Usa Today Inc Stock

Greetings, and welcome to USA TODAY Co.'s Third Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Matt Esposito, Head of Investor Relations with USA TODAY Co.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss USA TODAY Co.'s third quarter 2026 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer; Trisha Gosser, Chief Financial Officer; and Kristin Roberts, President of USA TODAY Media.

If you navigate to our website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance.

Before we begin, please let me remind you that this call is being recorded. In addition, certain statements made during this call are or may be deemed to be forward-looking statements as defined under the U.S. federal securities laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today.

We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in our filings made with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted.

In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, total adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin, and adjusted net income attributable to USA TODAY Co. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement.

Lastly, I'd like to remind you that nothing on this call constitutes an offer to sell or a solicitation of offer to purchase any USA TODAY Co. securities. The webcast and audio cast are copyrighted material of USA TODAY Co. and may not be duplicated, reproduced, or rebroadcasted without our prior written consent.

With that, I would like to turn the call over to Mike Reed, Chairman and CEO of USA TODAY Co.

Thank you, Matt. Good morning, and thanks to all of you for joining our third quarter earnings call. In the third quarter, we saw encouraging underlying signals in the categories that we believe are most important to our future, even as we navigated the impacts of the changes in consumer search, along with some inflationary pressures.

So when you look at the Q3 numbers, there are really two stories in our results, and it is important to understand both. The first is the industry-wide change in search behavior, which has had an outsized impact in the near term on a relatively small part of our business. The second is the continued momentum in the digital revenue categories that are central to our strategy and where we see the greatest opportunity to drive long-term growth.

Today I will walk you through both, along with the decisive steps we've already taken to strengthen the business, including the implementation of a $100 million cost reduction program at the end of Q3 and why we believe we are well positioned to deliver a strong fourth quarter. Let me start with the first story. Changes in consumer search patterns have been a headwind, not just for our business, but for many media organizations and, more recently, technology platforms.

Over the past couple of quarters, these changes have had an outsized impact on one specific part of our digital advertising business, indirect advertising, which includes programmatic advertising and sponsored content recommendations.

In the third quarter, we stabilized our audience. And through this, we're continuing to grow our direct sold digital advertising revenues. This reinforces an important point despite the changes in search. We're still delivering an audience that is highly valuable to advertisers with meaningful opportunities to further grow our premium advertising business. That said, these changes have pushed out our path to same-store total revenue growth by a few quarters.

Now I want to put that in context because it's important to understand just how much of our business touches search. Our digital advertising revenue is made up of 2 primary categories: Advertising sold directly by our sales teams, which, as I mentioned earlier, is growing, and indirect advertising. It's this indirect revenue, which represents about $100 million of revenue on an annualized basis or less than 5% of our total business that has seen the most impact, declining 32% year-over-year in the third quarter.

However, this part of the business has historically carried some of our lowest value advertising inventory, generating significantly lower CPMs than our premium direct sold advertising. So while the pressure is real right now, it is concentrated in a relatively small, lower value part of our business, and we do not view it as a permanent headwind. We also don't expect this revenue stream to go away entirely. But as we continue to shift towards premium sales and premium experiences and we improve the customer experiences across our products, it naturally becomes a less significant part of our revenue portfolio.

And as we move through the next few quarters, we'll begin to lap some of the more notable impacts, which will help our year-over-year comparisons. This is the first story. We felt the impact, but it is limited, and it does not change where we are headed. And that brings me to the second story, the one that really defines our future and the one we are most excited about, and it starts with our audience.

In Q3, we continued to serve one of the largest digital audiences in the media industry. And importantly, we're starting to see signs of stabilization with sequential growth over Q2 in both unique visitors and page views as well as stronger engagement across newsletters, social, and video. That scale is a real advantage because it allows us to grow the digital revenue categories most important to our long-term growth, even as the search environment continues to change. We saw that play out in Q3 as those categories continue to improve for us.

Let me walk through a few of those categories with you. Starting with digital advertising, our direct sold year-over-year revenue trends have seen solid momentum in 2026, highlighted by growth in Q3. And importantly, we expect stronger growth in Q4. Moving forward, we see several opportunities to accelerate this growth, including growing our base of high-value known users, expanding our video offerings on and off platform to capture a larger share of growing video advertising budgets, and scaling our AI discoverable branded content, which is a product we began rolling out in September.

Next is our digital-only subscription business and digital other business, which we believe are 2 important engines for sustainable growth, and they continued to perform well in the quarter. Specifically, digital-only subscription revenues posted its third consecutive quarter of year-over-year growth and also grew sequentially, while digital-only ARPU reached a new high.

Digital other also grew year-over-year in the quarter, and we expect sequential growth in this revenue category in Q4 as we sign additional AI licensing agreements and grow our commerce business.

Third, our DMS revenue trends improved sequentially year-over-year in the quarter. And lastly, our engagement with Palantir continues to make solid progress with our first products now live and beginning to scale.

Taken together, total digital revenue represented 48% of total revenues in Q3, up from 47% in Q2. And we also saw a sequential improvement in same-store total revenue trends in the quarter. And to support our long-term growth objectives, at the end of Q3, we implemented a new $100 million annualized cost reduction program. These targeted actions were put in place in late September, fully implemented by early October, and are already positively impacting our run rate in the fourth quarter.

With these cost actions and the green shoots we're seeing across our digital portfolio, we believe we are well positioned to deliver significant sequential growth in adjusted EBITDA and free cash flow, along with substantial margin expansion in Q4. And because these cost reductions are largely permanent, we expect the benefits to extend well into 2027.

Beyond the operating results, our antitrust case against Google continues to advance. As you may have seen, Google's motion for summary judgment was recently denied, allowing our claims to move forward to a jury trial. And you may have also seen that our trial date has been scheduled 5 months from today, on April 5, 2027. The ruling also made public our damages calculation, which totaled $901 million through 2024. We expect to update that figure ahead of trial for additional damages incurred through the trial date. And importantly, that figure doesn't include the potential for treble damages. The trial date is approaching quickly. We feel good about where the case stands, and we look forward to our trial in April.

So stepping back, when I look across the business, I'm encouraged by the underlying signals in the categories that are most important to our future. Our audience is stabilizing, engagement is getting stronger, and our cost base is lower. And despite the headwinds from search, the revenue categories most important to our future and to our same-store total revenue growth are growing. Put all this together, and we see a clear path in 2027 to same-store total revenue growth, along with adjusted EBITDA and free cash flow growth.

The changes in search and indirect revenue have cost us some time, but haven't altered our strategy, and they haven't changed our confidence in where we're headed. Finally, we believe our current share price does not reflect the underlying value of our business or the opportunities ahead of us. And with that in mind, we have approximately $97 million available under our authorized stock repurchase plan, and we intend to be opportunistic in repurchasing shares in the fourth quarter.

With that, I'll turn the call over to Kristin to discuss how we're putting our audience intelligence to work across the business, the early results and what we're working on next. Kristin?

Thank you, Mike. Last quarter, we talked about how every visit, every story read, every video watched, and every sign-up creates a signal. And when we connect those signals, we can make smarter decisions about the content we create, how readers discover it, and how we monetize it. And in Q3, we started putting that intelligence to work.

Let me start with our newsrooms because that's where every audience relationship begins. Both domestically and internationally, we're developing AI-powered tools that help our journalists identify story opportunities faster and with greater predictability, allowing us to produce more relevant and meaningful content for our readers. To be clear, this doesn't replace experience and judgment of our journalists. It amplifies it. And by pairing that judgment with predictive analytics based on what worked in the past, we can drive deeper engagement and stronger monetization across our platform.

We also are putting that same intelligence to work in how readers discover our content, starting with newsletters. In select local markets, we've begun introducing more personalized newsletter content using available reader and behavioral signals to create a more directly relevant offering for each reader. The early results are encouraging with personalized newsletter pilots outperforming our non-personalized standard.

Readers are seeing stories that are more engaging to them and aligned to their specific interests. The impact is significant both for the reader who experiences far greater relevance in our products and for us. A newsletter sign-up creates a direct relationship. It builds habit and brings readers back, and it begins the journey from anonymous to known users, which, as Mike mentioned, are higher-value users.

Our next step is to expand personalized recommendations across USA TODAY and our sports-related newsletters. We're seeing that same intelligence pay off in commerce. Last quarter, I described how much of our affiliate business depended on manual work to connect relevant offers with our stories, and in Q3, we automated that process. When an eligible story is published, a relevant affiliate offer is identified and added automatically.

We've now rolled this out across our local sports content, USA TODAY Sports, our Sports Wire sites, and most recently, entertainment. And across the network-wide rollout, affiliate clicks have increased 38%, which reinforces an important point. There is a significant amount of untapped value in the journalism we already produce, and we now have the tools to capture it at scale.

Our next step involves working with our commerce team to integrate a much broader range of affiliate opportunities, moving beyond general offers to more specific product level recommendations. Over time, we expect that to translate into more relevant shopping experiences for readers and more revenue from the content we create every day, which brings me to digital-only subscriptions.

The same intelligence that connects readers with the right content and products also can change how we acquire, engage, and retain subscribers. And moving forward, we're focused on three moments that matter. The first is the paywall. Not every reader wants the same thing. Some wants an ongoing relationship with us, others just want access to a single story. Our pay-per article offering meets those readers on their terms and opens up a new revenue opportunity from audiences who are not ready for a full subscription.

We've tested pay per article in the past, but we kept those tests small because we found it could cannibalize subscriptions. What's changed is that the audience intelligence we have today is much stronger. And as a result, we are confident we can scale it with precision to a broader audience in a way that allows us to both build a robust pay-per-article offering and a strong digital subscription business.

The second moment is the action or what we call the next best action. Rather than showing every reader the same offer or opportunity, we'll use what we know about their interest and behavior to personalize the timing, the messaging, the placement, and the offer itself. In other words, delivering the right engagement opportunity to the right reader at the right time.

And the third is retention. From a subscriber's first week, there are moments where a more personalized experience can make a meaningful difference. Getting those moments right can improve retention, increase lifetime value, and build a more durable subscription business.

On that note, I'm encouraged by the continued year-over-year growth in digital-only subscription revenues and the new highs achieved in digital-only ARPU. Over the past year, we've prioritized subscriber quality over raw volume. And as a result, we have a much healthier base. Now we can begin driving volume again from a much stronger position at the right price point where incremental subscriber growth can translate more directly into revenue growth. This is an important distinction from the past when volume was often driven by lower-priced subscriptions.

As we head into 2027, our focus will be on growing that base by giving readers more reasons to come back every day. Overall, we are confident in the direction we're heading and believe we have the foundation in place for our next phase of digital growth. Our focus now is on scaling what's working across our network and translating that progress into stronger financial performance over time.

Back to you, Mike.

Thanks, Kristin. It's important to see how we are turning our audience data into actionable intelligence and, more importantly, putting that intelligence to work across our business. As we've outlined this morning, we're growing the parts of the business that matter most to our future. Premium advertising is growing, our digital-only subscription business is growing, and our digital other revenue is growing.

That tells us we already have the scale we need to drive long-term revenue growth. Search referral traffic has historically been one of our lower-value audience sources. So while the changes are creating some near-term pressure, the bigger picture is that the areas we've been focused on continue to move in the right direction.

With that, I'll turn the call over to Trisha to walk through our third quarter financial results. Trisha?

Thank you, Mike. Good morning, everyone. Please keep in mind that all comparisons are on a year-over-year basis unless otherwise noted.

In the third quarter, total revenues were $519.2 million, a decrease of 7.4% or 5.8% on a same-store basis, which represents an improvement of 30 basis points over Q2 same-store trends. The pressure remained concentrated in digital advertising, where the continued shift in consumer behavior away from traditional search has had an outsized impact on indirect digital advertising revenues with programmatic advertising most affected. Importantly, this pressure is not broad-based, and we saw improvement across several key areas of the business during the quarter.

Direct sold advertising, our digital advertising revenue outside of programmatic and sponsored link recommendations grew in Q3. This is our premium and classified revenue, and we believe our focus on known users, video-forward experiences, and AI discoverability allows us to grow our direct revenue more substantially in future quarters. In addition, our digital marketing services revenue trends improved sequentially. Digital-only subscription and digital other revenue continued to grow year-over-year and both print advertising and print circulation trends improved compared to the second quarter.

In the third quarter, operating costs and SG&A expenses decreased approximately 4%, reflecting our continued focus on disciplined cost management. As Mike mentioned, toward the end of the quarter, we implemented a $100 million annualized cost reduction program, which included workforce reductions.

The third quarter reflected only a partial month of savings from these actions, and we, therefore, expect a more substantial impact in Q4. We also continue to evaluate and lower our cost structure with opportunities to transition to lower-cost vendors and software in certain areas, which we believe will generate additional savings in 2027.

Adjusted EBITDA totaled $36.6 million in the third quarter, down $20.6 million or 36% year-over-year. The decline was driven by lower revenue, most notably the digital advertising pressure I just described, along with elevated costs for raw materials, health care, and distribution.

In Q3, we reported a net loss of $4.6 million, representing a year-over-year improvement of $34.6 million. Adjusted net income attributable to USA TODAY Co. was $1.4 million, an increase of $32.4 million year-over-year. Total digital revenues in the third quarter were $249.3 million, a decrease of 5.1% or 4.2% on a same-store basis and represented 48% of total revenues.

Digital advertising revenues decreased 13.9%, reflecting lower page views tied to the changes in consumer search, the continued impact of the loss of a programmatic advertising partner in the second quarter and lower revenue from the third-party vendors as a result of Google spam policy, which continue to pressure indirect revenue.

Within digital, the underlying growth engines continued to perform. Digital-only subscription revenues totaled $46 million, increasing 5.3% year-over-year, representing its third consecutive quarter of year-over-year growth. Digital-only ARPU also reached a record high of $10.82 in the third quarter, increasing 23% year-over-year.

Our digital other revenues, which include revenues from our AI partnerships, content licensing agreements, and syndication grew 24.8% year-over-year to $21.3 million, and we expect sequential growth in this category in Q4 as we further expand this revenue stream and our suite of licensing agreements.

Turning to the USA TODAY Media segment. Segment adjusted EBITDA totaled $23.8 million, representing a margin of 6.3%. Third quarter revenue trends were primarily affected by the performance in digital advertising. Turning to the Newsquest segment. Revenue trends improved to slight growth over Q2, while segment adjusted EBITDA totaled $13.8 million, reflecting a margin of 23.3%. And looking at our LocaliQ segment, for Q3, core platform revenue totaled $105.4 million. Segment adjusted EBITDA totaled $7.3 million, and we ended the quarter with approximately 11,700 core platform average customer count, while core platform ARPU increased approximately 6% to a record quarterly high of approximately $3,000.

Let's now turn to the balance sheet. At the end of the third quarter, our cash balance was $68.2 million and net debt was $884.7 million. In Q3, free cash flow totaled $4.3 million, relatively unchanged in raw dollars from Q3 of last year, while cash provided by operating activities grew year-over-year by 9.9% to $16.7 million.

We ended Q3 with $952.9 million of total debt, reflecting $17.7 million of total debt paydown in the quarter. While debt paydown remains our primary focus of capital allocation, we continue to have authorization under our stock repurchase program and expect to make open market purchases in the fourth quarter, including through the use of incremental term loans.

In early November, we amended our existing 2029 term loan facility to provide access to up to $50 million of incremental debt financing from funds managed by affiliates of Apollo Global Management. This financing is available during the fourth quarter of 2026 and is specifically designated for share repurchases within the quarter.

We intend to utilize these funds to repurchase shares of our common stock before year-end. We have also obtained the necessary lender consent to move forward with these repurchases. We are also updating our full year guidance to reflect the impact of search-driven audience declines and continued pressure on programmatic advertising revenue, both of which we believe stabilized in the third quarter.

We now expect same-store revenue to decline in the mid-single digits compared to our previous expectation of a low single-digit decline with digital revenue reaching 50% of total revenues in 2027 rather than 2026. We expect a significant sequential improvement in adjusted EBITDA and free cash flow in the fourth quarter, although both are now expected to decline for the full year compared to 2025.

While these pressures have delayed our return to overall revenue growth, we believe we are building a foundation for improved performance. We believe that stabilizing our audience, better connecting our audience data and signals to revenue opportunities, and realizing the benefits of our cost reduction initiatives position us to deliver stronger results in the fourth quarter and to build on that progress in 2027.

I will now hand it back to the operator for questions, and then we'll go back to Mike for some closing thoughts.

[Operator Instructions] Our first question is coming from Giuliano Bologna with Compass Point.

As the first question, you mentioned consumer behavior changing around search, which has been seen throughout the industry. How should we think about that trend going forward? And how should we think about that trend in terms of the financial impact on the business?

Yes. Giuliano, thanks. The changes in search behavior definitely have had an outsized impact on our financial statements for the last couple of quarters, and you're seeing that really on a broader basis across the media industry, but also now into the tech industry. However, what I mentioned on the call that I really think is worth emphasizing here is that we see that impact really through one specific revenue line, and that's our indirect revenue category, which is programmatic advertising primarily. And that advertising category for us is about $100 million.

So we don't believe that category is going to zero. So our exposure is somewhat less than that. But I think there's important context around this particular search issue right now that is worth talking about. One is, we are seeing lower search traffic. We saw that in Q2. We saw it again in Q3. That's lower search traffic versus the prior year. I think it's important to note, we did not see any sequential declines from Q2 to Q3. That's an important factor.

And I think it's also important from a context perspective to talk about the fact that these are our anonymous users. It's our lowest value user on the platform with the lowest CPMs attached to any advertising that we sell. And with our long-term strategy that we've been talking about for the last couple of years, these anonymous users with low-value CPMs really start to go away and become less -- much less of a factor in our overall revenue picture on a go-forward basis.

So there's definitely a pull forward here. It's happening a little faster than we would have liked. But over the long term, our strategy moved us away from these users as we grow our known users and engage more with our known users, that's where the on-platform and off-platform high-value CPMs come from. So our -- and I also mentioned on the call, our digital premium advertising that our sales reps sell is a $200 million growth category that returned to growth in the third quarter, and we see accelerated growth in the fourth quarter. That's the category in our digital advertising space that we're really most focused on.

So it's painful right now, but our exposure is limited. It's a $100 million revenue category. It's not going to zero. So our exposure is less than that. As we grow our premium digital advertising, we become less dependent on this programmatic channel. And then finally, we did take $100 million of cost out at the very end of Q3 to help us mitigate the near-term financial impact of the changes of search. So I mentioned on the phone, on the earnings call, it's not a permanent headwind for us, but it's definitely been a challenge just in the last couple of quarters.

And maybe a second related question. You mentioned direct sold advertising returning to year-over-year growth and that you expect that to accelerate going forward. Can you expand on that, what you mentioned around that and on the call and why you think that direct sold advertising will accelerate?

Yes. I think -- thanks for that question. It's -- because it's really important to talk about. It is a $200 million revenue category. It is the category that we -- where we monetize our engaged and known users, and we're starting to develop that engagement off platform on our social channels as well. But I talked about 3 underlying principles on the earnings call that will drive that growth for us going forward.

First is that deepening engagement with consumers. We're doing things on platform to really convert users to known users to engage more with those known users on our platform. That's the work we're doing with Palantir, to put the signals from our users to turn those signals into actionable intelligence. And then the work we're doing with newsletters and our social strategy, all of those things -- and improving the experience on platform for our consumers. All of those things will deepen our engagement with consumers. It will grow our known users.

We saw pretty significant known user growth in the third quarter, which was nice to see. So we know this stuff is working. And all of that will lead to better CPMs, more advertisers on our platform, and we're already seeing that with the growth we saw in Q3 and our pipeline for growth in Q4, which gives us the confidence to say that, that growth will accelerate in the fourth quarter.

Second is our focus on video advertising. It's definitely one of the fastest-growing digital revenue categories in the ecosystem. And it's a category that's ripe for growth for us, both on and off platform, again, on our platform and on the social platforms where we have quite large audiences. We're using AI to help us expand our video capabilities. And it really starts with making all of our content available in video format as well as text.

We know consumers increasingly want to consume content in video form, making our content available in video form is a top priority for us. And then it also is creating more premium video advertising inventory from which to monetize, and video advertising comes with much higher CPMs. So the overall video opportunity for us in creating content, leveraging AI to help us do that better and quicker, and creating more premium space will allow us to grow the video advertising category significantly. And as I said, that's the fastest-growing digital advertising category in the ecosystem and a very small category for us today. So we see a lot of upside there.

And then third is a new product area for us, and it's AI-driven discovery for -- that's what I'll call it. We're finding that brands want advertising content on trusted platforms like ours that is also AI discoverable. We're perfectly suited to take advantage of this new developing revenue category and to grow it. We're creating new engagement opportunities for our advertisers on our own platform as well through our AI answer engine with deeper dives.

So as this marketplace continues to grow because there's so much crap and untrusted content out there on the AI platforms, it's a real opportunity for us to partner with brands to create trusted messaging and to make that discoverable on AI platforms. So we're pretty excited about the potential growth for that. So as we continue to improve the customer experience on platform, grow our known users, grow our engagement, we see significant opportunity to grow our premium digital advertising. And importantly, all of that makes us less dependent on programmatic and that less valuable consumer that used to come to us through search.

Maybe switching topics a little bit. On the conference call, you mentioned the $100 million cost reduction plan that was now fully in place. Are there more cost reduction programs or opportunities that you can see in 2027 and beyond? Or is this the big funnel cost reduction plan?

Giuliano, this is Trisha, and I'll take that. So you heard that we put in $100 million annualized cost reduction program in the third quarter. That was put in place in late September. We had it fully implemented by early October. So what you're seeing is a pretty limited impact in the third quarter, but we're absolutely already seeing that scale and having a really positive impact on our fourth quarter run rate.

With these actions, our intent was to be targeted. We did need to lower our cost structure, but also really protect the areas that are the most important to our long-term strategy. We were able in these cost reductions to do things like leveraging automation, outsourcing, using technology to make the more significant structural changes in our cost base. And that still allowed us to keep our resources aligned with the part of the business where we think we're going to see the strongest returns.

Those are going to carry into 2027. So we're going to see a large piece of this cost reduction program benefiting well into 2027. It's part of the reason we feel really comfortable that we're going to get to adjusted EBITDA and free cash flow growth next year and in the fourth quarter as well.

But to the second part of your question or the main part of your question, whether there's more to come in 2027, we absolutely believe we continue to have opportunities to improve our cost structure over time. I think I mentioned this on the call, but we've already identified opportunities where we can lower our vendor spend through things like consolidating systems or our technology platforms next year.

We'll continue to optimize our outsourcing agreements. We'll continue to optimize and streamline our print operations as that business evolves, continuing to automate across the business. So there really are areas where we see some really meaningful opportunities to continue to simplify our operations like we did in the third quarter. So you'll see the flow-through of the 2026 actions, but we think we have the ability to carry some of that into 2027 as well.

Switching over to the share repurchase program. Can you elaborate on why you've decided to start a share repurchase program? And when I think about that program, are there any timing limitations around how fast you can deploy the share repurchase program?

Yes. The answer on why, Giuliano, is pretty simple. We think that the -- where our shares are trading today, the company is significantly undervalued. We see what's going on in the business. We see all the opportunities ahead. We talked about a lot of them on the call today, and we think that the market is not valuing the equity correctly. And so it's an opportunity for us to purchase shares at a significant discount to where the company should be trading.

We've also done, I think, a really terrific job over the last 5, 6 years on improving the balance sheet. We've taken our first lien leverage from $1.8 billion in 2020, down to about $700 million on a net basis, down closer to $600 million. And so we've de-levered really significantly. And it puts us in the position to have a little more flexibility with capital allocation to take advantage of a mispriced equity like this.

So we feel good about our kind of a move to allocate a little bit of capital to the share repurchase plan. As far as how quickly or when we can do that, share repurchase plan is already authorized and in place. We have about $97 million available on it. I think trading windows open a couple of days after earnings release. So we can be in the market most of the fourth quarter with share repurchase.

And then as a final one, it seems like there's been a lot of that's happened in the last 3 months related to the Google litigation. Can you update us on this and your expectations around timing and also around the -- anything that is topical around this?

Yes. Sure. So yes, there's been a lot of movement since our Q2 earnings call. We talked on the Q2 earnings call about two significant items ahead of us, one being the judge ruling on Google's summary judgment filing and number two was getting a trial date set. Both of those have occurred since our last earnings call, which is great progress.

At the end of September, the judge ruled against most all of Google's summary judgment, which was favorable to us, and we were -- it was great to see. And then a few days after that, the judge actually set the trial date for April 5. So we were glad to see that it's a speedy trial in that we're only 5 months away from that right now.

The judge also, in the summary judgment ruling, made public the damages. So it's the first time the damages have been public. They were $901 million, and that was the damages that were part of the filing -- our filing as of 2024. So those damages will roll forward to the trial date and be higher than the $901 million. And I think it's also important to note that -- that because it's an antitrust case, the damages are subject to troubling as well, so -- and that's 3x damages.

So we're pretty excited. We remain really firm and confident on our case, and we're really pleased to have the next phase of this underway, which is getting to trial just 5 months from today, as I mentioned on the earnings call. So a lot of great progress over the last few months.

Our next question is coming from Matt Condon with Citizens Bank.

My first one is just on digital subscriptions. It seems things continue to go well there. Just wanted an update, what's going well? And what are the opportunities ahead?

Mike, I'll take this one, if you don't mind.

Yes, absolutely.

