only subscribers with new entitlements increased by 312,000 in the quarter. Please note that the net subscription additions in the quarter were reduced by 67,000 as a result of a decision to grant gains access to our home delivery subscribers who did not already have it as part of their print bundle. Excluding this impact, net subscription additions were 449,000 in the quarter. This had no impact on the number of subscribers. Our acquisition of The Athletic resulted in the addition of approximately 1.1 million subscribers and 1.2 million subscriptions as of the date of the acquisition. Subsequent to the February acquisition, The Athletic added 16,000 net subscribers and 24,000 net subscriptions. Most of these net additions came at the end of the quarter as we began to apply our audience and subscription growth playbook. We look forward to continuing this work in earnest in future quarters.

I also want to echo Meredith's statement that we expect there to be variability in net additions from quarter-to-quarter as a result of seasonal factors and the news cycle. However, we remain confident in our ability to achieve our goal of 15 million subscribers by year-end 2027. Total subscription revenues increased more than 13% in the quarter, with digital-only subscription revenue growing approximately 26% to approximately $227 million. Digital-only subscription revenue grew as a result of the large number of new subscriptions we have added in the past year, continued strength in retention of the dollar per week promotional subscriptions who have graduated to higher prices and the inclusion of subscription revenue from The Athletic. This quarter's earnings release includes the disclosure of digital subscriber ARPU, one of several new metrics we plan to disclose each quarter. Please note that the ARPU we are reporting beginning with Q1 of 2022 represents the average revenue per digital subscriber, and therefore, includes all of our digital products. The ARPU commentary I have made on previous calls referred solely to the digital news product.

For the quarter, digital-only subscriber ARPU decreased 1.2% compared to the prior year and 5.3% compared to the prior quarter, both largely driven by our acquisition of The Athletic. Excluding the impact of the acquisition, the year-over-year rate would have increased primarily due to new subscriptions graduating from the introductory price to either full price or an intermediate step-up price, while the sequential decline would have been more moderate as the growth in net subscriber additions in the quarter at introductory promotional pricing more than offset the gains from subscribers graduating to higher prices.

Print subscription revenues declined approximately 3% as overall volume declines in both home delivery and single copy more than offset the benefit from the first quarter home delivery price increase. Total daily circulation declined approximately 9% in the quarter compared with prior year, while Sunday circulation declined 8.2%.

Total advertising revenues increased approximately 20% in the quarter, with digital advertising growing more than 12%, largely as a result of our proprietary first-party targeted advertising products and expanded audio product portfolio as well as the inclusion of advertising revenue from The Athletic.

The digital results were negatively affected by lower spending than we expected in the technology category as well as advertisers' decisions to avoid placement near reporting on the war in Ukraine. Meanwhile, print advertising was higher by approximately 31% compared with 2021, primarily driven by growth in the entertainment and luxury categories.

Other revenues increased approximately 5% compared with the prior year to approximately $49 million, primarily as a result of revenue from higher commercial printing and Wirecutter affiliate referral revenues. Other revenues came in lower than guidance as a result of a delay to a nonrecurring licensing project, which we expect will be finalized later in the year.

Adjusted operating costs were higher in the quarter by nearly 18% as compared with 2021, in line with the low end of our guidance. Cost of revenue increased approximately 12% as a result of our acquisition of The Athletic, growth in the number of employees who work in The New York Times Newsroom and on our Games, Cooking and Wirecutter products as well as from higher subscriber servicing costs and print production and distribution costs, largely as a result of higher raw material costs.

Sales and marketing costs increased approximately 29%, driven primarily by higher media expenses. Media expenses also increased approximately 29%, largely as a result of higher brand marketing. This represents a significant slowdown in the year-over-year growth rate of media expenses as compared to Q4 of 2021, which is consistent with our expectation to improve the overall efficiency of our marketing spend.

Product development costs increased by nearly 22%, partly as a result of growth in the number of digital product development employees in connection with digital subscription strategic initiatives as well as a result of our acquisition of The Athletic. General and administrative costs increased by approximately 26%, largely due to growth in the number of employees as well as a result of our acquisition of The Athletic.

Our effective tax rate for the quarter was approximately 19%. As we said previously, we expect our rate to be approximately 27% on every dollar of marginal income we record with the possibility of some variability around the quarterly effective rate.