This is Kristin. Thanks. So what's going well there is an ARPU story from 2026. We believe we can return to subscriber growth while maintaining the progress that we've made in ARPU. We've been really deliberate. As you know, we've talked about it for a few quarters now. We've been very deliberate in prioritizing subscriber quality and prioritizing long-term value over simply growing volume, and we moved away from all of those heavily discounted promotional offers, and we focused on building what we see as a healthier and far more valuable subscriber base.

And that strategy is delivering results. You can see it in Q3. The digital-only subscription revenue grew 5.3% year-over-year, and that was our third consecutive quarter of growth. ARPU increased 23%. We hit a record $10.82. We think that puts us in a stronger position to start growing subscriber volumes again without really relying on deep discounting strategies of the past.

That's -- I also think it's important to add here that that's where our work with Palantir is becoming particularly important. It's about personalization and relevance. We're developing more personalized acquisition and engagement capabilities. Those are the things that are allowing us to better understand individual users, to understand their consumption intent, and that in turn allows us to deliver the right offer at the right time. It includes more dynamic subscription offers, pay-per-article options, personalized content experiences. All of it is designed to improve conversion and the value of the existing subscriber base.

Then the other thing I would throw in is around retention. Our confidence comes from our ability to build stronger relationships with our subscribers through more relevant content, increased engagement, better personalization. And we're also developing capabilities to identify subscribers who might be at risk of canceling so that we can engage them with more targeted retention offers.

I think those tools can help improve retention and increase lifetime subscriber value over time. So in thinking about -- now when I'm thinking about 2027, our focus for 2027 is on combining the ARPU improvements that we've already achieved with a return to subscriber volume growth. I think that -- we really don't expect that transition to happen overnight, but we believe we now have a much stronger foundation to drive sustainable growth in both subscribers and in revenue.

And then maybe a follow-up just on AI licensing. Across the industry, it seems like there's been a little bit of slowdown in just the pace of new agreements being announced. Just what are you seeing in the pipeline? And what should we expect here in 4Q and then heading into 2027?

Yes. Matt, it's Mike. Fair observation. We've seen the same. There's been a little bit of a slowdown in the number of deals being signed across media businesses and AI platforms the last -- this year, really. We actually still believe we will announce at least 1, possibly 2 this year before the end of the fourth quarter. So stay tuned on that.

We do have a pipeline, and we do have some negotiations going on. And so we're fairly confident that we'll have at least 1, maybe 2 announced this year. But from a -- if I take a step back and look at the general landscape for AI licensing deals, we still believe long term that this is a significant revenue category, but we do think it's the long game that we have to play to get there, continuing to block content, block the scrapers. And I think we continue to see signs every day that there's real value in the content we create.

And I think just yesterday, there's news in the marketplace that Anthropic signed its first AI licensing deal with the Associated Press to have real-time election update content on its platform. And I think that's significant because it really speaks to the value of real-time news and information, how important it is to the AI platforms. And that's at the heart of what we do, right? We're the largest producer of content in the U.S. And so I think that the opportunity will unfold, but I do think there's a bit of a long game here.

Anthropic did and its S-1 is now public, and they did say in their S-1, no surprise to anybody that they claim fair use for their -- for use of copyright protected content. However, that could change based on the marketplace, based on legal rulings, et cetera. So we believe in copyright protection and believe in the long run, AI licensing will prevail. And we believe the value of the content really speaks for itself, and that ultimately is what will allow us to prevail with a robust AI licensing revenue opportunity.

And then just a final one here. Obviously, with the announcement of the share repurchase program and leverage coming in here over the last several years. I'd love just to get an update on what are your capital allocation priorities here as we look out over the next several years?

Yes. I'd say three things, Matt. One, reducing debt and reducing leverage remains a top priority and number one priority for capital allocation when I look out over the next 2 or 3 years. Investment in the business to accelerate growth for all the -- in all the areas that we talked about today is the second priority for capital allocation. And then with reduced leverage where we have it today, we do have the opportunity to be opportunistic and repurchase shares when the market dictates like we're in right now where the equity is mispriced. And so those are our priorities for capital allocation, again, summarized reduction of debt, investment in the business, and opportunistic share repurchases.

Our next question is coming from Barton Crockett with Rosenblatt Securities.

I just wanted to dive a little bit deeper into the search environment that you're describing and trying to understand what changed specifically in the third quarter versus the second quarter because I'm hearing mixed statements from you that things didn't change, but they did. So I'm just wondering if you can be a little bit more specific. Was there actually something different in the third quarter than you were seeing in the second quarter?

No, no, nothing different. We started to see the declines in the second quarter, and they continued into the third quarter from a year-over-year perspective, which, Barton, I think I said on the call, from a year-over-year perspective, we saw declines in both Q2 and Q3. What I said was encouraging is we didn't see further erosion in the audience from Q2 to Q3. So we saw a stabilization at the levels we're at now, which I think is important and speaks to our underlying strategy of engaging with the users that are on our platform, engaging with users through our newsletter and social strategies and that we continue to have very significant scale post what's happened with search and that we didn't see further erosion from Q2 to Q3. So that might be the confusion.

Q2 and Q3 both saw similar year-over-year declines, but we didn't see any further erosion or degradation in audience. And importantly or encouragingly, that audience remains significant in scale. We had 158 million uniques on our platform in Q2. We had 161 million uniques on our platform in Q3. One other thing that maybe you're thinking about in the revenue environment that happened is, in Q2, and I'll use the layman's term, but as you know, the back button issue that Google started to consider spam, that happened towards late Q2. So it had a minor -- a much less impact on Q2. We had the full impact of that in Q3. Our exposure there going forward is a couple more quarters, but it's relatively small. So overall, yes, there's no change.

The one thing that did change is your guidance. And so what is it -- how is it that this is the quarter when you're changing the guidance versus the trends being apparent last quarter? Just a little bit of discussion of process there would be helpful.

Yes, go ahead, Trisha.

Yes. Barton, there's a couple of things that we adjusted our guidance around. The first is that even though our audience and our page views really did stabilize Q2 to Q3, we did see a little bit further of an erosion in that programmatic and sponsored links revenue year-over-year. I think that took a little bit of time to catch up. We had expectations that our direct sold revenue would improve in the third quarter. It did, but not at enough of a pace to outpace that indirect revenue decline in the third quarter.

The other thing I would say is that we're still confident that we will have new AI licensing deals to sign and announce here in the fourth quarter. We did have some expectation that we would see a benefit of that earlier in Q3 and earlier in Q4. So really, that's just a shift of timing to later in the year. And I'd say those are the 2 biggest impacts that caused us to adjust our guidance here in the third quarter.

And then one other thing, we're talking a lot about like referral from search, but another issue that popped up yesterday with Taboola is the circumstance that people are spending less time on some web pages generating fewer ad impressions. Is that something that you're seeing as well? If you could discuss that, that would be interesting.

We're not seeing that. We're not seeing a decline in the amount of time people are spending on our platform. We are not seeing a decline in the impressions per page that we are delivering. So we haven't experienced that yet, but did see that commentary yesterday. But we are -- as Mike has mentioned today, we're holding our audience both just in raw dollars and in their attention quarter-over-quarter.

As we have no further questions in queue at this time, I would like to turn the call back over to Mr. Reed for any closing remarks.

Yes. Thank you. Let me close with some observations or highlights that I think are important for investors. Our last 2 quarters have definitely been disrupted by consumer search. We talked a lot about that today, and the changes and some of the inflationary pressure, too. That's the bad news.

However, we're fairly confident the worst is behind us. And the good news is these near-term disruptions have not changed our long-term growth strategy. With the disruption to search, we have still returned our premium direct digital advertising revenue to growth year-over-year in the third quarter, you heard today. And we've continued to grow our digital subscription revenues along with our digital commerce and our licensing revenues.

In addition, our audience remains very large. And as you heard today, our audience didn't decline further from Q2 to Q3, and our engagement with that audience has held firm in the third quarter compared to the second quarter. So we're pleased with that. We believe this will continue to lead to growth in our key long-term digital growth strategies, which we did see in the third quarter. We saw growth, as you heard in our digital subscription business, our digital other business and our digital premium advertising business.

We also took $100 million of cost out of our infrastructure in late Q3. So we'll really see the benefit of that in Q4 and through the first 3 quarters of next year. And as you heard today, we're not done. We're going to continue to find more ways to lower our cost base as we head into 2027, which gives us a lot of confidence in our ability to grow EBITDA and free cash flow in 2027.

And as you heard today, the pressure on revenue we have seen is in the near term is very specific, primarily search-related changes impacting indirect revenue. I just want to highlight one more time. This revenue stream is now about $100 million annualized. It's a small percentage of our overall business. So our exposure here is not limitless. We do not believe this category is going to zero.

Our cost actions will help mitigate near-term pressure on this indirect revenue category. Our investments in growth, such as the work we're doing with Palantir that you heard about today are expected to improve engagement with our audience and accelerate revenue growth in our most important digital categories in Q4 and in 2027.

2027 will be a year with adjusted EBITDA and free cash flow growth driven by improving revenue trends and our significant cost reductions. So while the search disruption has pushed out our inflection point a couple of quarters, our confidence in our strategy leading to same-store revenue growth in the future has not changed.

And finally, we're also pleased with the judge's summary judgment ruling in the adtech litigation and that the ruling also disclosed our damages. The market now has that. And we're really happy that the trial date has been set for April 5. So that's right around the corner for us. And finally, as I mentioned on the call and in Q&A, we believe our current share price does not reflect the underlying value of the business or the opportunities that are ahead for us.

And with that in mind, we have $97 million available under our authorized share repurchase plan, and we intend to be opportunistic here in the fourth quarter repurchasing shares. As I mentioned earlier, we have received a commitment from our great partner and friend in Apollo for a $50 million incremental. This additional flexibility allows us to take advantage of what we believe after the New Year.

Thank you. Ladies and gentlemen, this does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Just a high-level strategy question. Like you said -- I mean, at one level, like your strategy is very clear, but there were a lot of things that happened on that last earnings call where you were talking about serving machines and stuff like that. And so I thought maybe just to start us off, just a high-level simple strategy question. What is your firm's strategy? How has it evolved? Where are we now? And what might change?

Yes. And trying to keep it simple and short, I think the way I would answer that is we are -- we have one of the biggest content creator forces in the country. We create content every day that's relevant to consumers. We're kind of in the news space, although we've branched out into entertainment, sports, games and things like that. But we have a national play and a local play, which makes us a bit unique compared to most media companies. But we're a content creator and what's really the underlying strategy is create content that's relevant and unique, valuable to consumers and to build an audience on our digital platform at scale. And that's really the underlying strategy.

What is changing really rapidly that impacts Q2, both positively and negatively is the search landscape is changing dramatically from the old search to new AI search, and that's impacted where consumers when they're doing search, what platform they stay on versus moving across -- around the open web. And that impacts us more in a negative way than a positive way. But then on the other hand, AI is creating opportunities for us to take the data we have on consumers, make it into intelligence that we can then use to create a more personalized and engaging experience for consumers, which we think in the long run will lead to better revenue opportunities for all consumers on our platform.

So for us, it's -- the strategy is still create content that's unique, but yet relevant, bring audience to the platform. leverage that data once they're on the platform, we get signals, turn that signal into intelligence, actionable intelligence and then have an opportunity to monetize that consumer on our platform. And our digital revenue strategy is across 5 really diversified revenue streams. We're not all in on any one. We're really focused on 5 that's digital subscription revenue, digital advertising revenue, e-commerce revenue, digital marketing services and then licensing and syndication of our content.

And across those 5 categories, we're looking to be able to grow ARPU per consumer on the platform as well as expand overall margins of the business as we especially enter licensing deals. So definitely -- it's complicated, and we could go into a ton of detail, but that's the underlying strategy, grow audience at scale, leverage, take that data, make it into actionable intelligence through technology today that makes a more personalized experience for every consumer on our platform.

Okay. And when you say the search ecosystem is evolving rapidly, that is something that transcends just the AI overview or whatever, right? This is just constant changes that are being made by Google all the time and then punctuated by this recent AI overview change or...

Yes, correct.

Yes. Okay.

Yes, correct. Deprioritizing search, removing things from search, Google plays a lot of games.

Right. They just want to keep you in their walled garden.

That's right.

All right. So Trisha, I have -- this is a question more for you. So I think the North Star for your stock is same-store revenues. That seems to be the thing that investors are most focused on. And the declines were like pretty sharp, almost 8% back in the first quarter of '25. And then almost every quarter, uninterrupted, it just got better and better and better and better until we got to, I'll call it, minus 1.8%, call it, minus 2% in the first quarter of '26. But then we sort of retrenched back down to minus 6% in the second quarter. And the stock sort of reacted to that, I think. And so my question is pretty simple. What happened in 2Q that caused this uninterrupted improvement to sort of get interrupted for 1 quarter? And do you think investors should take that as indicative of future growth? Or is that just a blip on a multi-quarter, multiyear improvement trajectory?

Yes, I think that's a great question. And I think the strategy that Mike just outlined really leads us to what we said we would do this year, and that is meaningful improvement in our same-store revenue. And we've done that through the first half of the year. And we came into the year saying that there would be quarterly variability in our business. And I think it's really important to separate the quarterly variability that we alluded to when we came into the year signaling and the underlying fundamentals of the business, which we think are moving in the right direction and are what are going to give us that sustained improvement in same-store revenue.

And I agree. I think that's the metric that investors look at the most and certainly what we look at. And so the AI content licensing business, which is growing, is still a very nascent business. There's a lot of quarterly variability in how that revenue is recognized. And we signaled that as we came into the year. It was particularly strong in Q1, not as strong in Q2, although it still had 20% year-over-year growth in the quarter. But when you look at the second quarter, you look at our digital-only subscription business, that grew nicely, a second consecutive quarter of year-over-year growth. We drove new highs in ARPU.

Our content licensing business continued to grow again at double digits. Even in a quarter where the same-store revenue didn't show the same kind of improvement in the first quarter, we still grew free cash flow year-over-year. We posted a solid net income. So I think it shows that we're able to control all of the variables even as the top line has some variance quarter-to-quarter. But I also think that the second quarter is not indicative of where we think we'll be. Certainly the quarter where we started to see the most impact from search on our traffic.

But we're doing quite a bit under -- in the foundation to bring that traffic to us in different sources. We expect that to improve in the second half of the year. So overall, a really strong first half of the year, and we think we'll continue to improve those trends as you've seen over the past several quarters.

Jason, I would just add to that, as Trisha is saying, I think with a transformation like we're going through from a legacy print business to a digital business, there are 2 steps forward, one step back and there are fits and starts and then there are things changing in the technology world and in the search world, and they impact our business. And so one of the things we really talk to investors about a lot and we manage the business this way internally is on an annualized basis, are we continuing to make progress because there are going to be some fluctuations quarter-to-quarter.

And sometimes the stock market quarter-to-quarter is more like a casino, and it's not really the right way to look at our business. And if you looked at the LTM, for example, at the end of the second quarter, while we had a step back from Q1 to Q2, our LTM at the end of Q2 was still improved from the year before. So I think the year before in Q2, our same-store was down 7%. So our LTM now with the down 6%, and it's a little bit better. So we are -- we really do encourage that kind of that long-term view of on an annual basis, are we continuing to make progress. And if you look back over the last 3 or 4 years, we continue to make progress on same-store sales towards that inflection point and then at the same time, expanding margins and growing free cash flow.

That inflection point, meaning flatter growth.

That's correct. Yes.

All right. LTM. Trisha can you go back to one thing you said? What was it that grew 20% in the first quarter? Was that all digital? Or that was digital? What was it?

Yes, digital other grew 20% year-over-year in the second quarter.

Okay. In the second quarter. Now maybe it's very hard for me to unpack sort of digital other, but I sort of assume that the weakness that we saw in the second quarter was really just a function of smaller AI licensing revenue, but maybe that's not right. Maybe it's more around some of the search things that you were bringing up. Can we sort of -- is that -- is it sort of an AI issue or it's more digital advertising dollars related to the search changes or both?

Yes. Well, I think if you're just simply comparing Q1 to Q2, down 2% versus down 6%, it is both. We had more licensing revenue in the first quarter that was tied to a specific set of content that somebody bought from us that didn't repeat in Q2. So that -- there was a difference there. And then we saw some changes in Google Search that impacted us more in Q2 than it had in previous quarters. And so there's a combination of those 2 things.

Okay. That's great. And then on the AI side, can you just remind us, Mike, what AI deals you've done so far and which just by in terms of names. And then are there any left? Or should investors think of -- it's just about sort of getting more juice out of the lemons that where we already have contracts?

Yes. No, there's more or less. So we've done deals so far with Meta, with Microsoft with Amazon. But -- so we will -- we do think we'll get more juice out of those lemons, those 3, but there are a lot more deals to do. There's just some of the names you could think of are Apple and Anthropic, OpenAI, Grok, whatever [indiscernible] is. And then there are the social media platforms that as each day goes by and you have so many hallucinations and fake content out there, our content being a trusted source of content, there's more -- that's being sought after more by the social media platforms who want trusted content on their platform.

And so them licensing or paying us essentially think about it like a licensing fee to produce more of our content onto those platforms in addition to our own, which is part of our growth strategy anyways, but that opens up more paths for deals as well. So we do think there's 1 or 2 more deals to come this year. We did say that on the second quarter earnings call. So I think you'll see that in the next couple of months. But then there are more deals to do out there as well.

Okay. And then when -- I think investors always struggle with these AI deals because it's like I think we sort of learned some of this is -- you've always said it's lumpy, but it's very hard for us, is it like fixed or variable or some combination of the 2. Without getting into the specifics, can you just qualitatively describe how these deals are typically struck?

Yes. And I say lumpy partially because the -- there's a lot of reasons why it's lumpy, but partially because this ecosystem is so new and it's just evolving and our partners on the other side who have the AI business are really still trying to figure out their business model. And so compensating us for the content as they figure out their business model, I think, gets easier. And I still think there's a big disconnect between what we perceive our content is worth and what they perceive it's worth.

And I think that dynamic continues to work in our favor each day because there's so much fake news out there and so much hallucination out there that trusted content is becoming more and more valuable. But as their business models evolve and as the desire to have trusted content evolves, I think that these deals will become less lumpy and they'll have a more -- it will be easier to understand how they work and to lay out how they work.

Right now, there's -- every deal we've done has been really different. Some have been more pay on performance. Some have been we want to buy archived content. Some are we want to buy real-time content for the next 2 years. So each deal has been structured a little bit differently. And so that's why I think this ecosystem still has to evolve for the deals to become more consistent.

Okay. That's super helpful. So outside of AI, I'm going to turn it back over to you, Trisha. The beyond AI and within other revenues, you've got a handful of these. So digital subscriptions, they grew year-over-year. But when I sort of look at the long-term numbers, like digital subscriptions, it's sort of flattish with like a lot of volatility, like the subs go up and then the subs go down and the ARPU is down and then the ARPU is up a lot. Like it's very hard to get a ton of modeling conviction as you're sitting there trying to go out and prognosticate the future, right? But you guys sound very optimistic about where digital subscriptions are going.

So maybe just talk a little bit about both the past in terms of the quantity and the price moving up and down and then what we should expect going forward and why you're so optimistic about digital subscription.

Yes, absolutely. So our digital subscription business has been growing this year year-over-year. You pointed that out in the second quarter, we saw good growth year-over-year. That's been driven off of our ARPU. So our ARPU continues to hit record highs, up over 30% year-over-year in Q2, consistently double-digit growth year-over-year. And we think we have continued headroom on our pricing. We think we can continue to improve ARPU.

But what you've seen is that our volumes have been pretty stable to declining. And what we saw in the second quarter that has us really optimistic is the fact that we're starting to see the underlying metrics of our volumes give us the indication that we're at the point where volumes will start to return to growth. We've been incredibly disciplined in our pricing strategy over the past year. And that means we've let go of high churn, low lifetime value customers that brought in a lot of volume but didn't bring in a lot of revenue.

We've taken that off of our platform. That's helped us increase our ARPU, but it's also given us a much more sustainable and predictable base of subscriptions and subscribers. And from that, we can model the future more predictably than we've been able to in the past. And so as you look at Q2 and you see things like our churn metrics are improving, our start-to-stop ratio is improving, our retention, our engagement is improving. And so long term, growth really does need to come from both levers. It needs to come from ARPU and it needs to come from volume. You're seeing that ARPU growth now. I think you'll see that continue. But I think you'll only see digital subscription revenue growth be more substantial as we bring back volume growth and ARPU growth.

So more stable going forward?

Yes. We did a lot of work over the past year. It was painful to take those high churning, like I said, low lifetime value consumers off of our platform. They were difficult to model, but we've done the work so that we have quality subscriptions left in our portfolio.

And when you guys say start to stop, that's just gross add as a start and someone that churns as a stop?

Correct.

Okay. And you're looking at that ratio and it's getting better and better -- that's great. So digital ads down, I think it was 9% in the second quarter. Does this just all circle back to the search changes? Or was there something else going on in the digital ad market beyond the search changes you alluded to?

Yes. So there were 3 things that happened in the second quarter that each had about equal weight. So the second quarter was the first quarter where we really saw the change in consumer behavior, search behavior impacting our digital advertising revenue. We also saw one of our programmatic partners being removed from one of the platforms that we use. And then we did see a change in one of our vendors, a Google algorithm change, which impacted one of our vendors, which then flowed through sponsored links onto our platform.

I would say all of those had about equal weight in the quarter. The thing that we're most excited about is that we have the ability to bring consumers onto our platforms in different ways. We've been intentionally stepping away from search for many quarters now. I think you've heard us talking for well over a year about lessening our reliance on Google Search as a funnel for traffic onto our platform. And the work that we've been doing, whether it's around social or newsletters are still a very valuable channel for us in acquiring customers.

As those start to scale and stack up, we have the ability to change that digital revenue trend in the back half of the year. I think you also have heard us talk a lot about the work we're doing around technology, the signals on our platform, our known users. And as that grows across our platform, our advertising CPMs start to grow as well. So I don't think that the trend that we saw in the second quarter is indicative of where we'll be in the back half of the year.

Great Trisha thanks. So Mike, I'm going to shift it over to you. During the second quarter, you brought up Palantir for the first time. At least I've missed this if you mentioned it in prior calls. What are you doing with Palantir? What -- if you can sort of dumb it down to explain for a layman, what does that mean? How is it going to help?

They have a software that they've written called Foundry over the last 20 years, and we're essentially renting that. So what we do and the simplest way to think about it is we take the data or the signals we get from consumers on our platform, and we have so much history of that. Not only do we create new signals every day, new data every day, but we've got history. So we have tons of data. And what we do is rent Palantir's software to turn those signals into actionable intelligence. That's really what we're doing. So with every single consumer on our platform, we can serve them a more personalized experience.

These are the -- this is the content we need to serve that consumer. Here's the e-commerce link we need to embed into that content. Here's the subscription offer we should deliver at this time, at this price to that consumer. This is the type of advertising that will work with this consumer. And so it's essentially taking the data or all those signals we have in all the history, but also the new stuff we're creating and really turning it into actionable intelligence.

For us to do that ourselves, it would take years to build the software, and they've done it. And so the data is ours, the output is ours. The last mile of delivery of that intelligence is on our platform. So it's really all of our stuff. We're renting their software and their future deployed engineers to help us. And so I'm really excited about the opportunity. And what might take us years to do, I think we can do in months with them.

So let's say that this succeeds, what ends up happening? We just see digital revenues get better as the advertising gets better.

Exactly across all categories, commerce subscription and advertising, I think, across all 3. So I think you would look at -- instead of looking at just a number per subscriber, we look at a number per consumer on the platform because there's a lot of people that will never subscribe. So our overall revenue per consumer on the platform should grow meaningfully from $2 where it is today to a much larger number in the future.

And that's $2 per DAU, -- is that what you're measuring or $2 per MAU or when you say a consumer on your platform?

Yes, per year in revenue. If you say we have 100 million -- 150 million consumers on the platform every single month, we do $2 to $3 per year in revenue because I'm taking DMS revenue out. So you can't look at our total revenue, just revenue generated on the platform.

From the consumers.

So if we do $2 or $3 and we can get that to $6, it's a double of digital revenue. And so I'm really -- we're really excited. We just started. So we don't have enough information to really say this is the pace we think this should grow at. But we're hopeful in the next couple of quarters, we have enough real information to be able to say, here's how you model it, here's how you should think about it.

Have you turned on all of these at the same time? Or is it like are you piloting one where it's like you're just focused on ads or just focused on sponsorship or something?

Yes. We're actually just -- we're turning them on, but doing it in a couple of markets.

Oh, interesting. So all of them are on in a few markets.

Yes, a couple of markets.

Sort of a beta test. Okay. When will you share with the Street how well that's going or not going?

No. Our hope is that we're actually going to see revenue improvement in the fourth quarter from this test. So hopefully, by the time we get to the fourth quarter, we're talking about what we saw from an improvement standpoint from Palantir. That's great. So not that far off.

That's great.

So not that far off.

Okay. Have you shared how many markets you turned on?

I don't know if we have, but it's 2. Two breaking soon.

And so the idea in these 2 test markets is just sort of get some learnings, lessons learned and then take those learnings and then expand.

Right.

Okay. That's great. So Trisha, I'm going to go back to something that Mike sort of caught me off guard during the 2Q earnings when he started talking about we serve both machines and humans. I haven't heard any other publishers say this. So can you just talk a little bit about that? Because I -- not that I disagree with you, I've just never heard it expressed that way.

Yes. The reality is that half of the traffic on the Internet now is machines. It is bots. And so we're aware that we have to serve both humans and machines with our content. The good news is you don't have to change the type of content that you're producing, and you don't have to approach your business from a content perspective differently for humans or for machines. What you do have to make sure you're doing is that your content is in a format that is beneficial for both machines and for humans. So we're leaning into things like subject matter expertise is going to be important. The speed that your site loads that is going to be important. content that is actionable.

All of those are things that are important for our human readers, but that's also things that are important for our machine readers. So machines may get there first, but our ultimate goal is always going to be to reach that human reader. So what you have to do is you have to take the work that we've done to optimize your content for search engine optimization, right? That becomes a lot less important. You have to pivot now to make sure that your content and your format is optimized for answer engines or generative engines.

And you also have to make sure that your experience, whether it's for humans or for machines, is in a format that's recognizable and repeatable. And that's the work that we're doing to make sure that we're providing that type of simple, easy to digest, recognizable content to machines. But interestingly enough, that's also what our human readers want, right? And so as we are working to lessen our reliance on search, creating that recognizable destination for human readers is also going to be important in our audience growth going forward. So it is interesting. We know that we -- our content is serving 2 different audiences, but it's really about the format that we have to be focused on and not changing the content that we're producing.

I think everyone in the audience would agree that machine -- I don't know if people know it's half. I didn't know it's half of all traffic, but everyone agrees machines are out there to a greater extent. But how is that different than the AI licensing? I mean I thought we all thought that you were taking your corpus of information and then licensing this to AI and then AI would do something with it, which would be machine traffic and then the human would come in and do something and get the answer from the AI. What you're describing here is a totally separate initiative from the AI licensing revenue, right, where you're just taking your corpus of information and making it more accessible to a machine. That's why I get a little.

Yes, I think there's an overlap there, right? So you need to create your content in a way that ultimately, AI licensing platforms that it's most effective for AI licensing platforms. And that is important. And we want to make sure that only we are blocking AI licensing platforms who are not -- don't have current licensing agreements with us. But once they do have licensing agreements with us, they process large amounts of data.

It's important that your content and your data be in a structure that is helpful and efficient for them. But it's not just AI licensing platforms who -- and we have millions of every day, every month scrap trying to scrape content from our platform. And sometimes you want those bots to scrape content from your platform. We have advertisers who want to have bots scraping against our platform because it gives exposure to that advertiser and to their ads on our platform. And so making sure that when in simplistic terms, good bots have access to content or those that we have agreements with that it's in a format that is efficient for them.

Okay. That's super helpful.

Jason, I think what's really interesting about that is that you have -- it is a bigger -- it creates a bigger AI licensing opportunity, too, in terms of the pay-to-play models because we've learned a lot in our partnership with Microsoft. And part of that partnership is they've created a marketplace for all their other business companies to come and leverage AI in the marketplace. And so our content is in that marketplace.

And we've learned what performs and what doesn't perform. And the human storytelling nature of our content we produce for humans doesn't work in the marketplace where it's mostly other businesses or other machines coming in to scrape that to utilize that content. So for us to create even more revenue on the AI licensing side, -- we need to have our -- the human content, human storytelling content reformatted into something that's all data and fact, not storytelling that then is consumed in a larger fashion in AI marketplaces. And so it's an interesting way to think about how we grow our AI licensing opportunity just by serving a different machine versus the human.

Super interesting. I'm going to shift to the Google litigation, if that's okay with you. So there's 2 cases, right? We've got the DOJ that has sued Google, and then you have a separate parallel lawsuit. And I just want to focus on the first one, the Google one. You've told us that the next step now that Google has been found to have a monopoly in the supply side and in the exchange that we're just waiting for the judge to hand down the remedies, right? My question is, is that when those remedies come out, if I was an investor and I knew that Google said they're already going to appeal this DOJ ruling, what do I do as a USA TODAY investor? It seemed to me if I know there's an appeal, there's not a major read across, but maybe I'm wrong.

Well, the remedies are -- Google has been found guilty of antitrust violations in the DOJ case. That's a fact. That's done. They found guilty. We filed summary judgment saying they've already been found guilty. So for our claims that are the same as the -- what the DOJ won, we shouldn't have to prove those. We should talk damages. And we won that summary judgment. So that's done. In the DOJ case, the remedies are what does Google have to do because they were found guilty. And that -- those remedies are about to come out. There's a memo. It's under lock and key for 14 days while there's redactions done, but we should know we did hear from our lawyers. It's 106 pages. And so we should know in the next couple of weeks.

That's a lot of remedies.

Yes, it's -- but the remedies are behavioral, not break the company up. But we should know in the next couple of weeks what those are. And Google may want to appeal what the actual remedies are, but that doesn't have anything to do with the guilt of the case. Like they were found guilty of these infractions. And so that applies to our case as well. So the behavior, the remedies are just what does Google have to do as a result of being found guilty. Just like in our case, they've now been found guilty of these things. So in our case, it's okay, what's that mean damages-wise?

Of course. So -- but my question is, if they're found guilty and Google has already said that they're going to appeal that finding, then aren't the remedies sort of at some level moot or I misunderstanding?

No the remedies go into effect regardless of whether they appeal or not, Google would then have to apply to have the remedies stayed. And I'm not an attorney, but they would have to argue that it would be so detrimental to their business to have these in while they're appealing. So the assumption would be that the remedies are in place unless they get those remedies stayed, which would be a separate action from the appeal.

Okay. So investors, whenever these remedies come out, investors can sort of take those to the bank. And I guess the most bearish interpretation is those remedies might be temporary if Google is challenging the guilty appeal in the first place, but they're going to go into effect. That's the point.

That's my understanding.

Unless they can get a stay, which we think is highly unlikely.

Understood. And then do you guys have a preference for behavioral or structural? I mean, I guess it was bad -- I don't know, you tell me. I mean, since we're not doing structural changes since they've already said that.

Yes. The structural changes, in our view, would have taken a long time to put in place. To break that business up and sell it, you could be looking at 2 or 3 years. And so the behavioral stuff to us can be done essentially in a matter of a week or 2 or overnight. So to us, the behavioral is a better path because it's more instantaneous to our business.

Okay. That's great. Anyone have any questions for the team at USA TODAY? All right. Well, this is great. Thank you so much for your time.

Thanks, everyone.

Greetings. Welcome to the USA TODAY Company Q2 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I would now like to hand the conference over to your host, Matt Esposito, Head of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss USA TODAY Co's second quarter 2026 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer; Trisha Gosser, Chief Financial Officer; and Kristin Roberts, President of USA TODAY Media.

If you navigate to our website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance.

Before we begin, please let me remind you that this call is being recorded. In addition, certain statements made during this call are or may be deemed to be forward-looking statements as defined under the U.S. Federal Securities Laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in our filings made with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call.

Please keep in mind all comparisons are on a year-over-year basis unless otherwise noted. In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, total adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin and adjusted net income attributable to USA TODAY Co. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement.

Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of offer to purchase any USA TODAY Co. securities. The webcast and audio cast are copyrighted material of USA TODAY Co. and may not be duplicated, reproduced or rebroadcasted without our prior written consent.

With that, I would like to turn the call over to Mike Reed, Chairman and CEO of USA TODAY Co.

Thank you, Matt. Good morning, and thanks to all of you for joining our second quarter earnings call. The second quarter reflects continued progress against our long term strategy and strengthens my confidence in reaffirming our full-year outlook.

Today, we'll highlight the operational progress driving that confidence, the momentum we continue to see across our key growth areas, such as digital-only subscription revenues and digital other revenues, as well as the strategic initiatives underway to further accelerate that progress. One example I'd like to highlight is our work with Palantir, which we expect to strengthen how we collect, connect, and activate audience data to drive more effective and faster monetization across our platform.

As we mentioned back in the spring, 2026 would be a year with real momentum, but also real variability, particularly in our content licensing business, where the delivery of revenue from those agreements can differ meaningfully from one quarter to the next. We saw some of that lumpiness in the second quarter, alongside the continued shift in consumer behavior away from traditional search.

It's important to note, this is a shift we have been preparing for and one that has guided our investments for some time now. We have been focused on building more direct relationships with audiences through newsletters, social platforms, and producing more video content. And those investments are driving strong growth across each of those channels and position us to better offset the changes in audience behavior.

At the same time, audiences are increasingly discovering content through AI systems that answer questions directly for consumers. What that means is we are now effectively serving 2 audiences, human readers and the AI platforms that surface our work to them. And it isn't only the consumer platforms that surface our work, a far broader universe of crawlers and scrapers seek to ingest our content. However, as you know, we continue to leverage technology to block those crawlers and scrapers who don't have licensing agreements with us.

We are also building our products and our strategy to provide essential content for our users and machine readable formats that let us expand current licensing structures. We recognize that we have to create and format content for humans and for machines. And while we see a change in search-driven behavior, we also see entirely new ways to license, distribute, and monetize the trusted content we produce every day.

Now with that framing, I'll walk through some of the key financial highlights for the second quarter. First, we generated approximately $20 million of free cash flow, an increase of 11% year-over-year. We also delivered our second consecutive quarter of positive net income. We continue to pay down debt and maintain a solid cash position. And our digital-only subscription business and digital other business, which we believe are 2 important engines for sustainable growth, continued to post strong performance in the quarter. For example, in our digital-only subscription business, volumes are stabilizing and digital-only ARPU reached another record high, driving digital-only subscription revenue to growth year-over-year for the second consecutive quarter.

Digital other also grew year-over-year in the quarter, driven by continued strength in our syndication and licensing agreements as well as our commerce business. We expect this revenue stream to expand throughout the year as we broaden our portfolio of content licensing partners and further grow our commerce opportunities.

And finally, some of the key metrics in our LOCALiQ segment continued to move in the right direction. We delivered sequential growth in our core platform revenue. Our core platform average customer count and core platform ARPU reached another record high, supporting more meaningful revenue opportunities in the back half of the year. We have consistently said that this transformation would not be linear, and Q2 reflects that. While quarterly results will fluctuate as we execute on our strategy, we believe our long term direction remains unchanged.

As we look across the business, we see continued strategic progress, a strong operating foundation, and growing confidence that the actions we're taking are positioning us for sustainable long-term value creation.

Our industry-leading scale at both the national and local levels, our highly diversified digital portfolio and vast collection of trusted real-time content that audiences value and AI platforms need, serve as strong drivers for the growth we expect to capture over time.

As mentioned, we are reaffirming our full year outlook. We expect revenue trends to improve as the year goes on and believe the inflection point remains firmly in sight. We also expect to grow adjusted EBITDA, expand margins, improve net income and deliver a fourth consecutive year of free cash flow growth. And in the background, we remain optimistic about the outcomes of the pending litigation against Google, as well as the opportunity to enter into more AI licensing agreements in the future.

Now with that, I'd like to discuss some of the key operational highlights from the second quarter in a little bit more detail. And I'll start with our diversified digital revenue strategy, which is rooted in having an audience at scale with improving engagement to provide a foundation for sustainable growth.

In the second quarter, we continued to serve one of the largest digital audiences in the media industry. And the opportunity moving forward is to better understand that audience and put the data behind it to work. Every visit, every session, and every moment of attention creates a signal. And when we connect those signals, they become actionable intelligence that allows us to engage users more effectively and monetize those relationships faster and at much greater value.

The work our team is doing with Palantir is a direct extension of this strategy. We are applying Palantir's AI-powered platform to one of the largest opportunities in front of us, converting the sheer scale of our audience into known orchestrated first-party relationships because that is what turns our reach into sustainable higher-value revenue.

We believe the work to build a common intelligence layer that connects our audience, content, and first-party data to better understand our users and translate those insights into stronger engagement and monetization across our platform can be a meaningful driver of ARPU across subscriptions, advertising, and e-commerce.

We view the evolving search dynamics as an opportunity to build a healthier and more resilient business, and a business that is less dependent on any single platform. We experienced the risks of that dependence firsthand in early 2025, when Google's manual actions delayed the growth we expected from several content partnerships. As a result, reducing that reliance has been a key focus of ours for several quarters, and it's something we have consistently discussed with you. It is how we gain greater control over the growth drivers in our business.

It also reflects the same approach we successfully applied in 2025, to our digital-only subscription business, where we moved away from volume that didn't create long-term value. That transition required patience and discipline, but it has produced a healthier, more durable business with consistent growth across key metrics. Some of which include our digital-only subscription revenue grew year-over-year for the second consecutive quarter, giving us increased confidence that revenue will grow over the next several quarters and beyond.

Our digital-only ARPU reached another record high in the quarter, increasing 34% year-over-year, and our start-to-stop ratio grew sequentially, reflecting further volume stabilization and bringing us closer to sequential volume growth.

We are applying that same discipline to our broader audience strategy by prioritizing the quality of engagement over the sheer volume of traffic. To support that strategy, our focus is shifting away from one-and-done traffic because even though it contributes to our unique visitor count, it is ultimately our least valuable and least monetizable audience. Instead, we are investing in new channels that allow us to build direct ongoing relationships with consumers. That includes expanding how audiences discover our content off platform through channels like social media, where we continue to see meaningful growth and where we see significant potential to unlock greater value from those audiences.

We also see social media along with vehicles like personalized newsletters, as important pathways to bring audiences back to our platform where we can deepen that engagement through immersive video experiences. And as those relationships deepen, so does our understanding of our audience, allowing us to deliver greater value to advertisers and drive higher CPMs while also connecting consumers with the right commerce opportunities at the right time.

We believe this is the right long term trade-off because replacing lower value traffic with deeper audience relationships creates a stronger foundation for predictable and repeatable revenue growth and in turn, long-term value creation.

Now with that, I'd like to hand the call over to Kristin, to discuss these initiatives in more detail as well as the continued momentum we're seeing in our digital-only subscription business. Kristin?

Thank you, Mike. Audience growth has been central to our transformation. And over the past 3 years, that strategy has helped us build one of the largest digital audiences among content creators in America.

As Mike noted, consumers are changing how they find and consume content, and we're meeting them where they are. We're doing that from a position of real strength through the scale, trusted brands, and loyal audiences that we have already built, which we believe will provide a foundation that very few others in the industry can match.

As consumer behavior shifts, we're putting focus on platforms such as YouTube, TikTok and Instagram, as well as leveraging creators, personalities, podcasts, and video-first experiences. Social video and newsletters are becoming primary engines of discovery, and the early results speak for themselves.

In the first half of this year, we generated 3 billion off-platform video views, putting us on pace to more than double last year's total. Within that, TikTok alone surpassed 1 billion views. These channels are still small relative to our overall traffic, but that's exactly what makes the opportunity so compelling.

We see significant runway ahead, and these numbers tell a bigger story than audience growth alone. They reinforce that our content continues to find audiences as consumer discovery evolves.

Importantly, we continue to see strong search performance in the categories where we have a clear right to win, including breaking news, sports, and entertainment. The World Cup is an excellent example. Coverage across the USA TODAY NETWORK generated 97 million page views with search driving nearly 65% of that traffic. That reinforces an important point. When content meets a real and urgent need, search still delivers. But we're not building our future on search. Even in our strongest categories, great content still finds an audience, and our opportunity moving forward is to ensure that our distribution tactics keep pace with the way readers and viewers want to consume content in digital spaces.

As we continue to strengthen how audiences discover and engage with our content, we are also expanding the ways we generate revenue from those relationships. Commerce is one of the clearest examples, and we believe our work with Palantir has the potential to accelerate that opportunity.

Historically, much of our commerce business has relied on manual processes to connect affiliate opportunities with our content. Our work with Palantir changes that by matching affiliate products and offers to relevant content at scale, which will allow us to monetize significantly more of our sports, entertainment, dining, and other relevant content categories in real time. And the opportunity extends well beyond commerce.

By connecting audience signals across our platform, we can create a unified understanding of our users that simply didn't exist before. That enables more personalized experiences, increases our base of known users and strengthens our first-party intelligence, which is expected to significantly increase the value of our audience over time. In other words, we are not working to simply monetize more of our content, but to better understand, engage, and unlock greater value from every audience relationship we create. Together, expanding our discovery and growing our base of known users fuels growth in digital advertising, and we believe this positions us to generate materially higher revenue from our audience than we have in the past.

Known users simply monetize at higher rates. And as they become a larger share of our audience, the value of every impression we sell rises with them. This shift in audience mix doesn't happen overnight, but the investments we have made are already improving that mix, and we're encouraged by the progress we're seeing.

We've done this before with our digital-only subscription business, where we absorbed short-term pressure in exchange for a healthier, more durable model. And today, we're capturing the benefits of that discipline. We believe digital advertising can follow the same path. The playbook is proven, and we are ready to run it again.

On that note, we're encouraged by the strong performance of digital-only subscription revenue. Our approach has not changed. We are deliberately trading a measure of raw page views for stronger engagement metrics as well as higher-value subscription revenue.

We're continuing to build out our stacked products model, and this quarter, we added Marvel Comics to the PLAY platform, which is an important step in extending the experience beyond puzzles and games.

Since launch, the audience engaging with Marvel content has been overwhelmingly new to us. That's a signal we take seriously. We believe it reinforces both the demand for premium entertainment experiences and our ability to bring entirely new audiences into our portfolio. It also supports PLAY's broader role in differentiating our product offering to drive long-term subscription growth.

On the subscription front, we continue to build momentum in the second quarter. Our progress reflects solid improvement across key drivers of the business, including churn, our start-to-stop ratio, and paywall encounters. Those improvements reinforce our confidence that we are building sustainable momentum and position us well for sequential growth over the coming quarters.

To recap, the work is far from complete, but we are confident in the direction we are heading. We have anticipated these changes for some time and the strategy we are executing is designed to build a broader, more engaged audience that delivers predictable and repeatable revenue. Back to you, Mike.

Thanks, Kristin. I'd like to reinforce a few of the points you just made because they get to the heart of the confidence we have in our path forward. We have significant scale, and we have made deliberate investments over the past few years to engage directly with that audience.

Most importantly, as Kristin put it, great content still finds an audience. Our job now is to meet that audience wherever they choose to be and from there, keep them engaged. That heightened focus on engagement is central to how we are using AI on our platforms.

DeeperDive, our generative AI answer engine, is a great example of this. Since launching in September of last year, readers have asked more than 50 million questions with average daily activity now exceeding 390,000 interactions. But the real story is not the volume, it's the value of that engagement.

When we tested pages with DeeperDive against pages without it, the difference was clear. DeeperDive generated longer time on site, higher advertising revenue per session and stronger subscription intent. These results reinforce what we already know: the engagement of our audience matters more than the raw traffic alone. And DeeperDive is another way we are deepening that engagement and translating it into greater monetization. As DeeperDive usage grows beyond just USA TODAY, we see a significant opportunity to replicate this engagement across the entire network.

We are also one of the first publishers in the U.S. to adopt this kind of AI answer engine. And as advertiser demand moves quickly towards this type of experience, we believe our position as an early innovator, combined with our scale, creates additional opportunities to unlock value across our advertising business. Overall, we navigated the quarter well, and we feel good about the momentum we are carrying into the second half of the year.

Now I'd like to turn the call over to Trisha, to provide additional details and color around our 2026 second quarter financials. Trisha?

Thank you, Mike. Good morning, everyone. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted.

As Mike mentioned, we expected variability in our quarterly results this year, and the second quarter was consistent with that expectation. While performance varied across the portfolio, we managed the business well through it.

We held the line on costs. We delivered solid profitability, and we grew free cash flow. We continue to see encouraging trends in several key areas of the business, reinforcing our confidence in our strategy and the opportunities ahead. Let me walk you through the numbers.

In the second quarter, total revenues were $536.3 million, a decrease of 8.3% or 6.1% on a same-store basis. Let me bridge this performance to the first quarter because the drivers are specific and in large part expected.

First, we are lapping an outsized content licensing contribution in Q1, while still driving strong year-over-year digital other growth in Q2. Second, digital advertising softened a bit as we adapt to the shift in audience behavior. We expected variability across quarters given the shift in revenue mix. But overall, we feel positive about the collective direction of the business over the first half of the year. Total adjusted EBITDA was $56.9 million in the second quarter, representing a margin of 10.6%. While total adjusted EBITDA decreased compared to the prior year period, we continue to expect year-over-year growth for the full year. Expense management remains a top priority. And in Q2, operating expenses decreased 7.8% compared to the prior year.

In the back half of the year, we will continue to align our expense base with our revenue trends while projecting the investments that drive our growth. Continued operational discipline made our net income more consistent, and we reported net income of $9.1 million in the second quarter, marking our second consecutive quarter of positive net income.

On an adjusted basis, adjusted net income attributable to USA TODAY Co. was $11 million. Total digital revenues in the second quarter were $254.3 million, a decrease of 4.2% or 3.6% on a same-store basis, and represented 47.4% of total revenues.

Digital advertising revenues decreased 9.2%, reflecting lower page views and the loss of a programmatic partner, creating pressure on programmatic advertising. Given the focus on audience engagement, we are expecting improved advertising trends in the back half of the year.

Within digital, the underlying growth engines continue to perform. Digital-only subscription revenues totaled $45.6 million, increasing 6.8% year-over-year. Digital-only ARPU also reached a record high of $10.47 in the second quarter, increasing 34.4% year-over-year.

Volume decreases moderated further during the quarter, while our start-to-stop ratio improved sequentially, reinforcing our confidence in the path toward renewed subscriber growth. In the second quarter, our digital other revenues, which include revenues from our AI partnerships, content licensing agreements and syndication, grew 20.2% year-over-year to $20.4 million, and we expect ongoing growth in this category this year as we further expand this revenue stream and our suite of licensing agreements.

Turning to the USA TODAY Media segment. Segment adjusted EBITDA totaled $42 million, representing a margin of 10.6%. Second quarter revenue trends were primarily affected by the performance in digital advertising.

Turning to the Newsquest segment. Segment adjusted EBITDA totaled $14.3 million, reflecting a margin of 24.2%. Revenue trends were impacted by the expected timing shift of a revenue-generating conference but reflects strong ongoing digital growth.

In our LOCALiQ segment, revenue remained lower year-over-year, but Q2 reflected sequential growth in both core platform revenue and segment adjusted EBITDA. We are pleased with the sequential momentum from Q1 to Q2, which is reflected in the following key areas.

Total core platform revenue was $106.3 million, up 7%. Segment adjusted EBITDA totaled $13.2 million, while margins expanded 560 basis points to 12.4%. Core platform average customer count increased by 300 or 2.8% and core platform ARPU increased 4.1% to a record quarterly high of $2,908.

Let's now turn to the balance sheet. At the end of the second quarter, our cash balance was $86.7 million and net debt decreased to $883.8 million. In Q2, free cash flow totaled $19.6 million, an increase of 11.2%, while cash provided by operating activities grew 8.6% to $35.4 million. We ended Q2 with $970.5 million of total debt, reflecting $17.7 million of total debt paydown in the quarter.

Now let me turn to our outlook. We are reaffirming our full year 2026 business outlook. We continue to expect meaningful improvement in same-store revenue trends as compared to 2025, driven by the strength of our digital-only subscription and digital other businesses and improving digital advertising trends.

We expect adjusted EBITDA to grow over the prior year and solid net income growth, along with double-digit free cash flow growth. Our second half reflects a shift away from search and the mitigating actions underway across content distribution, licensing and known user monetization. In short, we view the second quarter as a period of expected variability within a year that we still expect to be a strong one for the company. As we look ahead, we remain encouraged by the direction of the business.

This is a dynamic environment, and results may continue to vary quarter-to-quarter, but we believe the strategic foundation, following our audience, growing our data and known audience capabilities, expanding our license capabilities and footprint, and staying disciplined on costs will lead to long term growth and shareholder value creation.

I will now hand it back to the operator for questions, and then we will go back to Mike for some closing thoughts.

[Operator Instructions] Your first question for today is from Giuliano Bologna with Compass Point.

Great results. As a first question, you referenced your work with Palantir several times during the call. Can you elaborate on that and what the opportunity looks like?

Yes. Giuliano, good to talk to you. Yes, we're -- we did reference it a couple of times. We're really excited about this opportunity and what it could do for the trajectory of our business transformation. We have really a tremendous amount of data on consumers on our platform today. And this work with Palantir is really going to allow us to connect that audience behavior, content engagement and first-party data in a way that allows us to monetize each consumer on the platform at a much higher rate.

So I mean, the easiest way to think about it is taking this first-party data everything is a signal and turning it into actionable intelligence in a real-time and fast way where we can deliver the right content to consumers while they're on our platform, the right advertisement to consumers while they're on our platform, the right commerce opportunity embedded into that content in the right time and the right price for a subscription offer.

So it really allows us to take this wealth of data we have and turn it into actionable intelligence in real time. And that gives us a lot of optimism on how fast we can move and how big the opportunity can be. I think this partnership with Palantir -- Giuliano -- is exciting to us, too, because what may take us a considerable amount of time to build internally, we can do in a matter of weeks or months with Palantir.

So you're talking about taking a best in the world AI and software platform with Palantir and applying it to actions on our platform. It's important to note, all of our data remains our data. It's our data. The actions and the intelligence that we utilize takes place on our platform. It's our IP, it's our outcomes. So we're not replacing any technology. It's really just leveraging this incredible AI and software that Palantir has to allow us to move so much faster and to be so much smarter with the data we have today.

And then the other thing that's really going to help us do, which is really important to us is take a lot of the anonymous interactions we have today and turn those into known relationships. And that's going to just increase the amount of data we have. The more known relationships we have, the more data we create, the more signals we create, the more actionable intelligence we have.