Moving to the balance sheet. Our cash and marketable securities balance ended the quarter at approximately $475 million, a decrease of approximately $600 million compared with the fourth quarter of 2021, largely as a result of our all-cash acquisition of The Athletic in the quarter. The company remains debt-free with a $250 million revolving line of credit available. During the quarter, share repurchases totaled $29 million and $121 million remained under the company's repurchase authorization. As stated on the last earnings call, share buybacks under this authorization are expected to be used primarily, but not exclusively to offset dilution associated with stock-based compensation, which we expect will increase over the next several years. We also had one special item in the quarter for approximately $35 million related to our acquisition of The Athletic. It's worth noting that we previously entered into an agreement to sell a small parcel of land adjacent to our College Point printing facilities, which resulted in a gain of approximately $34 million that will be included in our second quarter results.

Let me conclude with our outlook for the second quarter of 2022 on The New York Times Group, which does not include The Athletic. Comparisons are to the company's consolidated results for the second quarter of 2021 prior to the acquisition of The Athletic. The effect of The Athletic on our consolidated guidance has been included in the outlook section of the earnings release that we published this morning.

For The New York Times Group, total subscription revenues are expected to increase 7% to 9% compared with the second quarter of 2021, with digital-only subscription revenue expected to increase 16% to 18%. Overall, advertising revenues are expected to increase 2% to 5% compared with the second quarter of 2021, with digital advertising revenues expected to be flat to down in the low single digits, partially as a result of more difficult comparisons in the prior year. Other revenues are expected to increase in the mid- to high single digits. Both operating costs and adjusted operating costs are expected to increase 12% to 15% compared with the second quarter of 2021 as we continue investment into the drivers of digital subscription growth. However, we expect cost growth in our core business to slow considerably beginning in the second half of 2022.

As Meredith said, we continue to expect to grow adjusted operating profit in 2022 in our core business before the impact of The Athletic, but we do not expect that growth to entirely offset the dilutive impact of The Athletic on a consolidated basis. And on The Athletic, consistent with what we said on the deal announcement call in early January, we continue to forecast a slight reduction in operating losses relative to its approximately $55 million loss in 2021 and continue to expect significant improvement over the next several years. With that, we'd be happy to open it up for questions.

(Operator Instructions) Our first question comes from David Karnovsky from JPMorgan.

Meredith, I know it's early, but can you maybe discuss key learnings on The Athletic so far? And any view into your thinking at this point on how you might position or market the product in a larger bundle alongside The Times?

Yes. Listen, I'd say we're super excited about The Athletic as part of The Times now. I think we're -- I'll echo what I said in my prepared remarks, we're off to a really good start operationally. We've got a very clear playbook of what we have done to grow our subfinanced business of The Times, and we are well on our way to applying that playbook to The Athletic, and we're beginning to feel the effects of that in -- certainly in audience development with lots more to come. And we'll begin to feel the effects of that on how we build and sort of optimize and perfect their funnel and also as we apply a lot of ad know-how and build out ad products. So I'd say broadly, we're off to a very good start there.

On the bundle specifically, we intend to begin to introduce The Athletic into a Times bundle in the back half of this year, so sometime in the second half. And I suspect you're going to see that play out in a few different ways, cross-sell, upsell, inclusion in the bundle, we're working through all that now. I will say I do think that's the opportunity we're most excited about, the big reason for the acquisition, and we think there's a really big opportunity there.

Okay. And then just on advertising. Just wondering if you could maybe speak to what you saw through the quarter, including the impact from a lot of reader engagement around war coverage and then kind of any softening of demand that maybe you saw due to macro issues, inflation or things like that?

Yes. I'd say, broadly, we continue to be optimistic about both our competitive position in the ad business, and I talked in my prepared remarks about the kind of wide and high, varied product set. And we believe advertising will continue to be an important -- digital advertising, in particular -- growth driver for The Times. And what we saw in the first quarter was just some of the effect of the very dynamic macroeconomic environment. So big categories like tech are under pressure. We saw some marketers pull back with the onset of war in Ukraine, and I'd say we're seeing some advertisers pull back just on the premise of inflation and the kind of dynamism in the market generally.

On the flip side, we've got a print business that performed really well in the quarter -- in the first quarter ahead of our expectation. And one of the things to note there is it tends to attract advertisers in different categories. We still get a lot of luxury business and live entertainment business in print and those categories were really strong. So I put it all broadly in the category of we're feeling the effects of what's going on in the economy on the business. But long term, we're optimistic about what we can do in advertising.

Our next question comes from Craig Huber from Huber Research Partners.

Meredith, can you just talk a little further about the addressable market, the 135 million people?