So we'll evaluate this work. We're in it now. We'll look at conversion, retention, engagement, and revenue per user. And we hope over the next quarter and the next -- actually in the next 2 quarters, we're going to be able to really start to talk more specifically about the financial upside here.

If you do -- when we talk to Palantir, they're very bold about the predictions of the financial upside. It's too early for us to do that yet. But we do believe the scale of our data, coupled with this best-in-class technology has the potential to really create a powerful uplift in the trajectory of our business. So we're excited to be working with them and think it's going to have a near-term and meaningful uplift to our business.

That's helpful. And next question, you mentioned the large audience you're building on social media platforms. Is that a potential new revenue stream?

Mike, I'll take this one. Giuliano, it's Kristin. The answer to the question about whether this is a potential new revenue stream is, yes, absolutely. And for us, social and video are increasingly becoming primary discovery channels. And that's where consumers are choosing to engage with the content.

As we said, couple of minutes ago, we generated more than 3 billion off-platform video views just in the first half of the year. And all of that reinforces for us the fact that our journalism continues to reach audiences really have significant scale even as those audiences are changing the way they discover that content.

So some of that audience, Giuliano, we'll monetize directly through platform revenue sharing, also through sponsorships, also through branded content. But another opportunity here is using those platforms to begin to build the direct relationship with consumers. And from there, what we're seeing is that we can bring a portion of these users back on our platform. And then coupled with our data, we can deepen that engagement and then create those higher value opportunities that hit advertising, it hits commerce, it hit subscriptions.

So in this way, these off-platform moments become -- it becomes a new on-ramp that drives frequency and habits and then ultimately, that leads to paid relationships. So we don't view social as separate from our business. We view it as an increasingly important part of how we build and engage and monetize the audience over a long-term period. I hope that helps.

And the next one, do you see any more licensing deals coming this year? Just kind of thinking about the AI front and other deals around that.

Yes. Giuliano, yes, the short answer is yes. We do see more AI licensing deals coming this year. To expanding on that, we do continue to believe that demand -- that the demand for trusted and real-time content will grow as all of the various AI platforms expand their products and their services. It's still really an evolving business landscape there. But the other thing that we're doing now, which I think is going to be really important to our future licensing opportunities is reformatting our content to be machine readable.

So we have historically always created content for humans. And in the AI machines, certain things are more important. And so reformatting our content to be machine readable is going to be really important, not only for future deals, but also to unlock more value in our current deals, so current deals. So yes, we're actively engaged in discussions.

I don't want to get into specifics until we have announcements, but we do expect more deals in -- and our objective here is not just to sign more agreements, but it's really to build recurring long-term relationships where we get proper recognition of the value that we bring with this trusted real-time content.

So we continue to block the scrapers and we are reformatting our content. We're working on that by the hour now to reformat content to make it machine readable. And as the ecosystem evolves, as an industry leader in terms of scale and the amount of great content, we expect to be at the table with new deals as well as expanding current deals.

So this opportunity really is still in front of us, even though we've had revenue and we've had nice growth from it, almost all of this opportunity remains in front of us. So we're pretty excited about it.

And then a couple of your second quarter revenue trends were softer than 1Q. Is that a setback? Or do you expect some of those -- some of that variability? And do things still remain on track at this point?

Giuliano, this is Trisha. Yes, I'll take this. I absolutely don't view Q2 as a setback. I think we really remain on track with the strategy that we've outlined. And I think it's really important to separate the quarterly variability that we saw from the underlying trajectory of the business.

So we discussed earlier this year, we expected 2026 to include both meaningful progress, but also quarterly variability, particularly around that content licensing that Mike was just talking about. That's absolutely still a growth engine for us. And I think we've also been talking about the changes in consumer behavior and the work we're doing to create a more direct engagement with our audience. And then if you couple that with the loss of a programmatic partner in the quarter, we did start to experience some pressure in digital advertising. But I'd say, at the same time, the businesses that we think are most important for long-term growth continue to perform extremely well.

Our digital-only subscription revenue grew again for the second consecutive quarter. Our digital other revenue grew by more than 20% year-over-year, and all this translated into really good free cash flow growth, solid net income. And we're also starting to see those underlying fundamentals of the LOCALiQ business stabilize, improve, and we think that leads to improving revenue trends.

So certainly, some of the revenue categories were softer in the quarter than Q1, but we're seeing really encouraging progress in the areas that we think are most important to the long term success of the business. We're seeing the work that we're doing on the audience and the data really start to scale more meaningfully. And all of that led us to reaffirming our full year outlook. So we have a lot of confidence in where we are and where we're going.

And then last one from me. Is there anything to update on the Google litigation?

Yes. Well, nothing specific since our last earnings call, but it's worth reiterating that we remain very optimistic about our position in that case. And just also reiterating the next big milestones are -- number one is, we do expect the remedies ruling in the DOJ Google case to be out in the market any time. We've kind of expected it for the last few months. And so that we think is coming sometime in the near future. And then we also expect a ruling on Google's -- the summary judgment filing motion in our case, specifically that Google filed earlier in the year, we expect a ruling from the judge in our favor in that case -- in that motion, probably September-ish. We'll disclose any material developments as they occur.

I think one other important point to make on this topic is in our outlook for 2026. And as we think about not only 2026, but 2027, we've not built into our outlook any specific upside that we would see from a more open and transparent advertising ecosystem that may evolve from the DOJ remedies.

So there is -- we reaffirmed guidance today, and that's without any benefit from the potential upside that we could get from DOJ remedies, the DOJ remedies case or, in fact, our specific litigation against Google. So that's all upside for us in the future, whether it's this year or next year.

Your next question is from Matt Condon with Citizens Bank.

My first one here is just Google accelerated its push into AI search this quarter. A lot of other open web companies have been calling that out. Is there any way that you can size that impact on the business in 2Q? And then have you seen search trends stabilize at all more recently?

Mike, I'll jump in on search trends and then I'll circle back to you and to Trisha. I would say, Matt, the way that we look at this is that the direct and engaged and identifiable audience is going to produce for us better economics and a more reliable business than maximizing that low-value anonymous traffic from any one platform.

And so what our strategy has been for many quarters now, and you can see that in Q2, is to diversify how the audiences are finding us, how they're discovering the content and then converting more of those interactions into those direct and known relationships, right? So social and video, as we talked about, are expanding discovery. Obviously, newsletters create habit. Registration and subscriptions allow us to better understand and then to monetize. That, in my view, creates value across multiple revenue lines, not just the key revenue line that has been most impacted by the change in search, which is programmatic.

So some of those channels are monetizing directly today. Others are creating a path back to own platforms. And what we can see is that the value of the audience we already have is actually paying out in those different revenue lines. There is a bit of a lag between audience growth in these channels and the full revenue benefit of our multipoint monetization.

Trisha, do you want to add anything here?

Sure. The one thing I would say is that our digital advertising performance in the quarter was really driven by three main things. I think one is what we've been talking about, the impact of search on our business. Second, we mentioned that we saw the loss of a programmatic partner in the quarter. And then third, we saw a platform policy change that impacted one of our sponsored link partners. I would say each one of those is fairly equal in size on the impact year-over-year. That helps give a little bit of color.

I will also say, though, that one thing that we're encouraged by is the fact that our premium sales on our platform did grow year-over-year. Our RPMs continue to improve throughout the quarter. So I think the things that we are able to control, we are moving in the right direction.

Great. And then another question. Just, Mike, some other people have talked about potentially shutting Google off as far as their crawlers. Obviously, that would very much impact search for you guys, but then that would give you more negotiating leverage as bringing them to the table for AI licensing deals.

Can you just talk about philosophically whether this would be something you'd be interested in? And at what point is -- could you easily do that? Meaning like the search become a low enough part of your business at some point that this would make sense?

Yes, Matt, I think the answer is yes. We're not there yet. But -- and we still -- as Kristin noted in our remarks on the call this morning, there are still some areas where we have great content, it's unique and we have a right to win, and search still performs in some of those categories like the FIFA World Cup for us this year.

So we're not prepared to do it today. However, search revenue on our platform today is pretty small. And the traffic that we're getting from search, as I mentioned in my remarks, a lot of that's one and done, and it's not really meaningful traffic to us in the long term. And so it's less monetizable.

So I think the short answer is yes, I can see a day where we turn off scraping or making our content available for the links. I think that that day is getting much sooner now than it was a while back. So I don't know if it's 9 months, 12 months, 15 months, but we're definitely -- there's a line of sight there.

And so we're -- but we're actually more hopeful that we can be proactive with Google in negotiating a fair licensing deal. That would be our preferred path to have our content appear both in traditional search as well as in AI summaries. That's obviously the preferred path. But if we have to cut them off and block them in order to get to the -- to a deal, then we'll do that for sure. And we're getting closer to that day today.

And then the last one for me, just on the subscription business, the underlying trends continuing to improve there. As we look forward, just what are the key areas that continue -- that you can continue to drive growth? And just how much of a lever is pricing still from here?

Sure. Kristin, do you want to take that?

Yes, Mike, I'll be happy to. I think -- first of all, I love this question. The most important point in my view, coming out of Q2, is that our digital-only subscription revenue is continuing to grow, and it's now grown year-over-year for 2 consecutive quarters. And the ARPU increase is an important piece of that, but it's not solely -- the ARPU increase is not solely sort of the result of broad price increases. It reflects that -- a better mix of subscribers that reflects more consistent offers, less reliance on deep discounting and importantly, I think the removal of lower-value subs that just did not generate attractive lifetime economics.

So the actions that we took to improve subscriber quality and economics really are working here. We would not extrapolate a 34% ARPU growth rate indefinitely, right? But we continue to see opportunity. We continue to see it through pricing and packaging and stacked products.

The other thing I would note is volume trends also are stabilizing. So the sequential decline moderated again in the quarter and the start-to-stop ratio improved during the quarter. So what we're committing to is ongoing growth in digital subscription revenue. And as we get closer to volume growth, we will have more levers to pull to make the growth more meaningful.

So Matt, I guess I would sum up by saying our objective really remains to grow subscription revenue and lifetime value, not to pursue subscriber volume at uneconomic price points.

Yes. And Matt, what I would add to Kristin's remarks is we do -- we're not at the end of the runway in terms of ARPU growth. So we do expect to be able to lift subscription revenue for many quarters to come from ARPU. But really importantly, as Kristin mentioned, we've seen volumes stabilize. And so when we look out not just several quarters, but several years, we see meaningful growth in subscription revenue that's really driven by the return of volume growth. And a really important piece of that is the work we're starting to do now with Palantir, which I think will allow us to deliver an even better content experience to consumers and deliver a subscription offering at the right price at the right time.

So we see runway ahead of us driven by ARPU growth certainly over the next several quarters or a year, but longer than that by the return of volume growth. So we're pretty -- we're really excited about the digital subscription category and its performance over the next few years.

Your next question for today is from Barton Crockett with Rosenblatt.

I guess one thing I was wondering about on just numbers. You guys report this monthly unique visitors. And I think it was down to a number that was substantially kind of lower than it was in the first quarter and in the year-ago. I was wondering if you could talk about what's driving that.

Sure. Kristin, do you want to take that?

I'll take that. Sure. Barton, nice to hear from you. A couple of things are true here. First, we still maintain one of the largest digital audiences among content creators, and I think there's value in that scale. But as you've heard from us, the way that the consumers are discovering the content is changing. And so what that means is that the quality of our audience is becoming increasingly more important than simply maximizing anonymous uniques.

The decline in uniques that you are noting and that we all are seeing during the quarter, it does not reflect lower demand for the content. What it reflects is lower referrals from traditional search because of those consumer discovery changes that we're seeing and witnessing.

Our reach is extending right now well beyond our owned and operated properties today. So the audiences are discovering the content through social, through video, and we're generating those views in those spaces just in the first half of this year alone is putting us on a trajectory to do extremely well this year in that category and to grow those on-ramps, if you will.

Those audiences might not be reflected in traditional unique visitor metrics, but they do demonstrate that our content is reaching consumers at scale. And so our strategy is to meet the audiences where they are and then use registration and use subscriptions and use the first-party data capabilities, some of which are coming from Palantir, in combination with the efforts that we're doing internally to build those direct relationships.

And ultimately, the way that we think about this is that we would rather have a larger share of known, highly engaged users than maximize onetime anonymous visits because those users are generating greater value across multiple revenue lines, advertising, subscriptions, commerce, content licensing because they engage more deeply and they are returning more frequently and they allow us to better personalize both the content and the monetization.

So yes, unique visitors remain an important measure of reach. We increasingly are evaluating the health of the business by the strength of engagement, by the growth of our known users. And then in turn, our ability to increase the lifetime value of every one of those relationships.

Barton, I think I would add to that. A good example to look at is, and we mentioned this on the call today, is what we did with the subscription business a little bit over 1 year ago, 1.5 years ago. And while -- and you're seeing the fruits of that labor today, we have fewer subscribers today than we had in the first quarter of 2025, but we're growing our revenue.

So it's about getting to the right subscriber base. It's about getting to the right unique visitor base that we can then increase ARPU per user on the platform. And so I'm being -- I'm just being vague here, but whether it's 180 million uniques or 150 million or 140 million, what really matters is ARPU per unique. And if we can do a much higher ARPU per unique visitor at 140 million or 150 million and then grow from there, that's a great place to be. And so that's what we're really hyper focused on now, especially as the search dynamics change.

Okay. And kind of extending on that, kind of related to the goal for you guys to be a majority digital at some point this year. This quarter slightly ticked down, I think, 47.4% from 47.8% or something like that of revenues first to second quarter. Part of that may be that ad revenue kind of accelerated down. What gets you to that majority digital? I mean, is ad revenue kind of turn around? Or does something else happen? Just get us the road to kind of get you there.

Yes, sure. Trisha, do you want to take this one?

Yes, absolutely. First, I do think that our advertising revenue trends improve. We alluded to that into the call that we think that our advertising revenue trends will improve in the back half of the year as we start to see that work that we've done on audience and on data start to be more meaningfully reflected in our revenue. I think there's a lot of other growth drivers as well.

Our AI licensing, we expect that to continue to grow. Mike mentioned that we expect new licensing deals and the work that we're doing to make our content both suitable for humans and machine readable should really unlock more value and additional AI licensing deals throughout the back half of the year and going forward as well.

We feel really happy about the underlying drivers that we've talked about on our digital-only subscription business. And then we talked a little bit about the indicators in our LOCALiQ business, the ARPU growth, the customer count growth, the core platform growth. We saw a nice uptick in EBITDA even in the quarter. So our LOCALiQ trends are also improving.

So absolutely, we're going to have a little bit of quarter-to-quarter variability. We alluded to that last quarter. You saw it in Q2. But when you see the way that our subscription business is moving and growing, the opportunity that we have ahead of us in licensing, the way that we intend to put our audience and our data to use and the way that the LOCALiQ business is starting to improve, I think that really gives us a lot of confidence in getting to that majority digital in the back half of the year and getting to revenue growth.

We have reached the end of the question-and-answer session, and I will now turn the call over to Mike, for closing remarks.

Yes. Thank you, and thanks for everybody for joining today. Just a couple of things I want to reiterate just to kind of close out the remarks for the day, and I want to recap a few really important points from today's call.

First, while we will have variability from quarter-to-quarter, as we said, it's not linear. It's not a straight line up. But overall, the first half of 2026 was actually very good. We've improved overall revenue trends and moving -- and we're moving toward our inflection point.

We grew EBITDA in the first half of the year. In the second quarter, we grew free cash flow double digits over the prior year, and we posted another quarter of positive net income. We feel really good about the second half of 2026, and that led us to reiterate our full year guidance, which calls for significantly improved same-store revenue trends this year versus the last couple of years. EBITDA growth over the prior year, double-digit free cash flow growth and the fourth consecutive year of free cash flow growth and positive net income for the full year.

Also, we talked a little bit on the call and in Q&A about how excited we are about the Palantir relationship and believe that will work to position us to turn up large amounts of first-party data that we have more actionable intelligence on. None of that is in our forecast for the year. So we think there's upside from the work we're doing from Palantir, both this year and in years to come. And we're really excited about the digital other category.

The last question we just got from Barton, that digital other category is going to be a big driver of what leads us to having more than 50% of our revenue coming from digital later this year in addition to what Trisha just mentioned.

We also are seeing really nice double-digit growth in our commerce and affiliate revenue categories. So we do see the ability to continue to grow there. Our off-platform revenue that Kristin mentioned through our social media channels and then our newsletter and video strategies are all potential digital revenue upsides in the back half of the year.

So we have a lot of good initiatives in the way -- in the works, and we're actually starting to see those hit the P&L. So all the work we're doing is leading us to building in a more engaged and recurring audience. It's really important. That leads to signals and intelligence we can use to grow repeatable revenue across our various digital streams.

So we're really excited about the work we're doing. We're excited about the second half of the year and look forward to really getting back to you guys in the third quarter to update you on the progress that we're continuing to make.

So with that, we'll end the call today. Enjoy the rest of the summer, and we look forward to talking to you again to update you on our Q3 progress. Thanks, everyone.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the USA TODAY Company Q1 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Matt Esposito, Head of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss USA TODAY Company's First quarter 2026 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer; Trisha Gosser, Chief Financial Officer; and Kristin Roberts, President of USA TODAY Media.

If you navigate to the USA TODAY Company website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance.

Before we begin, please let me remind you that this call is being recorded. In addition, certain statements made during this call are or may be deemed to be forward-looking statements as defined under the U.S. federal securities laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in our filings made with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call.

Please keep in mind all comparisons are on a year-over-year basis unless otherwise noted. In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, total adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin and adjusted net income attributable to USA TODAY Company.

You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement.

Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of offer to purchase any USA TODAY Company securities. The webcast and audio cast are copyrighted material of USA TODAY Company and may not be duplicated, reproduced or rebroadcasted without our prior written consent.

With that, I would like to turn the call over to Mike Reed, Chairman and CEO of USA TODAY Company.

Thank you, Matt. Good morning, and thanks to all of you for joining our first quarter earnings call. I am pleased to report that we had an excellent start to the year. In our last call, we laid out our expected path to growth. A critical part of that strategy is improving total revenue trends through digital revenue growth. And in Q1, we saw meaningful progress on both fronts.

As you will hear throughout the call this morning, our momentum continues to build, and we believe our first quarter results have set the tone for a promising 2026. Year-over-year, total revenue trends were a bright spot in the quarter, with same-store declines improving to less than 2%, representing our strongest performance in 4 years.

This improvement was driven by a return to year-over-year growth in digital-only subscription revenues and continued contributions from our AI partnership agreements. As a result, total digital revenues increased 5% on a same-store basis versus Q1 of last year and accounted for 48% of total revenues, representing an all-time high. In addition to our top line momentum, we drove a marked improvement across several key financial metrics in Q1.

Adjusted EBITDA increased 45% year-over-year. Net income increased $27 million over the prior year period. First lien net leverage decreased to 2.3x and we generated positive free cash flow in the quarter. Overall, we believe our strong execution against our most important strategic actions is leading to the results we had anticipated. And therefore, we are reaffirming our full year business outlook.

Now with that, I would like to review the operational highlights from the first quarter. Our digital strategy continues to focus on our large organic audience, deepening engagement and improving the revenue of each digital user on our platform. In the first quarter, we continued to attract one of the largest digital audiences in the media industry with 180 million average monthly unique visitors coming to our platforms, which is up slightly from 179 million in Q4.

That scale, combined with our ability to stay closely aligned with our readers' preferences, drove 1.4 billion total page views per month across our digital platforms at Newsquest and USA TODAY Media. We believe our large and highly engaged audience positions us well to accelerate total digital revenue growth through highly diversified and predictable revenue streams.

One area worth highlighting is our digital-only subscription business. In the first quarter, digital-only subscription revenue returned to year-over-year growth and recorded its third consecutive quarter of sequential growth. We also saw continued strength in digital-only ARPU, reaching a new high and growing 43% year-over-year and 5% sequentially. Regarding digital-only subscription volumes, we are starting to see signs of stabilization. Our start-to-stop ratio is quickly approaching parity, an important inflection point, and as we sustain that trajectory, it sets the stage for sequential volume growth over time.

Overall, we feel really good about the progress we have made in our subscription journey. Digital-only ARPU continues to grow, and we expect that momentum to carry through the year. Volumes are stabilizing with a return to sequential growth expected in the next few quarters, and we expect digital-only subscription revenue to continue growing on a year-over-year basis.

Now with that, I'll turn the call to Kristin to outline some of the exciting initiatives underway to drive monetization through the expansion of our content experiences and product portfolio. Kristin?

Thank you, Mike. USA TODAY Media continues to lead as an organization that prioritizes its audience, experiments with purpose and intent and delivers content that is both relevant and essential. And we're seeing that reflected in our scale as we continue to reach one of the largest digital audiences among content creators in the country.

Two verticals that continue to reinforce our position as a leading media organization are sports and entertainment. In sports, we recently expanded our High School Sports hub into 12 additional markets, bringing our total footprint to 35 markets nationwide. These hubs deepen our connection with local communities while enabling us to scale high-impact, locally relevant content that drives audience growth and attracts premium sponsorship opportunities.

High School Sports also underscores a key differentiator for us, the ability to follow an athlete throughout their entire career from high school and clubs to college and into professional sports. That continuity allows us to engage fans earlier, sustain engagement over time and drive stronger monetization.

In Q1, we also launched our USA TODAY soccer hub, bringing together our domestic and international soccer coverage into a single cohesive destination. We believe this creates a more immersive experience for fans, supports higher time spent on platform and better positions us to capture both audience and advertiser demand, especially as we move into the 2026 World Cup cycle.

Our entertainment team also rolled out an exciting initiative in Q1, with the USA TODAY Style Meter. Aligned with the Oscars, Style Meter created a fashion-forward way for audiences to engage by rating red carpet looks through an interactive voting experience. As a result, this feature was part of a strong Oscar season that generated approximately 20 million page views. That's up more than 5% year-over-year. Experiences like Style Meter helped deepen our connection with audiences around key cultural moments while creating incremental e-commerce opportunities. They also opened the door for additional engagement and visibility during high interest events, such as the Met Gala next month.

Shifting to our digital-only subscription business. As Mike mentioned, we made meaningful progress in Q1 with digital-only subscription revenues returning to year-over-year growth and marking the third consecutive quarter of sequential growth. As we move through 2026, we will continue to evolve how we monetize our audience with a more deliberate approach in how and where we introduce subscription opportunities across the platform. This comes with an intentional trade-off in page views, but over time, we expect to expand digital revenue per user and ultimately maximize monetization across the customer journey.

On that note, we're encouraged by the strong performance in digital-only ARPU in Q1. Moving forward, we believe there is meaningful upside ahead through additional pricing power and stacked products. Introduced late last year, stacking represents a foundational step in our shift toward a more flexible, value-driven subscription model. It provides subscribers with greater flexibility by enabling them to combine complementary offerings such as USA TODAY Play and local publications, into a single tailored experience.

As our digital users adopt a more personalized mix, we expect to see increased engagement, improved retention and higher overall revenue contribution relative to single product subscribers. Importantly, second is already showing meaningful potential with digital subscribers who add a second product to their bundle, demonstrating a 20-point improvement in pay-up rates versus single product subscribers.

In other words, these users are significantly more likely to choose a paid premium offering rather than remain on free or promotional access. As a result, we view stacked products as a powerful lever to drive continued growth in digital-only subscription revenue, especially as we add more products to the stack this year and next, including Golfweek.

We have also moved into a phase of disciplined experimentation focused on monetizing consumers' engagement on their terms. Rather than forcing a single subscription model, we're testing multiple pathways that align with different levels of interest and commitment. This includes a range of pathways from free access to registration and from article level purchases to broader topic or season-based offerings. A clear example is the introduction of our first limited series and single payment subscription offering around the Kentucky Derby, which delivers a 90-day premium event-driven experience. This USA TODAY front aggregates high-intent content, including live race updates, fashion and culture coverage and exclusive on-site reporting within a premium advertising environment designed for both dedicated fans and casual audiences.

More broadly, this initiative represents a key step in developing a limited series product model, enabling us to package existing network content into premium time-bound offerings. We believe this approach will drive incremental engagement, first-party data and monetization around major tentpole events, including the World Cup.

To recap, our progress in the first quarter was a team effort. I want to express my sincere gratitude to the entire team. We have important work ahead of us to sustain this momentum, but we are executing on our strategy to expand our content and product portfolio, amplify our journalism and drive diversified revenue streams.

Back to you, Mike.

Thanks, Kristin. It's encouraging to see these initiatives taking shape, and we believe they will strengthen engagement and enhance monetization across our platform. And as Kristin detailed, through the experiences we're creating and the introduction of more modern payment methods, we are driving registrations and expanding our known user base, which grows our first-party database and over time, should support higher CPMs across our advertising business.

At the same time, we are increasingly leveraging AI-driven personalization, combining dynamic paywall decisioning with personalized [ 4U ] placements on the homepage to deliver the right content and subscription prompts to the right users at the right time while balancing engagement, advertising and subscriber growth. These capabilities allow us to translate user behavior signals in real time and surface more relevant offers to audiences with a higher propensity to convert.

Now this is a good segue into AI. Over the past 18 months, we have positioned ourselves as a trusted content provider while building the capabilities to act quickly as opportunities emerge. We are doing this through valued and unique content creation on a daily basis at scale, digitizing more of our very large archived content base and deploying blocking technology on our platform to prevent unauthorized use of our valuable content. We have been at the forefront for our industry in terms of putting together licensing deals, and we see this as a continued significant future growth opportunity.

Our existing AI agreements, such as with Meta and Microsoft, had a notable impact on our Q1 results, and we continue to maintain an active pipeline across the AI ecosystem, including foundational model providers, start-ups and emerging licensing platforms. As a result, we expect this category to contribute meaningfully to our growth over time. We expect these deals to be lumpy in nature. But when you step back and take a longer term view, this opportunity remains significant.

Now turning to LocaliQ. While the return to growth has been slower than anticipated, this business remains an important solution for our advertisers, and we believe having it as a part of our portfolio allows us to capture a broader share of advertising spend across our media platform. The foundational actions we have put in place to shift from a traditional search agency business to a results-driven approach are beginning to take hold, and we can see that progress.

As we diversify search, we are expanding higher growth areas like our social offerings, our owned inventory and targeted e-mail, while also deepening CRM integrations. We continue to make Dash a more comprehensive AI-powered platform that helps customers turn more leads into paying customers faster. We are encouraged by the progress and expect these initiatives to improve our revenue trends and position this business for growth in the second half of the year.

I'd now like to turn the call over to Trisha to provide additional details and color around our 2026 first quarter financials. Trisha?

Thank you, Mike. Good morning, everyone. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted. As Mike mentioned, we're very pleased by our business momentum and the progress we made in the first quarter, which is evident in our financial results. In the first quarter, total revenues were $548.5 million, a decrease of 4% or 1.8% on a same-store basis. This represents a same-store improvement of 210 basis points over Q4 and is the second consecutive quarter of top line trend improvement. The strength in total revenues was primarily driven by the expansion of our digital revenues, which delivered solid growth compared to the prior year.

Total adjusted EBITDA was $73.1 million in the first quarter, an increase of 44.7% or $22.6 million. Total adjusted EBITDA margin expanded to 13.3% in Q1 compared to 8.8% in the prior year quarter. The growth in total adjusted EBITDA was driven by the improving revenue trends, the impact of the 2025 cost reduction program, along with ongoing cost discipline and the continued execution against our operational priorities. Expense management remains a critical priority. And in the first quarter, we drove an 8.8% reduction in operating costs and SG&A expenses compared to the prior year.

Total digital revenues in the first quarter were $261.9 million, up 5.2% on a same-store basis, representing the second consecutive quarter of growth. In the first quarter, total digital revenues accounted for 47.8% of total revenues, an increase of 400 basis points compared to the prior year. Digital advertising revenues decreased 3% in Q1 due to some softness in page views and programmatic revenue.

That said, we delivered our strongest quarter of new digital business signings in Q1, which combined with stabilizing retention trends, is expected to drive a notable improvement in our Q2 digital advertising and digital marketing services revenue trends.

Page views were down modestly year-over-year, primarily on our local sites. This was driven by lower referrals from Google Discover as well as the deliberate actions we've taken to increase paywall encounters and shift traffic toward higher-value monetizable experiences. As a result, we're seeing improved conversion rates and believe this is the right trade-off as we optimize for revenue per user rather than raw traffic volume.

Digital-only subscription revenues totaled $45.9 million in the first quarter, up 6.2% year-over-year and marks the third consecutive quarter of sequential growth. Digital-only subscription volumes continue to reflect the intentional actions to optimize sustainable and predictable profitability by prioritizing long-term monetization over short-term volume.

Volume decline slowed in Q1 with new starts approaching parity with stops late in the quarter, indicating stabilization and a potential return to volume growth. In Q1, digital-only ARPU also reached a record high of $10.30, up 42.7% year-over-year. In the first quarter, our digital other revenues, which includes digital content syndication, affiliate content and AI partnerships and licensing revenues, grew 125.6% or $18.8 million.

As we noted last quarter, we expect variability in timing and recognition given the structure of these agreements, with Q1 reflecting a strong contribution. We continue to optimize our print and commercial business. And in Q1, print and commercial revenue trends were largely unchanged from Q4 on a same-store basis, and our results reflect the shuttering of a substantial advertising mailer whose closure had no impact on total adjusted EBITDA.

Turning to the USA TODAY Media segment. Segment adjusted EBITDA totaled $59.5 million, increasing 89.9%, while segment adjusted EBITDA margin expanded 720 basis points to 14.3%. For Q1, total revenues decreased 5.4%, representing an improvement of 180 basis points from Q4 sequentially.

Turning to the Newsquest segment. Total revenues in the first quarter were $59.8 million, up 7%, representing the fourth consecutive quarter of revenue growth. In the first quarter, segment adjusted EBITDA was $14.9 million, up 6.6%, while segment adjusted EBITDA margin totaled 24.9%.

And looking at our LocaliQ segment, for Q1, core platform revenue totaled $99.3 million. Segment adjusted EBITDA totaled $6.8 million and reflected the inherent seasonality associated with the first quarter in our LocaliQ business. We ended the quarter with approximately 11,900 core platform average customer count and core platform ARPU remained near record highs at approximately $2,800.

Let's now turn to the balance sheets. At the end of the first quarter, our cash balance was $85.2 million and net debt stood at $903.1 million. Free cash flow in the first quarter totaled $6.4 million, and we ended Q1 with $988.3 million of total debt, reflecting $4 million of total debt paydown in the quarter, which combined with our strong total adjusted EBITDA growth, further reduced our first lien net leverage by 12% to 2.3x.

On the bottom line, net income totaled $19.9 million, up $27.2 million or 371.3%. As we look forward to the second quarter, we expect to largely sustain the top line momentum with total revenue figures and same-store revenue trends remaining largely in line with Q1. We believe our strong new business activity, combined with stabilizing retention trends, continued growth in digital-only subscription revenue and year-over-year growth in digital other, supports ongoing digital revenue growth.

With respect to total adjusted EBITDA, we expect continued year-over-year growth in Q2, though at a notably more moderate pace than Q1. Adjusted EBITDA in Q2 will be impacted by the mix of digital revenue with a higher contribution of DMS revenue and a lower contribution of licensing revenue. We view Q2 as a continuation of the progress we made in Q1, along with significantly higher free cash flow generation quarter-over-quarter. We are reaffirming our full year 2026 business outlook and remain confident in delivering year-over-year free cash flow and profit growth on the back of improving revenue performance.

Overall, I'm very excited about the progress achieved through the first quarter. The start of 2026 was successful from both an operational and financial perspective, and we are entering the second quarter with a great deal of optimism.

I will now hand it back to the operator for questions, and then we will go back to Mike for some closing thoughts.

[Operator Instructions] Your first question for today is from Giuliano Bologna with Compass Point.

Congratulations on the impressive results in the first quarter. As a first question, it seems like you're making very strong progress, especially early in the year, and it's great to see the outlook reiterated. I'm curious if there are any specific drivers that we should be focused on that are driving the results early in the year and how sustainable a lot of those drivers are throughout the year? I'm thinking about the AI potential deals and other things around that, that are obviously great positive contributors at this point?

Yes. Giuliano, thank you. Yes, the -- there is a -- there are a lot of drivers in the first quarter and then there are -- and those are sustainable not only this year, but throughout the coming years. We have -- licensing deals were definitely strong in the first quarter following a strong fourth quarter. And on top of that, their digital subscription revenues have really turned the corner and were a strong performer in the first quarter.

Obviously, we expect that to continue not only this year, but for years to come. And our affiliate revenue has really started to turn and grow as well, which is also captured in that digital other category. And we feel really good about the progress we're making on the audience side in terms of engagement, which leads to digital advertising growth. And finally, we feel good about the progress we're making underneath the DMS business, which will also lead to growth in the back half of the year soon.

When we look out over the rest of this year, Giuliano, we see all those factors contributing to digital revenue growth, starting with DMS, digital advertising, digital subscription and then digital other with contributions from both licensing and from affiliate revenue. So all of those will be contributors.

That's very helpful. And then there's obviously been a lot of progress when it comes to AI licensing deals. I'm curious where things stand in terms of the opportunity set that's still out there and the potential for more transactions or more deals on that front?

Yes, Giuliano, we think there's a lot of opportunity for more deals. As I mentioned on the last call, and I'll say again on this call, it's hard to predict the timing of those deals, so they will be a bit lumpy. However, we are taking all of the appropriate actions in our view, which start with creating really unique, at scale, valuable content every single day, combine that with we're digitizing more and more of our archived content so that we have a larger offering of archived content. And then finally, we're blocking those that don't have licensing deals with us from being able to scrape our content.

So creating new content at scale, blocking those that want to scrape and then digitizing more of our archived content, we think make us one of -- probably the premier news media company for AI tech companies to partner with. There are a lot of big companies out there, as you all know, that we have not partnered with yet. We have ongoing conversations with many of them. There are also new entrants and new marketplaces coming on board. So this opportunity is really massive in our view. We're taking a long-term approach rather than near term because in the very near term, it's a little bit lumpy or unpredictable. But over the long term, lots of opportunity. We think we're the premier partner, and we're doing, we think, all the right things to make sure that we are the right partner for those companies.

That's very helpful. And there's obviously a great improvement when it comes to your EBITDA margin as well. And I'm curious if there's still any opportunities on the cost side to continue working on your cost structure and other cost improvements around the company?

Yes, absolutely. Giuliano, it's Trisha. We think there is opportunity there. We were very smart in the way that we addressed costs last year, took $100 million out of the business. And I think you can see that we're still improving our revenue trends at a pretty good clip even with those expenses coming out of the business. And we'd look to be balanced and thoughtful in how we do it going forward. We're always optimizing our costs around our print infrastructure. We'll continue to do that. You've heard us talk about changes that we're making to our delivery structure, for example. We'll continue to explore those type of things.

The other things, we are seeing efficiencies, whether it comes from things like AI licensing or using vendors and partners, outsourced vendors. We're getting efficiencies within the organization. I think more so, those will eventually drive revenue upside for us, but they should also help us manage costs like software or outsourcing with our partners as well. So I would say, yes, long answer, but yes, we have the opportunity to continue to manage our expenses. You saw it in Q1, you'll see it for the rest of the year as well.

That's very helpful. And then maybe one final one. I'm just curious if there's any update or changes to kind of the timing or process around litigation and if you have any opinion around that?

Yes. No changes. Obviously, we remain very optimistic there. The next big things are really the -- outside of our case, the DOJ case, we expect the remedies to be ruled on by the judge here any day now. And then that would, we think then lead to the state of Texas's case going to trial probably within 60 days after the remedies ruling. And then with regard to our case specifically, the next big milestones are the judge ruling on Google summary judgment filing, which we expect in the next few months and then a trial date being set, which we expect for either late this year or early next year.

That's very helpful.

Your next question is from Matt Condon with Citizens.

My first one is just on the DMS side of the business. You obviously are seeing some underlying trends that give you confidence in the acceleration of growth in the back half of this year. Can you maybe just dig in on what a few of those catalysts or products that should drive that growth in the back half of this year are?

Matt, it's Trisha. Thanks for the question. Yes, we see a lot of promise in our DMS business. I think the first big thing to point out is that it's a product that our advertisers really view as a critical component of their marketing spend. And so we think that having it as part of our portfolio really allows us to capture more dollars across the advertising ecosystem, including on our own platforms.

So the things that we've done over the past year or so, things like integrating CRMs, leveraging AI search capabilities with Google on the platform, as well as bringing our own inventory or our owned and operated inventory into the Local IQ platform, really gives us confidence that we can continue to grow our customer account in our business. I think one of the things that we've seen is that we're maintaining near record high ARPU at about $2,800. And so our customers are seeing a lot of value in what we're providing to them. Now the work is really about growing our client count.

And the other thing I would highlight is that we're continuing to invest in Dash, which is our AI-driven platform, which allows our customers to address their leads and turn those leads into revenue much faster. As we build out capabilities on that platform, build out CRM-type solutions on that platform, we are finding that customers are stickier, and we should see that play out in our results as well.

Matt, I would add one thing, too, and Trisha mentioned this in her remarks before the Q&A. Both in our O&O on the media side as well as DMS in the first quarter, we saw really nice increases in new client count, but also in budgeted spend with us. And so what we saw specifically in the DMS business that we're referring to that give us a lot of confidence in outward look on revenue trends, a leading indicator for us is the budgeted spend from all of our clients.

And we saw a really significant uptick every single month from January through April here, now that we're at the end of April. So the underlying work we're doing, improving retention and becoming stickier with the clients and leading to bigger budgeted spend with us, has all materialized here in the first 4 months of the year. So we're pretty excited about what we're seeing underneath and expect that to really show up in the financials in the back half of the year.

That's helpful color. Maybe another question just on AI licensing. I think this is a big question is just the sustainability of AI licensing revenue going forward. Specifically, if you have lots of your content archived and used to train these models, on a go-forward basis, just how do you think about the sustainability of that revenue trend? Obviously, there needs to be the refresh of the new content that comes on. Do the value of those contracts go down over time? Again, obviously, it was a key driver in the quarter. I think people are just trying to wrap their minds around just how sustainable that is going forward?

Yes. No, I don't think that they go down. I think they go up. I think the real value in the content we produce is we produce it at scale and it's unique and it's valuable and it's new every single day. And you're right, these models and all of the AI programs out there, products out there need to be refreshed and updated on an ongoing basis. So I actually think the real-time content on a go-forward basis is much more valuable than the archived content, which theoretically can be used one time to train a model.

So I actually think that the value of our licensing agreements will grow over time. We are expanding the amount of content we have that is digitized in our archives, which hasn't been available for training. So we think that's also an opportunity for more revenue, but the real value in our eyes is the ongoing kind of new content we create every day. And we're in a lead position because we create more content than most anybody, and it's unique, right, because of the local aspect. So where we feel really good about the sustainability and the ability to grow the AI licensing category over the long-term.

That's very helpful. And then maybe just a final one. On digital advertising, it sounds like there were some contracts that were signed in the quarter that just give you confidence that, that can accelerate here or improve in 2Q. Maybe just to dig in on just the underlying trends that are going on in digital advertising, what happened in the quarter? And what are the improvements that are taking place under the hood?

[indiscernible]

Sure, Trisha -- Yes, go ahead Kristin. You can take this.

Sure. I'd say that the impact that we're seeing in digital advertising, it has something to do with AI overviews, but it's been much more muted than what much of the industry has been reporting. That said, we have always expected some headwinds in this category in digital advertising, and we've been prepping for it, Matt. I think what's more impactful in Q1 for us has been the shift in Google Discover, and that's been surfacing less local content this quarter. So when we look at these numbers, we expect Google to recalibrate over time, but it does reinforce the point that we've been making for a while now, which is the importance of reducing our reliance on any single traffic source.

And a good -- I'd say a good illustration of this was our coverage this weekend of the White House correspondent dinner event. Roughly half of our audience came to us from search referrals, but the other half came from direct visits and social and e-mail and other referral sources. And that indicates that we are building that direct relationship with the audience, and that has been our deliberate focus. We also have the ability to turn the dial a little bit from programmatic revenue to subscription revenue in local, especially now that we have a more profitable subscription strategy.

And as we layer in these new AI-driven smart tech insights, new tools, we can really target the right user at the right time with an offer that makes sense for that person, and we can choose to turn the dial more towards subscription. So that's the value of having an audience and a portfolio like ours. We're not overly reliant on any one source of traffic or any one revenue stream for revenue growth. And when you look out longer term, you can see this model gives us the opportunity for more significant overall digital revenue growth of our data and our insights, and importantly, our orchestration capabilities mature, and that includes our digital advertising. I hope that helps.

Very helpful.

Your next question for today is from Barton Crockett with Rosenblatt.

I wanted to just drill in a little bit more into the Google Discover thing that you were talking about. And just to be clear, you're saying that this is not related to AI overviews. This is a separate mechanism? I just want to be clear on that. And then could you give us a little bit more kind of quantification of how much of an impact this had? And given that it seems to be like a choice that Google has made, I mean, what can you do about it?

I'm happy to take that, Barton, and it's nice to hear from you. Google Discover and the AI overviews are separate issues for us. And so AI overviews have had an impact primarily in local, but not uniformly. Google Discover also has seen -- also is surfacing less of our local content. But what we've been seeing over the course of Q1 has been sort of a new norm. So we've begun to see some calibration, some normalization in what we're seeing from Google.

The impact varies. It varies by market, depending on market size, on total number of audience we already have. It also varies between local and USA TODAY. And it is why we have begun moving and shifting our content-related resources to things that we see working in real time.

So for example, there are some content categories that continue to overperform for us, whether they're overperforming on local page views or for geo-neutral audience, we are shifting resources to those places. And you can see the impact of that both in local and the USA TODAY. So for example, for local, the things that continue to work for us are obviously sports, from high school all the way through college and pro sports. Also breaking news, also local opinions, these are content categories for us in addition to service journalism that continue to drive significant audience for us. And so we're leaning into those places. And where we see content categories that are not working or not appearing in Google Discover, for example, we are shifting those resources to develop a kind of exclusive and distinctive content that Mike just referenced in his answer to what is the future value of AI deals. Right?

On USA TODAY, what we're seeing is we have ongoing ability to drive significant audience via Google, right? And that is around content categories that we have a right to win, where we are, if not the dominant player, in contention to be the dominant player. So think about sports, think about entertainment, again, think about breaking news and think about lifestyle. These are content categories for us that continue to drive significant audience. And it's the reason why, according to Comscore, we are still serving the largest audience in America among content creators.

The other piece that I will just throw in here before giving you the mic back Barton is, that video is increasingly driving audience for us, especially on USA TODAY. And so we took a deliberate step last year to begin expanding our catalog of video content, and that's paying off now as Google begins to shift what it is surfacing.

Okay. And then Mike, I don't know if there's anything to say on this question, but as you guys are aware, a Google executive made a blog post earlier this year about presumably in response to some U.K. proceedings about being open to separating the search crawl from the AI crawl, allowing people essentially to opt out, which presumably would, maybe that happened would give you leverage. Has there been any advancement on that front? Or is there anything happening in the U.K.? Any developments there? Or is that just kind of a post and then follow through?

Yes. No, Barton. To state the obvious, Barton, we're very supportive of that, and we'd like to see that be followed through on. There hasn't been any movement at this case at this point in time, but we're hopeful that, that moves forward. I think it's more likely to move forward in the U.K. before there's any traction here in the U.S., but that's obviously something we would like to see.

And Barton, just on the last question, too, because I don't want to overplay anything here on the downside in terms of audience. One of the reasons we mentioned the 180 million uniques and 1.4 billion page views on the call this morning is that those are higher numbers than we saw in the Q4. And so, I know there's so many in the media industry that are seeing overall audience declines, page view declines, things of that nature. We have not seen that. We've been very proactive in driving this business, driving our audience. And our audience does have scale and our biggest opportunity is engagement with that audience. More engagement with that audience is obviously is our biggest opportunity, but we're not seeing any large declines.

Google does adjust algorithms all the time, and we have to adjust our strategy based on those changes, and that's what Kristin outlined, and we're confident we'll be able to do that. But the biggest driver for us over the last 2 years in audience growth has been what Kristin mentioned, which is really recognizing you can't be too dependent on one source of referral traffic. And so we've been very aggressive in building traffic from a lot of different sources, including direct, and we really reap the benefit of that.

And so we're pretty excited even about the digital advertising strategy going forward and don't view anything that happened in Q1 as permanent or long-term.

We have reached the end of the question-and-answer session, and I will now turn the call over to Mike for closing remarks.

Yes. Thanks. And before we wrap this morning, let me just quickly recap a few important things. First of all, Q1 was a great quarter. It's the strongest start to the year that we've had in several years. And the truth is what you're seeing in the results reflects the work we have been doing over the last 24 months to strengthen the foundation of the business and to execute against a clear strategy. That work is paying off, and Q1 is a clear signal of that.

A few highlights, I think, worth calling out because we're really getting very, very closer tied to some important inflection points that we've been talking about over the last couple of years. First of all, in Q1, total revenue trends were the best we've had in nearly 4 years. And we're nearing that inflection point at down 1.8% to being down 3.9% in Q4 and down -- over 6% in Q3 last year or near around 6% last year in Q3. So we're really nearing that inflection point, and we expect that to come here in 2026.

We also saw total digital revenues grow at over 5% in the first quarter and reach 48% of total revenues. We've been talking about inflection point of total digital revenue being 50% of total revenues. We're really nearing that inflection point as well, which we also expect to happen here in 2026. But importantly, with this revenue mix shift and the growth in digital and the improvement in same-store, we're also seeing growth in EBITDA and free cash flow and expanding margins. So this is good profitable revenue, which is very important.

And then finally, we're seeing leverage continue to come down, and we've been aiming to get under 2x. We finished the first quarter at 2.3x. So we're getting very close to that 2x mark, too. So a lot of things going in the right direction and a lot of inflection points here to be reached in 2026.

You put all that together, we got improving revenue trends, expanding margins, strong and growing cash generation and a healthier balance sheet. A lot for us to be excited about. We're looking ahead to a really strong second quarter as well. And our digital-only subscription business has really turned a great corner. We saw the results in the first quarter, and that will continue to be a big contributor as the year goes on, as will the digital other category, which contains our licensing agreements as well as our affiliate deals. And that's a really nice category for us as well.

So expecting a strong second quarter with even stronger free cash flow generation and look forward to updating you all in 3 months with our progress on Q2. And again, thanks for joining us this morning, and thanks for your support.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the USA TODAY Company, Inc. Q4 2025 Earnings Call.

[Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Esposito, Head of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss USA TODAY Company's Fourth Quarter 2025 Financial Results.

Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer; Trisha Gosser, Chief Financial Officer; and Kristin Roberts, President of USA TODAY Media. If you navigate to the USA TODAY Company website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance and our 2026 business outlook.

Before we begin, please let me remind you that this call is being recorded. In addition, certain statements made during this call are or may be deemed to be forward-looking statements as defined under the US federal securities laws, including those with respect to future results and events, and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today.

We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in our filings made with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted.

In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, total adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin, and adjusted net income attributable to USA TODAY Company. You can find reconciliations of our non-GAAP measures to the most comparable US GAAP measures in the earnings supplement.

Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any USA TODAY Company securities. The webcast and audio cast are copyrighted material of USA TODAY Company and may not be duplicated, reproduced, or rebroadcast without our prior written consent.

With that, I would like to turn the call over to Mike Reed, Chairman and CEO of USA TODAY Company.

I am pleased to report that Q4 was by far our strongest quarter in recent years, and we are excited to share our progress with you today. I want to begin by highlighting some very important themes that you will hear throughout this morning's call. We delivered our strongest profitability in 4 years, with total adjusted EBITDA surpassing $90 million and growing approximately 17% over the prior year period.

Margin expanded 300 basis points to approximately 16% and represents our highest margin percentage in 5 years. Same-store revenue trends also achieved their strongest performance in nearly 4 years, driven by an expansion of digital revenues, which, importantly, returned to year-over-year growth on a same-store basis.

Digital revenues represented more than 47% of total revenues, an all-time high. We also generated $32 million in free cash flow, reflecting significant growth over the prior year period. At the same time, we continue to strengthen our balance sheet with an increased cash position, further debt repayment, and First Lien Net Leverage reduced to 2.4x.

We exited 2025 with good momentum across the business, reflecting our strategy to scale the largest audience in the nation, improve engagement, and maximize revenue growth. We expect this momentum to carry into 2026, including full-year growth in net income, total adjusted EBITDA, and free cash flow, improving same-store revenue trends, total digital revenue growth, and continued deleveraging.

Furthermore, our fourth quarter performance capped off what we believe was a defining year for USA TODAY Co., highlighted by significant milestones and a successful rebrand that fully embraces the ethos of a dynamic media company.

Before turning to our quarterly results, I want to highlight some of these milestones that help to reinforce our confidence as we move into 2026.

We delivered our third consecutive year of free cash flow growth over the prior year. We achieved positive net income for the first time since our merger in 2019. We saw further expansion in our digital revenue mix, as I just mentioned. Over 47% of our revenue is digital, and we are well-positioned to surpass 50% during 2026.

We executed several AI licensing agreements that we expect to improve digital revenue trends and be highly accretive to total adjusted EBITDA, including a recently signed partnership with Meta, which represents our largest AI licensing deal to date. These agreements contributed positively to our fourth quarter results and positioned us for further growth in 2026.

With regard to total adjusted EBITDA for the full year 2025, keep in mind that our results reflect some larger asset sales completed during the year, including the Austin American-Statesman. And without those sales, total adjusted EBITDA would have essentially been flat year-over-year.

We continue to strengthen our capital structure by repaying approximately $136 million of long-term debt and repurchasing $14 million of convertible notes. And we reduced our First Lien Net Leverage by 11% versus the prior year. In the second half of the year, we also took meaningful actions to create a lower and more flexible cost base, which resulted in $100 million in annualized savings, some of which we expect to flow into the first half of 2026

A couple of other factors that will further improve 2026 results were completed in January of this year. First, we completed the transfer of the Detroit News. This strategic transaction strengthens the USA TODAY NETWORK's audience across more than 200 local publications nationwide and reinforces our commitment to local journalism in the Detroit metropolitan area.

And second, as part of the transaction, we were able to reduce our First Lien Interest Rate by 50 basis points or about $3.5 million annually, which will generate cash interest savings in 2026. Overall, we believe the strength of our results demonstrates the traction we have gained and the long-term potential of the business we are building.

Now I'll turn to the operational highlights from the fourth quarter.

Our digital strategy focuses on expanding our audience, deepening engagement, and maximizing monetization across the customer journey. In the fourth quarter, we continued to attract one of the largest digital audiences in the media industry with 179 million average monthly unique visitors coming to our platforms. That scale, combined with our ability to stay closely aligned with our readers' preferences, drove another quarter of at least 1 billion page views per month domestically. As a result, digital advertising revenues delivered a third consecutive quarter of year-over-year growth.