In your mind, how much of that is outside the U.S.? And also curious what percent of your digital subs right now are overseas versus where would that number, say, a year ago? That's my first question.

Great. So we think the addressable market is somewhere in the neighborhood of 135 million people and growing. We think about 50 million of those people are outside the U.S. and that's -- we get at that number by saying what is the number of people outside the U.S. in English, who will pay for a news subscription, and we see the addressable market as the remainder of that $135 million domestically. And that's people who have either already pay or willing to pay for a subscription to news and/or shopping advice, recipes, games, sports information, podcasts. So that's sort of how we look broadly in it.

And I'll just say, I'm not sure what you're asking me directly, but I'll say it's 9 million and change subscribers. We think we've got a long runway for penetration, both domestically and internationally, I'd say, in news and beyond news and that the bundle is going to be a big part, particularly in the U.S. as to how we penetrate. On international, I think we're the teens. Roland, do you want to give the numbers?

So, Craig, at the end of Q1, international stood at 19% of our subscribers. So the percent that were part of the net adds was a little bit higher than it has been in the last few quarters?

And I'll just add, Craig, the 135 million number comes from sort of long tracking the market and how many people pay, and also from our own research about willingness to pay across that widening product set.

Okay. Great. And then my other question on the digital advertising front. Can you talk about The New York Times competitive advantage of all the first-party data you have increasingly? So going forward, I got to think, how that sort of sets you apart from your peers out there?

Yes, I'm happy to do that. We are probably 3, maybe 4 years into building and deploying a really robust first-party data set and applying that to our proprietary ad units and really rich ad canvases. So both the units and the data underneath them really -- perform really well for marketers. And we are confident that we're going to continue to build advantage there. The way to think about that is we just have an enormous amount of signal from our readers that we can use in privacy-forward ways to do -- to help marketers target and it's really working.

And as with some of the other things that The Times does with data and the application of machine learning, so we use data and machine learning, obviously, on the subscription side of our business as well, it just kind of gets better and better. So you build more signal and you get better at deploying the signals. So we're incredibly focused on the advantage we've already built and believe we're going to continue to add to it. And the sort of size and the size of our audience and its depth of engagement, for a publisher, is a real differentiator as opposed to for a platform. Obviously, platforms have enormous scale in how they do this, but for a publisher, we believe that makes us really advantaged. And then we've got a long track record now of those products performing well for marketers. So we're optimistic about it.

Our next question comes from Vasily Karasyov from Cannonball Research.

Just wanted to ask you to tell us what you think is keeping those people who are in your addressable market but are not subscribers yet on the fence. What does your research show? Why are those guys not subscribers yet? And what would it take for them to become subscribers? And how long -- what would the trajectory in your opinion? Would it be like a steady growth? Would it be waves driven by new cycles or some other patterns? So I would appreciate your thoughts on this.

Yes, good questions. Let me first say what does the trajectory look like? I just want to point to the new kind of medium, long-term guide we gave on the last call and which we reiterated here, which is we believe the next mile marker in the model is to get to 15 million subscribers, reminding you that, that's a sort of harder to achieve target than subscriptions, by year-end 2027. And we see that as a mile marker by no means an end state. So that's what I would say in terms of our plan for penetration now.

I think it's a really good question, like what stops people from subscribing now. And I might flip it around a little bit and say what gets people to subscribe is to make sure we're: #1, able to convey the value of being in the subscribed state. One of the things we started talking to you about much more actively last year and began to do in the product much more actively last year is to differentiate between the anonymous registered and subscribed state. And there are a number of examples of that, but the most obvious one is, I think in the second half of last year, we launched our first subscriber-only newsletters. And those are now 19 in number. And I said in my prepared remarks, we're beginning to see real correlation with people who -- subscribers who get those newsletters retaining better. We also see the sort of differentiated value for subscribers as something that over time will likely make more people convert as they see, yes, I can get a lot of news for free from The Times, but I get more. And I get something of even higher value if I pay.

So a lot of our work is in demonstrating the differential value of paying. That's one thing. The second thing I'll say is, I think we are sitting on an enormous amount of value, both in news that is like insufficiently unlocked today for people, and then across the whole breadth of value that The Times has to offer in recipes, games, shopping advice, sports information, podcasts. And so much of the work is how do we actually expose people to that value in a way that they know it's there.