Turning to our Digital-Only Subscription business. As many of you know, we made a pivot in early 2025 on our Digital-Only Subscription strategy. We felt some pain on volume and revenue from that pivot early in the year. However, we have conviction around the merits of that pivot. We saw some early signs in Q3, and those were further reinforced in Q4.

Our Digital-Only Subscription business delivered its strongest quarterly performance for the year. Digital-only ARPU reached a new high of $9.81 in the fourth quarter, up 24% year-over-year and 11% sequentially. Digital-only subscription revenues also grew sequentially for the second consecutive quarter, and we realized year-over-year growth in December. We believe the actions we took in early 2025 are creating a more sustainable, predictable, and growth-oriented subscriber base.

Importantly, we expect Digital-Only Subscription revenues to continue to grow year-over-year, contributing to the overall growth we expect in total digital revenue per user in our ecosystem. We see additional upside through pricing optimization, leveraging our full product portfolio, including our newly launched gaming hub, PLAY, and doubling down on local growth.

Combine this with the outstanding work, our content team delivers through our high-quality journalism and broader content experiences in categories consumers engage deeply with, and we believe we have a compelling value proposition for both consumers and advertisers.

With that, I'll turn the call over to Kristin to outline some of the exciting initiatives underway to expand our content experiences and product portfolio.

Thank you, Mike. 2025 was a year defined by innovation, resilience, and strong collaboration across our media business. We rallied around new ideas, new approaches, new opportunities, and we implemented meaningful change across the organization that generated strong momentum in our key metrics. We sustained one of the largest digital audiences in the media industry, generated more than 1 billion page views per month, marking 2 consecutive years at that level, and maintained our overall reach even as we implemented a new subscription strategy.

We also closed the year as the #1 news and information provider among content producers in the country, based on unique visitors as measured by Comscore. Together, these results reinforce our position as the preferred platform for relevant and essential content, and that includes sports.

In the fourth quarter, we continued to enhance our NFL and NCAA sports hubs with new features and richer data designed to deliver more immersive mobile-first experiences. As a result, we're driving stronger engagement as well as increased time spent with our content.

And more broadly, these enhancements are elevating how we cover sports every day and how we show up during the moments that matter most to our sports readers and viewers. And from marquee events, that means activating the full strength of our platform to drive scale, to deepen engagement, to maximize monetization across the consumer journey.

That approach was evident during the Winter Olympics, the NCAA Football Championship, and the Super Bowl. We generated millions of dollars in revenue across advertising, eCommerce, subscriptions, and merchandise, as well as visibility for the beloved USA TODAY Ad Meter. This is the tool recognized in the advertising industry for gauging consumer sentiment related to Super Bowl commercials.

Importantly, we see similar opportunities with global events such as the FIFA World Cup. Entertainment is another vertical where we're building meaningful momentum. We continue to execute strongly on our strategy to create standout experiences around topics our readers love, so celebrities, fashion, style, and doing so in the formats and platforms they prefer.

In the fourth quarter, we launched a reimagined entertainment hub designed to be more immersive and visually dynamic with a focus on vertical video, prominent photography, and richer storytelling formats, as we deliver scoops and exclusive content. Importantly, these enhancements are driving deeper engagement and audience connection across our platform.

As we've seen in sports, Entertainment also attracts robust advertiser demand, and it creates incremental opportunities to expand our commerce platform. On that note, our Digital-Only Subscription volumes in the fourth quarter reinforce that there is a meaningful opportunity to further strengthen our core business, which, in turn, will allow us to unlock the company's full potential. I'm encouraged that our subscription strategy drove both sequential and year-over-year growth in Digital-Only ARPU.

As I emphasized throughout the year, local is our key differentiator for generating unique content, attracting subscribers, and connecting with communities in more profound ways, where local stories feed national news, and national news connects with local relevance.

With a combined reach of 125 million average monthly unique visitors coming from our US media network, we are well-positioned to be essential and relevant in the local communities we serve. Our extensive portfolio of local brands allows us to deliver non-commoditized hyperlocal content that cannot be found anywhere else. From local government and politics to high school sports and community events, these are the stories that matter most to our readers, and we are uniquely positioned to deliver them at scale.

Looking ahead to 2026, we plan to further expand our subscription portfolio around high-interest areas and differentiated content experiences. PLAY is an example of that strategy in action. The launch is off to a solid start with early indicators showing audience expansion, deeper engagement, and growth in registrations and subscription starts. More broadly, games complement our sports and entertainment portfolio by driving habitual engagement, opening new monetization pathways, and supporting long-term growth.

To recap, our progress in 2025 was a result of strong collaboration across the organization, and I want to thank the entire team. We see significant opportunities ahead, and we believe our strategic actions have positioned us for sustainable long-term revenue growth. Back to you, Mike.

Thanks, Kristin. It's exciting to see the key initiatives underway to deepen engagement and enhance the overall monetization across our platform. It's so important to our overall digital revenue growth strategy.

Now I want to turn to AI. High-quality, trustworthy content is foundational to a healthy open web, particularly as AI agents become more common to help people discover and consume information.

Our strategy in this evolving landscape is straightforward, engage early with foundational partners, help shape the framework, maintain flexibility as monetization models evolve, and protect our long-term upside in this emerging ecosystem.

Consistent with that approach, in the fourth quarter, we entered into a multiyear strategic partnership with Meta to license both new and archival content from the USA TODAY NETWORK. This partnership enables Meta's family of apps and devices to incorporate accurate, timely information rooted in incredible local and national journalism. This multiyear AI licensing agreement, as well as the agreement we signed with Microsoft back in October, is high-margin and will contribute meaningfully to expected year-over-year revenue growth in digital other revenue.

And while we continue to engage with foundational partners and evaluate additional opportunities in this space, we are doing so with a disciplined long-term lens. Excluding Google, we currently block more than 99% of verified and unverified AI bots attempting to scrape our content without licensing agreements in place.

As we look ahead to 2026, we will continue to take an aggressive approach by actively sourcing AI-related revenue opportunities while continuing to protect the value of our content. And given the scale of our national and local footprint across the US and the U.K., we are uniquely positioned to be a leading provider of real-time trusted content to these various technology companies.

Now turning to our LocaliQ segment. In the fourth quarter, segment adjusted EBITDA totaled approximately $17 million, while core platform ARPU remained near record highs and grew over the prior year period. There is still work ahead with regard to customer count and revenue. However, the progress we made last year to strengthen our product foundation and sales strategy positions us well to drive stronger results across our key metrics, and we expect to return to revenue growth during the back half of 2026.

Let me highlight a couple of important initiatives underway. These initiatives include expanding our CRM integrations, strengthening our search optimization capabilities, and advancing the features and functionalities of our AI-powered software solution, Dash. These product enhancements are expected to increase client retention, deepen customer engagement, and improve measurable ROI across our platform. We also recognize that consumers are engaging with social media more than ever. And as a result, we are proactively expanding our social offerings to meet that demand.

In January of this year, LocaliQ became a badged TikTok marketing partner, joining a select group of companies recognized for quality, scale, and innovation in driving advertiser success. Being part of this exciting program means we have enhanced tools, deeper integration, and direct collaboration with a platform where over 1 billion people come to discover, connect, and take action.

In 2026, we plan to further align with evolving consumer behavior by improving and expanding our AI solutions across all parts of the sales funnel, which in turn will strengthen our ability to help SMBs achieve their goals by driving measurable results and unlocking the full value of their digital investments.

I'd now like to turn the call over to Trisha to provide additional details and color around our 2025 fourth quarter financials and 2026 business outlook. Trisha?

Thank you, Mike. Good morning, everyone. Please keep in mind, all comparisons are on a year-over-year basis, unless otherwise noted.

In the fourth quarter, total revenues were $585 million, a decrease of 5.8% or 3.9% on a same-store basis, which marks a 290 basis point improvement over Q3 same-store trends. The strength in revenue was driven by renewed momentum across our digital portfolio, with 3 of 4 categories growing over the prior quarter.

Importantly, this progress reflects both the early success and long-term potential of the strategic initiatives we've been building in 2025, including AI licensing agreements, more targeted subscription efforts, and expanded content in high-interest verticals such as sports and entertainment, where advertising performance and audience engagement remain strong. Together, these initiatives reinforce our integrated model, enabling us to drive the highest possible digital revenue per user across all streams.

Total adjusted EBITDA was $91.1 million in the fourth quarter, an increase of 16.6% or $13 million. Total adjusted EBITDA margin expanded to 15.6% in Q4 compared to 12.6% in the prior year quarter. The growth in total adjusted EBITDA was driven by the improving revenue trends, ongoing cost discipline, and continued execution against our operational priorities. Expense management remains a critical priority. And in the fourth quarter, we drove a 9% reduction in operating costs and SG&A expenses compared to the prior year.

Total digital revenues in the fourth quarter were $277.5 million, growing 5.6% sequentially and up slightly on a same-store basis. In the fourth quarter, total digital revenues surpassed 47% of total revenues. Digital advertising revenues increased 1.8% in the fourth quarter, marking the third consecutive quarter of year-over-year growth.

This momentum was primarily driven by improved sell-through and stronger yield performance as our B2B sales teams more effectively leverage the USA TODAY co-brand, attract new national advertisers to our platform, and deliver highly relevant, scaled audiences. This is an encouraging signal as we look ahead to digital revenue growth in 2026.

In the fourth quarter, Digital-Only Subscription revenues totaled $45.6 million, up 4.4% over Q3 and marking the second consecutive quarter of sequential growth. Digital-Only Subscription volumes continue to reflect the intentional actions to optimize sustainable and predictable profitability by prioritizing long-term monetization over short-term volume. As a result, digital-only ARPU reached a record high of $9.81, up 23.7% year-over-year.

We expect digital-only ARPU to continue to grow in 2026 as we remain focused on attracting and retaining higher-value subscribers while remaining smart in our pricing across the portfolio. In the fourth quarter, our digital other revenues, which include digital content syndication, affiliate content, and AI partnerships and licensing revenues, grew 27.1% and grew approximately $10 million over Q3.

This growth reflects our recent agreement with Meta as well as the shift of revenue from Perplexity into the fourth quarter. As we continue to expand these AI licensing relationships, we expect variability in timing and recognition given the structure of these agreements relative to our more traditional revenue streams.

Our strategic efforts to enhance the quality and the overall value proposition of our print product continued to deliver encouraging results. While print and commercial revenues remained in secular decline, we are actively managing the long tail. The actions taken to improve the subscriber experience have helped moderate decreases over the past several quarters. We remain focused on managing the print portfolio efficiently and profitably, and we expect this disciplined approach to continue into the year ahead.

Turning to the USA TODAY Media segment. Segment revenue decreased 7.3% in the fourth quarter. Segment adjusted EBITDA totaled $69.9 million, increasing 19.3% year-over-year, while segment adjusted EBITDA margin expanded 340 basis points to 15.6%.

Turning to Newsquest. Total revenues in the fourth quarter were $60.1 million, up 3.1% year-over-year, representing the third consecutive quarter of revenue growth. In the fourth quarter, segment adjusted EBITDA was $13.5 million, up 20.7% year-over-year, while segment adjusted EBITDA margin expanded 330 basis points to 22.5%.

Looking at our LocaliQ segment, core platform revenue in the fourth quarter was $107.3 million, and segment adjusted EBITDA totaled $16.6 million. We ended the quarter with approximately 12,700 core platform average customer count, and core platform ARPU remained near record highs at approximately $2,800, reflecting growth of 1.4%.

Let's now turn to the balance sheet. At the end of 2025, our cash balance was $90.2 million, and net debt stood at $887.1 million. Free cash flow in the fourth quarter increased by $27.7 million to $31.5 million. And for the full year, free cash flow totaled $64.2 million, an increase of approximately 10% versus the prior year. We ended 2025 with $977.3 million of total debt, reducing First Lien Net leverage by 11% to 2.4x.

In the fourth quarter, we repaid $19.1 million of long-term debt. And for the full year, we repaid approximately $136 million of total long-term debt. Our net loss of $30.1 million for the quarter reflects a tax provision of $73.6 million, reflecting the expected large quarterly variances in our provision.

For the full year of 2025, our tax benefit was $3 million, and our full-year net income was $1.7 million. Subsequent to year-end, we completed the transfer of the Detroit News. This follows the conclusion of the long-running joint operating agreement between the Detroit Free Press and the Detroit News, which ended on December 28, 2025, under which the results for both titles were consolidated into our financial results.

Now with common ownership, we can operate more seamlessly in a strategically important market, creating opportunities to better scale audience, strengthen local journalism, and accelerate digital growth while continuing to support distinct newsroom voices for both titles.

The transfer of the Detroit News was funded in part by cash on hand and $15 million of additional principal under our 2029 term loan facility. In connection with the transaction, we also secured a 0.5 percentage point reduction in the interest rate on the 2029 term loan and the first required amortization payment as per the amendment agreement, shifted to June 30.

As we look forward to 2026, we intend to build on the successes of 2025. In Q4, total adjusted EBITDA grew approximately 17% over the prior year, and we expect higher levels of total adjusted EBITDA growth in Q1 as revenue trends improve, in part due to the impact of AI licensing and as we cycle the impact of the sale of the Austin American-Statesman.

As new revenue streams scale, we expect to have more consistent total adjusted EBITDA across the quarters in 2026, which may result in greater year-over-year variances by quarter than has been typical. We finished 2025 with a marked improvement in our same-store revenue trends, and we expect to continue to improve on that trend throughout the year, which we believe will lead us to same-store revenue growth late in 2026.

For the full year, we expect total digital revenues to remain at year-over-year growth on a same-store basis, driving more meaningful growth and exceeding 50% of total revenues during the year. We expect total revenues to be flat to down in the low single digits on a same-store basis and expect to continue to drive ongoing improvement in year-over-year trends through the year.

With the expectation of improving revenue trends and the impact of the cost reductions made in 2025, we expect full-year growth in net income attributable to USA TODAY Co., and in total adjusted EBITDA. These year-over-year gains in profitability still allow us to invest in our business in data, technology, product development, and people, which we believe enables us to create a sustainably growing media company.

We also expect double-digit year-over-year growth in cash provided by operating activities, as well as free cash flow, with a slight usage of cash in the first quarter and more meaningful free cash flow generation occurring over the remaining 3 quarters of the year.

Overall, our strong finish to 2025 reinforces the confidence we have in our strategy, and we believe it positions us well to build further momentum in 2026.

I will now hand it back to the operator for questions, and then we will go back to Mike for some closing thoughts.

[Operator Instructions] The first question today is coming from Giuliano Bologna from Compass Point.

Great to see the continued performance. As the first question, the fourth quarter showed great revenue improvement. Do you expect that to continue in '26? And what do you think will drive that?

The answer is yes. And from a high level, the driver is continued digital revenue growth, digital revenue improvement. But let me be a little more specific, and these are all items that we actually covered in the call this morning.

First is our focus on the scale, the size of our audience, and continuing to grow that audience, but more importantly, improving engagement with those folks coming to our platform. And that is leading and will continue in '26 to lead to improved consumer revenue. And we look at total ARPU across the platform, which comes from advertising, subscription, and affiliate. And we're looking to continue to grow that total ARPU per consumer on the platform through improved engagement, as well as growing the number of users on the platform.

Second, we talked about it a bit in our remarks here this morning, is both our current AI licensing deals and any new AI deals we do this year will lead to growth here in 2026 and improve our revenue trends.

And third, I'd highlight our improved digital subscription revenue trends. We started to really see that shine in the fourth quarter, including growth that we saw in December from a year-over-year perspective. So, with that return to growth, we expect those revenue trends to be much improved in 2026, leading to overall revenue improvement on the digital side.

And then finally, we do expect to improve our DMS revenue trends. We expect to return to growth later in the year, second half of 2026. And we outlined the various action items we have underway in the DMS business as well. I think to summarize this, the good news here is these are all action items that we have been putting in place during 2024 and '25. They're not things that we yet need to do. So, there are things that we're starting to reap the rewards for in our financial statements now, as we really started to see in Q4. And these things will all drive better, improved trends in growth in 2026. So pretty excited about the outlook.

That's very helpful. And just as a follow-up, you gave strong guidance for 1Q and 2026 free cash flow and also 2026 free cash flow guidance, but it was indicated a slight usage of cash in the first quarter. What's driving that?

Giuliano, this is Trisha. Yes, the usage of cash in Q1, it's largely seasonality and timing. It's consistent, I think, with what you've seen historically from a working capital perspective from us. And year-over-year, there's also some minor timing changes in our interest payments. But you're right, we did guide to a pretty strong quarter for Q1. We took a really meaningful step forward in our same-store revenue trends in Q4, almost 3 percentage points. And we expect, as Mike mentioned, to take another step forward here in Q1.

And then if you look at our Q4 adjusted EBITDA, we grew about 17% year-over-year and above 20% if you take out the impact of the asset sales we made earlier this year, mainly in Austin. So we'll cycle Austin, the sale of Austin, mid-quarter in Q1. And so you take that with the strong revenue and the flow-through of the cost actions that we put in place in Q3, we expect similar to higher EBITDA growth in Q1 on a percentage basis in Q4.

So as Mike said, we've been building on this for '24 and '25, and it's really encouraging that we're starting to see the impact of our strategy play out in our results. The steps we took on subscription revenue are resulting in a more sustainable, growing digital business. The efforts we've taken to monetize our content in multiple ways, including these licensing deals, leading to improving revenue trends and what we think is going to be a really strong Q1 and, over the long term, sustainable growth.

That's very helpful. And congrats on the new high in digital ARPU. As it approaches $10, do you see more upside from there?

Mike, I'm going to take this one. Giuliano, it's Kristin. We feel really great about the progress, only ARPU hitting $9.81 in Q4, and that's up 24% year-over-year, and Digital-Only Subscription revenue growing sequentially again. So in terms of upside, I think we continue to see room to grow ARPU in 2026, and I think we're going to do that through a couple of levers. There's smarter pricing and smarter packaging across the portfolio. There's better retention and life cycle marketing. I think there's also an expanding product set like PLAY, right? And we're using PLAY and these other products to drive habitual engagement and, in turn, some incremental monetization there.

On the ARPU versus volume issue, our philosophy remains to optimize long-term value, optimize long-term predictability. We did intentionally trade off some short-term volume earlier in '25. But what you're seeing now is a healthier and more sustainable subscriber base. And we do expect that Digital-Only Subscription revenue will continue to grow year-over-year as we execute on this strategy. So I hope that helps, Giuliano.

That's very helpful. And switching over to kind of the meta topic, but you announced the Meta AI deal in 4Q. And how should we think about AI licensing revenue in 2026?

Yes. Giuliano, it will be a good growth category. And I would think about it in terms of '26 and beyond. It's a multiyear good growth category for us, we believe. I would like to introduce just a little bit of caution here as we think about the AI licensing revenue opportunity.

We do expect significant growth in 2026, but it's still a developing marketplace. And so we're learning a lot as we go forward. We have learned that the deals can be lumpy and they can take some time to get done. So the past 12 months, we have made a lot of progress. We have some great deals in place now. So we do expect nice growth in 2026. But our eye on the prize here is the longer-term opportunity, which we see from more deals to come as this overall business model in this ecosystem continues to evolve. So pretty excited, but a little bit cautious in the near term. It's a growth category, but it's also still an evolving category, and we're playing the long game here, too.

That's helpful. And when you talk about kind of like the growth expected in '26, is that mostly from the existing contracts you've already signed? Or are you considering potential new deals that you could sign in '26?

Yes, it's both, Giuliano. It's existing deals. So we have some banked growth already with the deals we've signed, but we do expect additional growth through more deals to be signed and more deals to come. So both.

That's very helpful. And then, as a final one, you made very strong progress on debt reduction in '25. Can you provide a little more detail on 2026 debt paydown expectations and what you're targeting from a First Lien Debt leverage perspective?

Yes, absolutely. You're right, we did make great progress in 2025. We repaid approximately $135 million of long-term debt in the year, and that brought us down to about 2.4x First Lien Net leverage to the end of the year, and we remain focused on bringing that number down again in 2026. So, our approach this year is going to be that debt is funded primarily through our operating performance and our free cash flow. We guided to double-digit growth in free cash flow in 2026.

So, less reliance on asset sales and more reliance on the cash flow that we're throwing off. We guided to full-year growth in total adjusted EBITDA and in free cash flow based on those improving revenue trends. And so, all of that's going to support our deleveraging. So, we're thinking about 2026 as the year that we continue to improve the business, and we use that cash to bring down our debt. I think that will put us much closer to that 2x First Lien Net leverage to end the year here in 2026.

The next question will be from Matt Condon from Citizens.

My first one, just some of your peers, just in the publishing industry, have called out just the AI overview impact on just programmatic revenue. Are you seeing any sort of impact or click-through rates, or traffic? Or is there anything to call out there? And then I have some follow-ups.

Yes. Matt, good to talk to you. Our click-throughs from Google from the search perspective have remained flat. So, we've done a pretty good job of continuing to have a great ranking in the search ecosystem there with regard to Google. But with regard to AI overviews, pretty much all of the AI platforms, the amount of traffic that comes back to publishers is almost nothing. So, the user stays on the AI platform in those experiences.

So, our path to monetization is by licensing content for use in those AI platforms. It's not through clickbacks to us. But with regard to the publishing industry has seen a lot of declines in traffic from search. We've been fortunate enough to be proactive from a strategy perspective over the last 2 years, we've been able to maintain a flat number with regard to search from Google blue links.

And then we've been really good at growing traffic to our platform from other means, social media being one of the biggest drivers, and then also more direct engagement with consumers coming directly to our platform. So overall, our page views remain strong. Audience remains strong, and we're battling through some of the challenges the industry is facing from declining search.

That's very helpful. And then a follow-up. There's more and more AI, and it's improving internal workflows across, I think, all companies. Just as you look at the business, obviously, you've implemented the $100 million in annualized cost savings. Are you seeing increased opportunity to implement AI internally just to further those cost reductions and run the business leaner?

Matt, the answer is yes. And we do have an AI task force that's working on deploying AI in every single facet of our business. And so we do see future cost efficiency opportunities that come from the use of AI technology. But I would say, Matt, we're actually more excited about the use of AI technology to improve our revenue performance, our ability to do better lead gen work, our ability to do better presentations with customers to tell the story better to improve ROIs for customer usage on the deployment of AI technology inside our company. That will be the big win for us. But to answer your question, we do see further cost efficiencies as well.

Great. And then maybe just the last one. Can we just get an update on the Google lawsuit? I don't know if there's anything updated there. And I think investors would just love to hear just the timetable and where we sit here today.

Yes, Matt, thanks. So yes, Judge Castel, the judge in our case last October, granted our partial summary judgment in the case, which was a great, important step for us because it established liability on certain claims. So, we're really excited about that. In January of this year, Google filed its own motion for summary judgment. We expected that. It was all in the normal course. We believe their motion lacks any merit, and we expect a favorable ruling on that motion, favorable for us. We anticipate that motion being ruled on later spring or summer of this year.

And then we expect to have our jury trial set later this year, and we expect the jury trial to be set for the end of '26 or early '27 at the latest. As far as other milestones in the case, similar to what we talked about on previous calls, we do expect the remedies ruling to be issued very soon for the DOJ case. And we expect once the remedies are ruled on, we expect the case out of Texas to go to trial. So that should happen shortly after the remedies are announced.

So, we are expecting quite a bit of progress here or quite a few milestone announcements to come over the next several months. The DOJ remedies ruling, the Texas case going to trial, a summary judgment ruling on Google's summary judgment filing in our case, and then a jury trial being set. So, we feel very, very positive about our case. That hasn't changed, and we think there's a lot of good momentum to come here in 2026.

And the next question is coming from Barton Crockett from Rosenblat.

I wanted to ask about the steps that Google took earlier this year to make a blog post saying that they would take some steps to allow separation of presence in AI overviews from search, seems to be in response to some U.K. actions, but it would seem to be a global statement of ambition to do something that was applauded by your trade group here. That would seem to be potentially very interesting, maybe providing some leverage to have a stronger licensing conversation with them if that proceeded. But I was wondering if you could give us your thoughts on what you think about that, and if you have any reason for optimism that, there could be something that could move the needle forward there.

Yes. Thanks, Barton. We are encouraged by that blog post, and nothing has happened to date. We probably should be clear about that. But the blog post was encouraging. We think it's the right move. It would move the playing field toward clear publisher control and directionally, it'd be constructive for sure. Our guiding principle remains the same. Trusted high-quality journalism has real value. And if that content is being used to power AI experiences with no compensation to the publishers, it's illegal.

And so, we believe there should be a level playing field, fair compensation for our content, and certainly, Google distinguishing between blue link search and usage in their AI products it would be a really positive development. So, we're encouraged by that. We think it's the right thing to do. And you're right, it would lead to, we think, a better licensing discussion around licensing our content for usage in AI. So, it could be a real positive development. We're hesitant to say anything too optimistic right now because we just don't really know what they'll do.

Yes. I mean to follow up on that, they made a blog post. Is there an opening for a discussion with them on your part or industry-wide, or not at this point, do you think?

Well, I wouldn't say that we don't have discussions. I wouldn't want to get into any kind of confidential information for ongoing discussions we have with any potential AI licensing partners. But I would suffice it to say that we do have a lot of conversations going on with a lot of different technology companies.

Okay. Now, one of the things I was also curious about was your monthly unique visitors. I think the number was 179 million, I think, which is down a bit from the third quarter, down year-over-year. What's driving the dip there? I mean, you said search is steady. So, what is it that's driving that?

Kristin, do you want to take that?

Yes, I'm happy too. We made some intentional steps over the course of 2025 to maintain our audience reach at more than 1 billion page views per month, so that we could begin to turn the dials on our subscription strategy and begin to do some testing and some experimenting around various tactics that would improve engagement, improve registration, and then improve take-up and then pay up on our subscription offers.

So, I think what you're seeing is a reflection of some deliberate actions that we're taking to stabilize around 1 billion page views per month, which gives us the breathing room to be testing around different subscriber thresholds in the attempt to build back a healthier long-term subscriber base in the digital-only category. Does that help answer the question?

Yes. Yes, that helps. And then one other topic I was wondering about in terms of the court schedule, if I could. I was wondering if there's also one other key milestone that you can see in terms of timing, and that might be important in terms of getting your jury seated. And that is a decision by the judge of which witnesses would be allowed for a trial proceeding. There's a term of ours for that, and I'm not a lawyer, so I forget what it is. But is that something that we should also be looking for as a marker that would signal that things are about to get started?

Yes, I do. And I'd say late summer, fall, we should have more clarity on that. So, it's right to look for it. And I would say that's another milestone to look for as we get to the summer this year.

And that concludes today's Q&A session. I will now hand the call over to Mike Reed for closing remarks.

Yes. Thank you. Thanks, everybody, for joining us this morning. Let me just quickly recap a few of the most important highlights from this morning's call.

And I'll start with, as mentioned, Q4 felt good because it was the best quarter we've had in several years. And so many of the initiatives that we've been working on really started to show up in the financials, and we're encouraged by that and how that's going to roll into '26. We delivered our strongest profitability in 4 years. And as a result, in the fourth quarter, adjusted EBITDA returned to meaningful year-over-year growth.

And also on the total digital revenue side, we returned to growth, which was great on a same-store basis. More than 47% of our revenue came from digital, and we do expect to surpass 50% here in 2026. And you saw a real step forward on same-store revenue trends in the fourth quarter, improving by about 300 basis points, and it was the best trend we've had in several years. And you heard this morning, we expect that to continue into 2026 and Q1 as well.

We did deliver our third straight year of free cash flow growth, and that was great, and we continue to expect double-digit growth again in 2026 for free cash flow. And when you take all these things together to reflect improving revenue momentum, expanding margins, strong cash generation, and deleveraging, we continue to think we're going to create great value for shareholders.

And finally, I would just say, as you heard from Trisha, we are expecting a stronger Q1 across most all trends, feeding off of the Q4 we just delivered. So, we look forward to getting back together with you all in 2 months to update you on our progress and fill you in on our Q1 results. And so, thanks for joining us this morning, and everyone, have a great day.

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.

All right. Why don't we get started? So good morning. I'm PK Keller, and I'm an associate on the media and communications research team here at UBS. TODAY, we're joined by Trisha Gosser, CFO of USA TODAY Co. USA TODAY operates a network of 200-plus local, regional and national newspapers across the U.S., Newsquest in the U.K. and LOCALiQ, a digital marketing services business. So Trisha, thanks for joining us today.

Yes. Thanks for having us.

So why don't we start by kind of outlining the company's strategy and your priorities for next year?

Yes, absolutely. So our goal is to inform, inspire and connect communities. And we do that through what we believe is the only local to national media organization in the country. Our focus is on unbiased journalism, content that brings people together in the center. And it's created the largest digital audience of any media content creator in the country. We have 187 million unique visitors digitally to our properties every month. Like I said, that's the largest of any local provider, any national provider. And with that comes a lot of responsibility and a lot of opportunity.

And in the last couple of years, our focus has really been about expanding that audience. We've been growing our audience on a very regular basis. And expanding the way that we monetize that audience. We're leaning fully into monetizing that audience across a full spectrum of opportunities. When you reach that many people across the U.S. and the U.K., we have opportunities to serve them digital advertising, to serve them digital subscriptions to find ways to monetize our content that we're already producing elsewhere on third-party platforms with AI licensing companies and to really build a full funnel advertising suite as well.

You mentioned our business, LOCALiQ, it's about a $500 million digital marketing solutions business that helps small- and medium-sized businesses find, locate, keep and grow their revenue. And so our focus is really on growing our audience on our platforms, engaging that audience more fully and really leveraging the full monetization opportunity and suite we have against that audience.

Great. So you guys are still you still have a majority of nondigital revenue you've spoken to the different types of digital revenue that you're trying to drive building out this kind of full suite of differentiated revenue streams. Can you talk about kind of how that digital mix evolves getting to 50% and where you're trying to kind of build the business in terms of if it's specific lines of revenue or if it's more about kind of the holistic view of the business?

Yes, absolutely. It's really about a holistic view of the business. So we're very close to being 50% digital. We're about 47% digital revenue in Q3. We expect to approach that 50% digital mark in Q4 and then be over 50% digital in 2026. And that's a really pivotal moment for our company. When you've got digital revenue as a predominant revenue source for you, and that's a growing business, you become a sustainably growing journalism and content business. Our goal is to leverage that audience that we have, that large audience, the largest in the country and monetize it fully. So when you have an audience that size, you know that not everybody is going to subscribe. And we want as many subscribers as we can, but that's not our only focus.

We know that we can fully monetize every opportunity we have with somebody who visits our platform. And that can be advertising revenue. It can be subscription revenue. It can be e-commerce. We have a growing and substantial e-commerce business. And like I said earlier, we also have the opportunity to take the content that we're already creating and find other avenues to monetize that, whether that's through syndication or licensing. And so it's really about taking that audience and orchestrating a full monetization of that. When we do that, when we're so close to that 50%, we really see us on this path of being a consistently growing content company.

Awesome. So going to licensing, AI has been massive over the last few years. I think people have thought print media and legacy media companies are really exposed here, but USA TODAY has been very active in licensing its content. You had the Perplexity deal that started in October. You just announced a new deal. Can you talk about kind of how AI applications are impacting the media industry, both from kind of the licensing perspective? And then are there other ways it can be a net positive to the business?

Yes, absolutely. I think we're at a pivotal shift here from the media industry. You've certainly heard you see the headlines that AI can be very disruptive to the media industry, and we're well aware of that. We are not seeing that. Our audience is growing on a consistent basis, and we are very focused on making sure that we're creating a very engaged audience. So we want people to come to us directly, not via search, and we are actively leaning into vehicles and avenues to make sure that people are coming to USA TODAY and engaging with us directly.

We also have implemented things like Taboola's DeeperDive on our website, which is an AI search-like experience that exists on the USA TODAY platform. So people don't have to go to other sites to other AI search engines to just come to USA TODAY and get our content in the format that they want it. So certainly, it has the potential to be disruptive. We are well aware of that, and we are aware of the risk that it could be for the media industry, ourselves included.

We are actively blocking AI scraping bots, the ones that we can. We're blocking 99% of verified AI bots coming to our sites right now. We mentioned on our Q3 earnings call that we're blocking something like 75 million AI scraping attempts on a monthly basis, regularly outside of Google, which we don't have the ability to block, nobody in the industry has the ability to block. And with that comes the opportunity to really force the conversation on monetizing our content. The vast majority of the AI scraping bots are local content. Like I said, it was $75 million in September. About $70 million of that was our local content. So we can see how valuable our unique content is to these AI engines, and we see a real opportunity to create a marketplace and monetization opportunities for publishers.

Got it. So can you touch a little bit more on the monetization side, the licensing deals? You signed a lot. Are there kind of other avenues in terms of having just other avenues, I guess?

Yes, absolutely. So we've signed some really important and meaningful AI monetization and licensing deals over the last several months. Perplexity was the largest that launched in Q4. You mentioned we just signed a licensing deal with Meta. We announced that last Friday. These are our 2 largest AI licensing deals that we've signed to date, along with deals with Microsoft and Amazon. I think this monetization marketplace is really developing.

Our goal is to be in the conversations early to help shape what that marketplace could look like. I think AI license -- AI companies, search engines and publishers really realize that it is unbiased factual reliable content that's going to fuel the Internet of the future. People are going to use AI search engines to get their content. You want it to be factual. You want it to be relevant. We are the largest content provider in the country. We are going to be part of those conversations. We want to help shape those conversations.

The way that we're monetizing this currently is we are licensing our content for AI companies to use for real-time use. We are also starting to explore monetizing our archives as well to allow AI engines to start to train their models if they haven't already. So it's largely a licensing opportunity right now. You are starting to see and we do have deals where we're sharing advertising revenue with some of these AI companies. I think that, that piece of the marketplace is still developing. I think there's a substantial marketplace that can be developed.

And our goal right now is to make sure we're helping to shape that, but also to make sure that we capture the long-term value of this. And so you'll see that a lot of our contracts are 3 months, 6 months, 1 year to 2 years, because we really think the marketplace could look vastly different in a couple of years than it is now.

Got it. So those are much shorter term than I would have imagined. I think we've seen other licensing deals, maybe not on the AI side, but in the publishing industry, like multiyear deals. And that speaks to wanting to be ahead of the curve and knowing what this marketplace will be. Can you give us some insight on kind of from signing to operations within the company to monetization? What does that kind of time line look like?

Yes, it varies. One of the things I will say is that I think a lot of AI companies are still determining their monetization models right now as well. Very few of them are profitable, and they are still very much determining how they will reach profitability. And so that will also determine how the marketplace develops. And I think that's why you're not seeing some of the longer-term deals that maybe you do in more mature marketplaces elsewhere. The time from a conversation to a deal signed, it varies.

It is an evolving space. And so I think the first one takes a little while as you go through conversations. But we know what's important to us. We know that attribution is incredibly important to us. We know that fair compensation is important to us. And we're having conversations with companies who believe that's important as well, and that helps those conversations move more quickly.

Great. So you touched on licensing. You touched on all these different digital revenue streams. I think one investors have looked at is advertising, and you guys have spoken to that being a growth driver given your large audience that you have digitally. Can you talk about kind of the advertising ambitions you have as a company? And how can you kind of more effectively capitalize on the engagement scale that you guys have?

Yes, absolutely. So our ambition, as you called it, is to make sure that we are fully leveraging and monetizing the scale and the quality of the audience that we have. We have an incredibly large digital audience, and there's a lot of opportunity there to drive advertising revenue. We've seen good growth year-over-year over the last couple of quarters, and we expect that to continue. That comes from a couple of different places. First, we've always had a very strong programmatic channel. We're in a lawsuit with Google, and we think there's a lot of opportunity there should that marketplace change in a more fair and equitable way.

But outside of that, we're really leaning into USA TODAY as our brand and who we are as a network, and there's an incredible amount of opportunity there. You're starting to see national brands shift back towards publishing. Stagwell has published some really great research about the high ROI and the safe space that journalism and content creators provide for brands. So you're starting to see brands shift back towards publishers into the media landscape. We're starting to see that, and we're starting to see that on the back of our strong brand here at USA TODAY.

Got it. So I think my understanding is people have avoided or advertisers have generally avoided news, maybe some of them maybe not because of the issues that they sometimes touch on. Do you think that's not really becoming a concern anymore?

I think there's 2 things there. First, where you've seen people shift their dollars to is a social media platform like TikTok or Instagram or Facebook. And I think we can all acknowledge that those issues that you talked about exist on those platforms and certainly less regulated and brand safe than they would on our platforms. So I think there's a realization that the things that brands are shifting away from exist on all the platforms that they shifted to.

Our content is much safer than perhaps you would find on a TikTok or on Instagram, for example. I also think that when you have a brand like USA TODAY, that it's not just journalism in its traditional sense. We lean very heavily into sports. We have the second largest sports audience of anybody in the country behind only ESPN. Sports content is the place that brands want to be around. We have a very large entertainment audience. It's a very strong vertical for us. So there's a lot of very safe content verticals that brands are coming to as well.

Got it. Okay. That makes -- the arguments make a lot of sense there. So you kind of touched on Google and the Google lawsuit. I know you guys had a recent kind of court finding there, which you viewed as positive. Maybe outline us -- give us a little rundown of that, your view on it and maybe kind of the long-term impacts for your business and the ad tech space broadly.

Yes, absolutely. So Google has certainly been found to run a monopoly in many places. They've done it in the search space in a separate case. And with the case that the DOJ brought several years ago in the ad tech space, Google was found to create a monopoly for where publishers are selling their inventory. And we believe that Google maintains a monopoly in the ad tech space, controls how publishers can sell their inventory, creates depressed rates and that negatively impacts publishers' revenue and Google takes more of the profits. You mentioned a ruling in our case. So we brought a case against Google several years ago, very similar, a little bit more expansive than what the DOJ had that the DOJ was successful in prosecuting with the ruling earlier this year.

The judge in our case, Judge Castel issued a summary judgment ruling here in Q4, which says that, yes, in fact, what was found in the DOJ case that Google did create a monopoly in the ad tech space applies to our case. And so all of those claims that we have brought under -- that are similar to the DOJ, now shift from having to prove those claims. It's been accepted through that summary judgment. And now we just moved to the damages phase in that part of our trial. We have incremental claims that we've made above and beyond the DOJ. There's a state case with state Attorney Generals that will move forward here, we believe, in Q4, early next year.

We think that our case will go to trial at some point next year. We see that the actions that Google has taken has interfered with billions of dollars of revenue just for Gannett or just for USA TODAY alone, given the size of our audience and the size of our digital advertising revenue. And so we're certainly seeking damages for the revenue that's been interfered with. But we also think that once -- we will learn remedies in the DOJ case here in the next several months. Having a fair advertising ecosystem will benefit all publishers, USA TODAY included. And we're looking forward to operating in a more fair advertising tech space.

Great. That's great to hear. So I'd like to talk about kind of PLAY, which you talked about the kind of horizontal scale you guys have with a number of different publications. You talked about the different verticals, sports being very big, entertainment and the different types of revenue. I think PLAY is new versus games. Can you give us an update? It just launched in October. How is it going? How is engagement with the new service?

Yes. We're really pleased with the way that PLAY is performing. You're right. We just launched it in October. So it's very early days. but PLAY is a hub for people to come for casual entertainment. It's games, it's puzzles, it's comics, and we're seeing incredible engagement on our PLAY site. What's interesting is that it allows a lot of different types of monetization against an audience. We're seeing increased engagement. We're seeing increased time spent on site. And there's many ways for people to engage with that vertical.

You can have an ad-free version with a subscription. And so it introduces a new subscription offering into our portfolio. It introduces a subscription to an audience they may not typically subscribe to USA TODAY. We also have free versions, and we're really proud of the breadth of gaming that we have in an ad-supported manner. So we're early, early days, but it does give people the opportunity to stay on our platform, take a break from news and content and just have some casual entertainment on our site.

Got it. That's awesome. So you talked about kind of the engagement that it's bringing. Are you seeing it bring in kind of USA TODAY loyalists people who have kind of been on the platform for a while? Or is it opening up kind of a new audience that you haven't seen before?

Yes. So we currently reach 1 in 2 adults in the United States. So we have a pretty significant scale of audience as it is. PLAY certainly brings in new audiences for us, but we're already reaching what I would say is the majority of Americans currently. And so it's really about engagement. It's about giving people a new experience on our site, on our mobile apps and creating a new type of stickiness in that relationship. So we certainly hope that it brings in new eyeballs and new consumers, but it's really about increasing the engagement with the 185 million people who are already on our platform.

Got it. And then kind of on expanding the business by entering new verticals, do you think this is kind of a new growth vector for you guys in terms of kind of driving all of the new digital revenue streams. Is opening new verticals and new types of content that hasn't previously been provided by you guys something that can drive growth going forward?

Absolutely. We think that content and journalism is our bread and butter, and it's incredibly important. But I think when you think about USA TODAY and our USA TODAY NETWORK, we're so much more than just traditional journalism. And I mentioned earlier, sports is a huge vertical for us, and we have ambitions to be the largest sports audience in the country. And there are other verticals that are very strong for us and that we are leaning into. And so sports is an example of that. Entertainment is an excellent example of that.

People come to USA TODAY to live their life better. And so finance is an excellent example, too, and people want to know how to manage their mortgage and which credit card they want. And so there are so many different verticals that we are -- we have the right to win in. And a lot of them are video-first verticals as well. So when you think about sports, when you think about entertainment, those are really video-first verticals. And that's the way to really fuel our digital advertising revenue. So video CPMs are significantly higher than the traditional display advertising and people are increasingly wanting to engage with content in a video-first manner. And so we're providing that.

So absolutely, I think there's a lot of places that we have the right to win, a lot of verticals that we're leaning into and expanding that's really going to drive that audience growth that we've been seeing for many years and continue to drive improved engagement.

I love that you brought up video because video, I think, has been a large driver of kind of engagement and then monetization that kind of builds off of each other. You look at the kind of companies that offer short-form video, and they have super high engagement relative to kind of other media providers. How large do you think the video opportunity is for you guys across all of the applications?

Yes, we think it's enormous. One thing that's really interesting that our data shows is that people don't necessarily want to consume their news in video, but they want their content outside of news to be in video. And that's where USA TODAY is so strong. They want their sports to be in video. They want their entertainment news to be in video. They want their -- how do I do this around the house? How do I live my life to be in video. And so when you have a brand like USA TODAY that is so much more than just the great journalism that we provide, there's an enormous opportunity to continue to expand relevant video on our sites in the format that users want, and it's a great monetization opportunity for us.

Great. So you're transforming the company, going more digital than print for the first time ever. You have these new kind of revenue streams. And as part of that, you kind of recently rebranded from Gannett to USA TODAY. Is that kind of emblematic of kind of the new kind of growth vectors that you have?

Absolutely. So USA TODAY is a brand that's been known for innovation from the very beginning. It was the first national news brand. It was the first digital news brand. And so it's really a brand that's known for being innovative and digital first. And that's who we are as a company. We are innovative and we are digital first. It's also a brand that's known for bringing America together, and that's something that we're passionate about, too.

So I think the rebrand to USA TODAY really leans into the cornerstone, our largest masthead within our portfolio, and it's really emblematic of where we're going as a digital-first company. We're really excited about it, and it's been a great change for us.

Great. So I think you guys mentioned on the third quarter earnings call, you had a $100 million cost savings program that's now fully implemented. Can you just remind us kind of what costs were taken out of the business? How do you think about kind of cost reduction going forward?

Yes, absolutely. So maintaining our costs, moderating our costs, optimizing our cost is something that we have always been good at here at USA TODAY. And so we did take out $100 million of annualized costs that's fully in place in Q4 2025. The type of costs that we took out, we were really focused on finding efficiencies in our print business and also eliminating any duplication that we might still have in the organization, really optimizing back-of-the-house operations and making sure that we're leveraging new technology to really automate across our business.

The bigger things will be things like we closed 2 of our largest print facilities. So we'll continue to consolidate our print production. That really helps us find efficiencies in our print business. And so you'll start to see those expense reductions really fuel Q4. We think it will get us to EBITDA growth year-over-year in Q4 and then set us up well for 2026 as well.

Got it. So EBITDA growth in Q4, how do you think about EBITDA in 2026? I don't want to touch on guidance prematurely, but I'd love to hear some thoughts.

No, it's a fair question. We certainly think that we're set up well to be a growing company in 2026. Our revenue trends are improving. We're starting to add these really high dollar, high-margin AI licensing deals that are impactful in Q4 and more so in 2026. We've done cost takeout in Q4. So I think that sets us up for a really successful 2026.

Great. So taking out costs, I think you've also been very focused from a capital allocation perspective recently on kind of taking out debt. Do you think that's still the focus going forward?

Absolutely. Debt paydown remains our #1 focus for capital allocation. We've done a really great job of reducing our debt over the past several years. We fell below $1 billion of debt for the first time since the acquisition in Q3. We're expecting to pay down more than $135 million of debt here in 2025. We think getting our first lien net leverage closer to 1x is really important. So just like getting to 50% digital revenue is a huge milestone for the company, and we think really opens up shareholder value. Getting to sustainably growing revenue is another milestone, but also getting to that first -- that onetime first lien net leverage is incredibly important, and we think that really unlocks some share price as well. So that remains our #1 focus.

Last year, we did a refinancing. We took on a bit more first lien debt, and that allowed us to extend our maturities on our debt, but also take out the potential for a lot of dilution in our convertible notes. So we're going to continue to address our debt. It's our #1 priority. And as we get down to that first lien or that onetime first lien leverage, it will open up the opportunity to do a lot more with our cash, whether it's share buybacks or addressing the remaining convertible notes.

Got it. So I believe roughly a year ago, you guys sold some kind of assets based in Austin, Texas. How do you think about kind of asset sales going forward? Would that be more focused on the print side? Or does it kind of matter? It's just the kind of price that you guys are getting and the value you're getting that is the driving factor?

Yes. We're really happy with the size of our network. We're really happy with the size of our audience. We think that scale is important in this industry. And so we're not actively looking to divest any of our properties. That being said, if the right multiple comes along for the right property, we're always going to entertain that like we did with Austin. But for now, we're really happy with the size of our audience, with the size of our network. And as our free cash flow continues to grow, we have the ability to address our debt with the free cash flow that we're going to generate.

Great. So I guess, on the opposite, but same angle of that, how about acquisitions and kind of adding new networks?

Yes. I think that we'll be opportunistic if the right thing comes along and there was something that we need to tuck in. I think that we, again, have the right scale that we need, and we're finding that we can grow our business more quickly and with less capital through things like partnerships and licensing deals. And so I think our priority is going to remain on paying down debt with our cash.

Great. And I meant -- touched on this earlier, but I think Newsquest has been growing very well in the U.K. Can you kind of talk about what has kind of driven that outsized growth and how you expect that to go going forward?

Yes. Newsquest is a fantastic business for us. They're the second largest publisher in the U.K. You're right, they are consistently either a flat to growing media company. And I think that, that is really telling of the potential of our entire portfolio. It's a very profitable business, really high cash flow. And I think that they do an excellent job of representing the communities that they serve in the U.K. And there's a lot of benefit in having the scale of the U.S. and the U.K. I think it helps in things like licensing deals, for example, where you can provide a great breadth of content. So Newsquest is an excellent business. It's a big part of our audience and a big part of our growth going forward.

Great. So I guess, kind of lastly, do you have kind of any additional comments or insights you'd like to leave with investors to kind of reinforce the optimism that you guys have for the business?

Yes. We're really excited. I think we're really at a pivotal moment for us here at USA TODAY. We've touched a little bit about the fact that we're approaching that 50% digital mark. And so we're going -- we're expecting to be a predominantly digital business here in 2026. We think with that comes overall growth in our total revenue. So we're a predominantly digital business, growing revenue, sustainably growing EBITDA. We've been growing our EBITDA for the last 3 years. Growing our EBITDA, growing our free cash flow. That's a really valuable business.

We've got the largest audience in the U.S. and across the U.K. And with that audience comes incredible opportunity to further monetize, whether it's through digital advertising or through AI licensing. And then we also think we're on the cusp of something changing in the digital ad tech space. And when you have an audience of our size and digital advertising of our scale, that's a real opportunity for us. And so we see all of these things kind of converging at the same time, along with continued debt paydown. And we think that there's so much opportunity for shareholder value as all of those things come together.

Great. Why don't we leave it there? All right. Thanks, Trisha.

All right. Fantastic. Thank you.

Greetings. Welcome to the Gannett Company Q3 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Esposito, Head of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Gannett's third quarter 2025 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer; Trisha Gosser, Chief Financial Officer; and Kristin Roberts, President of Gannett Media. If you navigate to the Gannett website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance and our full year 2025 business outlook. Before we begin, please let me remind you that this call is being recorded.

In addition, certain statements made during this call are or may be deemed to be forward-looking statements as defined under the U.S. federal securities laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in Gannett's filings made with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call.

Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted. In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, adjusted EBITDA margin and adjusted net income attributable to Gannett. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement. Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any Gannett securities. The webcast and audio cast are copyrighted material of Gannett and may not be duplicated, reproduced or rebroadcasted without our prior written consent. With that, I would like to turn the call over to Mike Reed, Gannett's Chairman and CEO.

Thank you, Matt, and good morning, everyone. I'd like to start this morning by drawing your attention to some very notable highlights from the third quarter and subsequent to the quarter end. First, we accomplished a significant milestone within the quarter with our total debt falling below $1 billion for the first time since our merger in late 2019. And we are nearing another milestone with total digital revenues growing to 47% of total company revenues in the quarter, an all-time high, and we believe that we'll close in on 50% in the fourth quarter. Our $100 million cost program is now fully implemented. And as a result, we expect to start realizing the full benefit in Q4, and that is expected to drive significant year-over-year growth in adjusted EBITDA in the quarter.

We had a few large digital clients shift spend from the third quarter to the fourth quarter, and those clients have begun their campaigns in October. While that influenced Q3 results, it positions us well for a strong fourth quarter.

And finally, we were pleased with Judge Castell's partial summary judgment ruling earlier this week in our lawsuit against Google. The decision represents an important step forward as it establishes liability on certain claims. We remain encouraged by the continued legal progress addressing Google's monopolistic practices and are optimistic about what this means for both Gannett and the broader publishing industry.

Turning to the business. We remain confident in our strategy, our execution and the sustained progress we are making toward our long-term growth objectives. Let me call out a few more important highlights from the third quarter. Our audience grew sequentially on what was already an extremely large base, and we delivered another quarter of year-over-year growth in digital advertising revenues. In our digital-only subscription business, digital-only ARPU reached a new high, and we saw digital-only subscription revenue improve in Q3 from Q2, movement in the right direction after our strategy shift this year. And our DMS business saw improved year-over-year trends in core platform revenue and average customer count, while core platform ARPU remained near all-time highs.