So that when I talk about the third pillar of our strategy as being about having an expanded and better connected product experience, that's really about unlocking more of the value for people through personalization, through better targeting, through better promotion -- cross promotion within the product. And we think the -- our research tells us there is a real opportunity there to demonstrate to people that there's a lot of value here that you might not even know that we have, in an area where you may have a passion, like sports information or game play that would make you subscribe where you might not otherwise. So that's how we think about penetrating the market.

Our next question comes from Doug Arthur from Huber Research Partners.

Roland, maybe because I stayed up and watched over third overtime period of the Rangers...

Yes. And the heartbreak. A complete heartbreak.

Yes, that was a tough one. You've got to disaggregate the subscriber numbers for me. You've got a number with The Athletic, without The Athletic, with the 67,000 kind of games that were -- you've now reversed. Can you break the number down? And is the implied or stated news only, did you say 312,000 because that's a pretty significant upside surprise, if so?

Correct. So let me start with this. We're -- as I started to talk about on the last call when we announced that we were going to change our reporting to being more subscriber centric, what we really think that folks should focus on is our total number of subscribers and the amount of money they pay us in terms of ARPU. We think that, that is the best representation of the economics of the business.

With that, we've got a few other ways we want to break it out, which we think are important, and you can see that in the release and the tables in the release. So we show the number of multiproduct subscribers, which we believe is an important disclosure since we're talking about making the bundle -- being much more important to driving our economics. We do show the digital-only subscribers with a news entitlement, which we also think is an important disclosure since news is our main product and will remain that, will always be that. And then, of course, we're breaking out The Athletic as we have 2 reportable segments to give folks really good insight into how that business that we just acquired is going. So, Doug, if you look at the digital-only subscribers with news entitlements line on the table, you can see the comparison to both last year and the fourth quarter.

So that comparison to the fourth quarter reveals an increase of 312,000 people, more people that have entitlements to the news product than did last quarter. So that's the sequential way to look at it.

And is it fair to say that relative to your expectations coming into the quarter, given the strong news flow -- I mean, we've seen that Reuters News yesterday reported a big upside surprise in revenues. So did that drive the number, I guess, is the question?

I'd say it's 2 things drove our subscriber numbers. We had the news cycle, the big news about a war on the European continent in Ukraine. And then the acquisition of Wordle brought tens of millions of folks into our audience, which helped drive a lot of game subs. So we're really happy with the numbers, both in terms of the number of bundles we sold, the number of games stand-alone that we sold, it's a very good quarter. We're very satisfied with it.

Our next question comes from Thomas Yeh from Morgan Stanley.

Meredith, I was hoping you could give us some thoughts on the local news initiative that Dean Baquet is now spearheading. How should we think about the time level of investment, what kind of scope this entails? And maybe just framing that opportunity out? And then a follow-up, one more on The Athletic. Now that you've spent some more time with the company post close, can you help us think through the seasonality of sports in terms of which quarters might have more outsized opportunity, and how we might think about that impacting kind of the cadence of the subscriber net adds there?

Sure. Both good questions. Let me start on seasonality. What we see in the historical pattern from The Athletic is that the second quarter, it actually mimics our own business. But the second quarter tends to be slower seasonally and the back part of the year tends to be stronger. So similar to what we see at The Times for the -- what we now call The Times Group and for our own News business. On the initiative we announced, thank you for noticing the initiative.

We announced that Dean Baquet will be running it, which is essentially a -- I'd refer to it as a really important challenge to which we aspire for it to be a really important talent development engine for really high-quality journalism at a local level.

I would say not material from an investment standpoint. There's an enormous amount of know-how in building. Dean is an extraordinary leader. I can't quite say enough about him. He came out of the local ecosystem and there is an extraordinary amount of kind of know-how and expertise in the building and the idea is to be able to use that expertise to develop more high-quality journalism at the local level and to develop the talent that can do that.

And I'll just give you a comp for it. We have an incredible fellowship program already broadly for journalism where we bring, Roland -- I don't know if you remember the number, but my guess is it's in the dozens of people in every year as fellows. I think they do a year-long fellowship. And then after that, some of them get hired, many of them go kind of into the broader news ecosystem. And I would regard this in a similar way. And I would also regard this as The Times, Roland and I both long said, and our publisher has long said, the health of the ecosystem is quite important to The Times, and this is a way for us to make sure we're playing our part in continuing to develop the ecosystem.

But from a cost perspective, I would say nothing material for -- to be concerned about. And long term, this is talent development, which is really good for the business and good for -- we think we've got an attractive model where we know how to develop talent and then see the attractive economics from that over the time horizon we've been talking about.

This concludes our question and answer session. I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.