Subsequent to the quarter end, we had a couple of nice developments on the licensing front. First, on October 8, we had the full launch of our Perplexity deal timed with the launch of their Comet browser. And we are very excited to announce this morning our new AI licensing deal with Microsoft. This new deal is timed with Microsoft to support the upcoming launch of its publisher content marketplace, which you'll hear more about later in the call. We are hopeful to keep building on our growing portfolio of AI licensing deals with the announcement of additional partnerships. Debt reduction continues to be a top priority for us. And for the first time since our merger in 2019, total debt fell below $1 billion, which marks a significant milestone in strengthening our balance sheet and reducing leverage.

With regard to financial performance in the third quarter, it's important to note that revenue was influenced by several large customers shifting their spend from Q3 into Q4, the largest of which was Perplexity. Adjusted EBITDA was impacted in the quarter by approximately $7 million versus our expectations, driven by revenue moving into Q4 and incremental expenses, primarily a pull forward of expenses associated with our cost reduction actions, including medical and benefit-related costs tied to employee exits from the organization. While these factors created some noise in the quarter, most of our key fundamentals and metrics remain strong and the drivers we were most excited about for the second half of the year continue to hold, including the momentum across our audience in terms of growth and engagement, our diversified growing digital product portfolio as well as our $100 million cost reduction program.

With these items in place, we expect to drive meaningful year-over-year adjusted EBITDA growth in Q4, along with solid growth in total digital revenues and free cash flow. Based on what we are seeing already in October, we expect to deliver a strong fourth quarter.

Now let's discuss a few key operational highlights from the third quarter. Our digital strategy focuses on expanding our audience, deepening engagement and maximizing monetization across the customer journey. In Q3, we continued to drive one of the largest digital audiences in the media industry with 187 million average monthly unique visitors, which grew more than 3% compared to Q2. This significant scale, combined with our unique ability to stay closely aligned with our readers' preferences, drove another quarter of at least 1 billion page views per month domestically. As a result, digital advertising revenues recorded another quarter of year-over-year growth. And moving forward, we expect to accelerate this momentum into Q4 as several new advertising deals have now moved through the pipeline. Separately, the focus in 2025 on the quality of our digital subscriber acquisition strategy is showing positive results. Digital-only ARPU achieved a new high of $8.80 in the third quarter, up approximately 8% year-over-year. Q3 also returned to sequential growth over Q2 for digital-only subscription revenue. While it will take a few more quarters to return to volume growth, these wins show that our intentional actions are working. And moving forward, we will continue focusing on acquiring high-value subscribers in our core local markets, where we offer a differentiated product, trusted brand and create meaningful value for our customers as evidenced by the growth in digital-only ARPU. With the innovative work Kristin and her teams are doing to expand our content experiences and product portfolio, we believe we have a strong value proposition for our consumers and advertisers.

And with that, I will turn the call over to Kristin to share more work underway to strengthen our media business. Kristin?

Thank you, Mike. Gannett Media continues to lead with purpose by providing essential content that informs, engages and entertains audiences across the country. By listening to our audience and leveraging data to understand how they interact with our platforms, we maintained our position as one of the nation's leading news and information providers among content creators. We also continue to keep our readers deeply engaged as we delivered another quarter with more than 1 billion page views per month across our network.

As we enter the final months of the year, we recognize that sustaining audience growth and engagement requires an innovative approach. Video is undeniably the most critical format for our future as Americans increasingly turn to video platforms for their news and information. Thanks to the work our unified video team has done over the past year, we are well positioned to meet audiences where they are and deliver content in the format they prefer most. One of the areas where we have seen tremendous success with video is through our sports coverage and OneTEAM Sports. In the third quarter, we launched a comprehensive suite of sports hubs for the Big Ten, SEC and NFL that brings fans closer to the action through vertical video and story carousels that create an immersive mobile native experience. These hubs also feature real-time scores, player stats and standings that give fans immediate access to the information they care about most. Early results show that time spent within these hubs is double compared to traditional browsing on our platforms, along with higher engagement levels, which in turn creates a promising opportunity to further monetize our loyal sports audience.

We're taking the same approach to new categories that spark passion and loyalty, whether it's entertainment or our recently launched USA TODAY Pets, which debuted in July with new branding, a fresh design and a video-first content strategy that spans the full journey of pet ownership. As we grow this passionate audience, our teams are expanding monetization opportunities through affiliate partnerships and sponsorships, while enhancing the platform with new features such as vertical video support and additional storytelling formats that are designed to deepen engagement and give our readers more reasons to register and subscribe.

On that note, our digital-only paid subscription volumes continue to reflect the deliberate actions of our refined acquisition strategy. I'm encouraged to see new highs in digital-only ARPU, which drove sequential growth in digital-only subscription revenues from Q2 to Q3. As I mentioned on the prior call, games remain a key focus for us in the back half of the year, and that progress is evident with the launch of PLAY, a unified digital hub for casual entertainment and gaming. Designed to align with the daily habits of USA TODAY readers, PLAY brings together everything from morning horoscopes and comics to afternoon puzzles in one convenient destination.

What's most exciting is the promising upside we see in games as a new consumer revenue stream. Nearly 1/3 of our readers already play games online, but only a small share are currently doing so on PLAY. That means every incremental gain and engagement has an outsized impact. For instance, if we can get 1 more percent of our audience to play games at our current play ARPU rates, that equates to an additional $10 million annually in digital-only subscription and digital advertising revenue. Overall, this presents a great opportunity to expand our audience, deepen engagement and drive incremental revenue as we continue introducing new features and promoting PLAY across our network.

Across every initiative, from video to new verticals to games, our teams are working with creativity, focus and urgency to meet audiences where they are and deliver experiences that truly resonate. I want to thank our teams for their continued collaboration and determination. We are building meaningful momentum, and I am confident that our collective efforts are setting the stage for a strong finish to the year. Back to you, Mike.

Thanks, Kristin. It's exciting to hear about all you and your teams have going on and especially exciting to see our PLAY business launch, which we believe has tremendous potential.

Now shifting gears to AI. The value of real-time trusted content continues to increase, and we are excited to partner with Microsoft on the upcoming launch of their publisher content marketplace. We are proud to be one of the select few U.S. publishers participating in their pilot program with Microsoft Copilot. And this exciting new initiative represents one of the first large-scale efforts to fairly compensate publishers for AI usage of their content to ground AI-powered features and results with trusted output.

With regard to our AI content monetization strategy, in addition to creating valuable trusted content at scale and licensing at fair value is our new approach to deploying technology to block AI bots that try to scrape our content. Today, we are blocking over 99% of AI verified bots other than Google that try to scrape our content without licensing agreements in place. In September alone, we blocked 75 million AI bots across our local and USA TODAY platforms, the vast majority of which were seeking to scrape our local content and about 70 million of those came from OpenAI. This is a clear signal of just how valuable our content is to these AI engines, especially our local content, which we are uniquely positioned to deliver at scale.

We will continue to partner with and provide access to companies that are interested in licensing our content responsibly and fairly. However, current structures limit publishers' ability to control how some major platforms such as Google use unlicensed content, an issue we continue to advocate for as part of building a fair and transparent AI ecosystem. Additionally, in Q3, we announced that DeeperDive, our industry-first Gen AI answer engine is now fully implemented on USA TODAY. Following a successful beta in Q2, DeeperDive brings the power of Gen AI conversations directly on USA TODAY's platform for all users, tapping into years of proprietary real-time, high-quality content created by journalists and editors at USA TODAY and across the USA TODAY Network. Since launching in mid-September, readers have asked more than 3 million questions with average daily activity well over 50,000 interactions. These early results show strong traction and highlight the meaningful opportunities to drive higher readership, deeper engagement and in turn, enhanced monetization on our platform.

Now turning to our DMS segment. We continue to see encouraging stabilization across our key metrics with year-over-year trend improvement on our core platform, which includes revenue and average customer count, while ARPU remained near all-time highs. These gains reflect the positive impact of our strategic initiatives such as AI smart bidding and enhancements to our AI-powered software solution, Dash.

For those who have been following our progress, I would like to provide a quick update on where these key initiatives currently stand. Starting with AI smart bidding. Search remains a key lead gen tool for our SMBs, and we've created greater efficiencies through the use of AI smart bidding. The adoption continues to ramp. And by year-end, we expect close to half of our U.S. budgets to be leveraging it. We are seeing encouraging results so far as it delivers a better cost per lead versus traditional integration strategies.

Turning to Dash. We continue to see strong momentum with our voice and SMS agents managing a growing volume of customer interactions. Our voice agents are managing 15% of calls for enabled customers. As a result, we are driving greater efficiency and simplifying daily operations for the SMBs we serve.

In parallel, for customers whose needs fall outside our core platform's ideal profile, particularly larger bespoke or media-heavy programs, we are increasingly serving them through capabilities in our Media segment. This approach puts each customer on the best fit solution, protects platform unit economics and enables us to grow DMS at the company level while concentrating incremental investment where ROI is highest on our own platform. Together, these efforts are building a stronger, stickier and more resilient DMS business, and we see a clear path to sustained growth.

I'd now like to turn the call over to Trisha to provide additional details and color around our 2025 third quarter financials. Trisha?

Thank you, Mike, and good morning, everyone. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted. In the third quarter, total revenues were $560.8 million, a decrease of 8.4% or 6.8% on a same-store basis. Despite the static revenue trends in Q3, we expect notable improvement in the fourth quarter, which is driven by a more significant impact from AI licensing revenue and larger digital advertising campaigns, along with targeted subscription pricing adjustments and platform enhancements.

In Q3, operating costs and SG&A expenses decreased approximately 8%, reflecting our ongoing focus on disciplined cost management. That being said, Q3 expenses reflect incremental costs associated with our cost reduction program, which removed $100 million in annualized costs from our base. We believe the reduction of expenses, primarily associated with our headcount reductions, also accelerated some costs into the third quarter in areas such as medical and other benefit-related programs, which traditionally we would have expected to incur in the fourth quarter.

Total adjusted EBITDA was $57.2 million in the third quarter, representing a 10.2% margin. These results were impacted by the timing of large drivers of revenue and adjusted EBITDA that shifted into the fourth quarter as well as the expense impacts I just mentioned. Many of our most profitable revenue drivers will contribute more meaningfully in Q4 rather than Q3, and our cost reduction program is fully in place as we enter the fourth quarter. As a result, we expect robust year-over-year growth in adjusted EBITDA in the fourth quarter as well as our third consecutive year of full year adjusted EBITDA growth.

Total digital revenues in the third quarter were $262.7 million, a decrease of 5.3% or 4.1% on a same-store basis and represented 47% of total company revenue. Within digital, advertising revenues increased 2.9%, driven by a continued improvement in client retention and our large audience base. We anticipate even stronger results in the fourth quarter, fueled by strong advertiser response to our sports, pets and other high engagement verticals.

In Q3, digital-only subscription revenues totaled $43.7 million, representing sequential growth of 2.4%. As a reminder, we faced our toughest year-over-year comparisons in Q3 as we cycled the prior year's benefit from system conversions and grace relief. Digital-only paid subscriptions also continue to reflect the intentional actions to optimize our acquisition costs by prioritizing long-term monetization versus shorter-term volumes. We believe these deliberate actions are paying off, evidenced by digital-only ARPU achieving a record high of $8.80 and growing approximately 8%. We expect digital-only ARPU to increase in the upcoming quarters as we maintain our focus on attracting and retaining more profitable subscribers.

Looking at the Domestic Gannett Media segment. In Q3, segment adjusted EBITDA was $35.4 million, representing a margin of 8.5%. Revenue trends in Q3 on a reported basis continue to reflect the sale of the Austin American-Statesman in Q1 and businesses divested in late 2024.

Turning to Newsquest. In Q3, segment adjusted EBITDA totaled $14.6 million, up 4.6%, while segment adjusted EBITDA margins increased 50 basis points to 23.9%. Revenue trends also posted their second consecutive quarter of growth, increasing 2.5% year-over-year.

In our Digital Marketing Solutions segment, Core Platform revenue in the third quarter was $114 million. Segment adjusted EBITDA was $9.8 million. We ended the quarter with approximately 13,400 core platform customers and core platform ARPU remained near record highs at approximately $2,800, which reflects growth of 2%. We see encouraging signs of stabilization. And in Q4, we expect year-over-year improvement in both core platform revenue and segment adjusted EBITDA. and to better serve our customers in certain categories, particularly large multi-location businesses, we have transitioned some of these clients to be serviced through our Media segment, where they can leverage additional tools and capabilities.

Now let's shift to the balance sheet. At the end of the third quarter, our cash balance was $75.2 million and outstanding net debt was approximately $921 million. Debt reduction remains a top priority, and we continue to make meaningful progress during the period. In Q3, we repaid $18.5 million of debt and generated $4.9 million of free cash flow. For the 9 months, we have repaid $116.4 million in debt, which brings our total debt to below $1 billion, and we expect to repay over $135 million in debt during 2025.

As we look at the full year, several large revenue drivers that were originally expected to contribute to the third quarter are now expected to start in the fourth quarter. As a result, we now anticipate digital revenue to be down in the low single digits for the full year on a same-store basis, with growth in the low single digits in the fourth quarter. We believe the expected strength of the fourth quarter, combined with continued expense discipline, positions us to achieve full year growth in adjusted EBITDA and 30% growth in free cash flow. We know there is more work ahead to strengthen our financial results, but the third quarter also underscores the progress we're making to build a more durable and diversified business.

With the scale of our audience, the strength of our brands and the ability to leverage our content across multiple revenue streams, we believe Gannett is well positioned to create lasting value. Combined with an ever-improving balance sheet and a disciplined focus on the execution of our strategy, we believe we are laying the foundation for long-term value creation. I will now hand it back to the operator for questions, and then we will go back to Mike for some closing thoughts.

[Operator Instructions] Your first question for today is from Giuliano Bologna with Compass Point.

Congrats on the continued execution, especially on the securing another important AI licensing deal. As a first question, you referenced some of the developments this week in the Google antitrust lawsuit that you have outstanding. Can you share what the development was and how you think it impacts the case and how the case should move forward as a result of that development?

Hey, Giuliano, good morning. Thanks. Yes, let me start by explaining that or actually emphasizing that this is a very positive development for Gannett as it relates to our case against Google. And so a little more detail on what happened on Tuesday this week, Judge Castell the federal judge in New York issued a summary judgment ruling in our case against Google. And effectively, the court agreed with the Department of Justice's earlier findings earlier this year that Google illegally monopolized the digital advertising market and ruled that Google can't relitigate those issues in our case. So Judge Castell said Google basically -- said Google can't relitigate the issues in our case. That was a big win for us.

But trying to simplify it, what it means for us. It means the court has already established liability on key aspects of our claims. And the case really now focuses on damages and remedies for these claims. And this is another important point, Giuliano. We believe this ruling has the potential to move the case forward more quickly now, allowing us really to concentrate on demonstrating the harm caused and the remedies we're seeking, which obviously include compensation for the damages done to us. So it was a significant win for Gannett that establishes liability, and we think moves the case along quicker and also will lead to a more fair and open digital marketplace eventually. So this was a really positive milestone for us, and we're excited about the developments this week, but also staying really focused on the next steps of the process in this case.

That's very helpful. Maybe shifting gears a little bit. You noted some of the large revenue drivers shifting, yes, from 3Q into 4Q. Can you unpack what's driving that timing and whether it reflects broader trends you're seeing in advertiser demand or digital monetization or onetime shift.

Yes, sure thing. I think the first point I really want to emphasize here is we do think based on October's activity that it is simply a timing shift. And I'll start with Perplexity, and that was really not -- that was just due to a product launch timing shift. We signed the deal with them, as you know, towards the beginning of the third quarter, and their common browser was scheduled to launch in September, and that got pushed to early October. And so the revenue that we had planned on for September from that licensing deal didn't begin until October. So truly a timing shift tied to a product launch. The good news is it launched in early October, and we are enjoying that partnership now with Perplexity, and it will help the fourth quarter now.

We also saw a number of digital advertising deals that were in the pipeline shift from Q3 spend to Q4 spend. And again, the good news here is that we're successfully seeing those deals up and running in October and running their messaging and contributing to revenue in October. So we do believe that there's not more to it than a timing shift, both for the advertising customers that shifted as well as Perplexity. So we feel good about -- feel disappointed that it impacted the third quarter, but really excited about the positive impact it's going to have for us on the fourth quarter.

That is very helpful. I appreciate it. I guess can you give some more color on the incremental expenses that you incurred during the third quarter? And do you think any of these will continue to have an impact going forward?

Hey, good morning, Giuliano, this is Tricia. Yes, the biggest component of the incremental expenses that we saw compared to what our expectations were for the quarter were associated with the headcount reductions that we completed in the quarter. So that was tied to that $100 million cost takeout that we did. So we saw things like medical and other employee benefits programs spike up in the quarter. And we really think that, that was tied to people exiting the organization. And to your question about whether we think that continues, I don't think so. I actually think it has the ability to have a favorable impact on Q4. Generally, we see a spike in claims towards the end of the year, and we really think that, that was pulled forward into the third quarter as people exited the organization.

The other thing I would highlight that's really important is that cost program is now fully implemented. So we're going to see the full benefit of that impact in the fourth quarter, and that really should set us up to have a strong year-over-year EBITDA growth in the fourth quarter.

That is very helpful. I appreciate that. And then next question, given that the digital revenue mix is now approaching 50% of revenue, how do you see that evolving into '26? And what gives you confidence in the durability of those revenue streams?

Yes. As you know, in Q3, we were about 47% of total revenues coming from our digital businesses. We expect that to be closer to 50% in the fourth quarter and then expect that to surpass 50% in 2026. And I think it's important to note that the makeup of our digital revenue is much more diverse today than it has ever been. You heard Mike talk about Perplexity launched earlier this month. We announced a Microsoft AI licensing deal just this morning. We've signed agreements with AI licensing partners throughout the year. We think there are more AI deals to be coming in the coming quarters and months.

You heard Kristin reference the launch of PLAY, and we think that could be a good contributor from both the digital advertising and a subscription standpoint. And so we continue to develop these new revenue streams that can be created from the content and the core competencies we already have, creating high-quality content at scale and attracting this massive audience. And so we have all these new revenue streams taking hold, and we're also seeing some progress in our foundational revenue streams. The DMS initiatives that Mike mentioned, the fact that our digital-only subscription ARPU continues to grow and to reach new highs as our strategy takes hold. Our digital advertising deals have been strong as we enter the fourth quarter, and that ladders on top of what's already been a growing business. So we've got this really diverse digital revenue profile. We've got this really strong audience and the direction of each of these components is headed in the right direction, and that gives us a lot of optimism on the fourth quarter, but getting to that 50% plus composition in 2026.

That's very helpful. And then maybe the last one, touching on the AI side. You referenced the new AI partnership, including Microsoft. Can you elaborate on how those partnerships translate to monetization? And what do you see as next steps?

Sure.

Trisha, I'll take this one. This is Kristin. And first of all, thank you, Giuliano. I'm always very, very happy to talk about the value of these partnerships. I think that what is foundational to a healthy future for AI on the web is content that is high quality, of course, also trustworthy and factual. And so the way we're thinking about this is that as AI agents become sort of central to how people are discovering and consuming content, we -- alongside companies such as Microsoft, we believe that publishers play a critical role in determining the value of their content in these experiences.

So now Microsoft is focused on building a scalable and equitable solution, one that is going to ensure that publishers are fairly compensated for the value that they're delivering through their content offerings, their premium content offerings. And so to this end, they are piloting this publisher content marketplace. They're doing this with a number of select U.S. publishing partners, and the aim here is to learn and to shape the tools and the policies and the pricing models really that are going to define this era.

I'm certainly happy -- I think we're all very happy to be participating in creating that marketplace, creating it with Microsoft and with Perplexity and other partners. Each of our licensing deals, Giuliano, is structured a bit differently. Some of them include direct licensing fees, others include revenues sharing components. What I would say is that they all expand the ways that we can monetize the content we already produce and do it at fair value. So we see significant long-term opportunity in the space. The AI content marketplace certainly is still developing. I think the ultimate models for monetization are not quite fully defined yet. So our approach is to participate early, help shape the framework and then ensure that our agreements do not trade off the long-term upside of this evolving ecosystem.

So I'd just say that overall, we view these partnerships as early building blocks for a more sustainable, more balanced digital ecosystem and one where publishers are rewarded for the value they are creating. I hope that helps.

Your next question for today is from Matt Condon with Citizens.

My first one is, just can you elaborate on what you're seeing as far as traffic coming from these AI platforms? Are you seeing meaningful click-through rates and meaningful traffic coming to your sites from these platforms, then thinking specifically about Perplexity just as that deal is launched in the early days here?

Yes, Matt, thanks, and thanks for the question. No, there's not meaningful traffic coming from AI search companies. And that's really why the value from a monetization standpoint for publishers like Gannett has to be from the licensing of our content. The whole model of answers on AI search platforms is they get the full answer on that platform. So the Google model of the blue links click back to the publisher's site is not the same model inside of the AI platform. So that's why we've been so focused on these monetization deals, these licensing deals because we don't see the traffic coming back.

The other point I would make, Matt, is that we are actually blocking 99% of all the AI bots trying to scrape our content, other than for those platforms that we have to deal with or, as I mentioned early on the call, with Google for which we can't block because we still need that search traffic from the blue links, even though they don't distinguish and let us authorize content for the blue links only and not for AI, which is the problem I mentioned in the ecosystem that I mentioned earlier in the call. So the short answer is no, there's not a lot of traffic coming from the AI search platforms. That's why the licensing deals are so important. However, what's also important is that we're blocking the scrapers. And so in order to get traffic on their sites based on our content, they need to pay us for that content. And we continue, as you hear from Kristin on these quarterly calls, we're continuing to develop ways to go direct to the consumer and bring the consumers directly to our platform and also using other social media ways to bring consumers to our platform.

And I think the final point I would make is despite not getting traffic necessarily from the AI search platforms, we're not having an issue with overall traffic. You heard this morning we had 187 million uniques on average on our platform in the third quarter, and that was up from 181 million uniques in the second quarter. So we're doing a great job creating the right content and doing the right -- doing a great job in driving consumers to our platform.

Great. And maybe just a follow-up on that. It's just obviously, one of the major companies that you're blocking is OpenAI. And can you just talk about just their willingness to come to the table, maybe other AI platforms that you don't have partnerships today, their willingness to come to the platform and negotiate deals where you do feel like you'll get fair value for your content. Just how is that pipeline developing here today?

Yes. OpenAI, as you heard, was -- is the biggest offender in terms of trying to scrape. I mentioned we had 75 million AI bots we blocked and about 70 million of them were OpenAI. Another interesting data point there is that we're rounding down, it was a little more than 70 million. 69.9 million of the AI bots from OpenAI that we blocked were seeking our local content, really interesting. They really want our local content. We blocked them 69.9 million times in September.

OpenAI is not willing to cut a fair deal at this point. We continue to talk to them, and we'll continue to block them. And we do know that there's value in our content. Otherwise you wouldn't have seen over 70 million attempted scrapes in the month of September alone. So short answer, Matt, no, we haven't gotten to a good place with them yet. We're really hopeful to. Our goal is to be -- and you heard it in Kristin's discussion and answer to the question Giuliano asked is we want to be proactive in creating the right solutions here with our AI partners. And so that remains the path we'd like to take, and we'd love to take that path with somebody like OpenAI.

That's interesting. And then maybe just shifting gears here to the DMS side of the business. Can you just elaborate on what you were talking about, about pushing certain clients to the Media segment? Talk about the benefits there are both for those clients and for Gannett, just, yes, how, just how that strategy will develop over the long term.

Yes. Matt, this is Trisha. Good morning. I think there's 2 things here. First is how do we invest with the highest ROI in our platform? Who is the right ideal customer for our DMS platform? And how do we focus our investments to make sure that we are delivering the best experience and the lowest cost per lead for those customers on our platform. And we think we've identified what that ideal customer profile looks like.

For those who sit outside of that, so you heard us talk about really large customers that are multi-location. There are tools on the market today that allow us to do that more quickly, get those campaigns up and running with more speed and to manage many, many different locations at scale, still leveraging some of the knowledge we have within the company and within the platform. But rather than develop that on our own platform, we're starting to leverage some tools in the media space that allow us to serve not just the ideal customer on our DMS platform, but a broader category of DMS advertisers. We also see that there's a percentage of DMS customers who want a predominant media buy. So a lot of our customers buy across our platform. But when somebody wants a predominant media buy with DMS, we can use some of these tools to service that buy more effectively. So it's really about how do we get the most value out of our platform and how do we deliver the best experience for our customers.

Great. That's very helpful. And then maybe just one last one for me. Just great to see debt below $1 billion for the first time since the merger. Can you just talk about where we sit today as far as just real estate and asset sales and further debt paydowns?

Yes. So we're at $116 million of debt paydown through the year. We feel very comfortable that we'll get to $135 million or above for the full year. We still have a few small to midsized real estate deals in our pipeline that we expect to get through Q4, maybe Q1. We know we've talked about this before. We will always have some things in our portfolio that we're able to monetize. But I think once we get through this next chunk, we've largely monetized our real estate portfolio. But we also see that we're generating a good amount of free cash flow. We have several drivers for improved free cash flow next year. This year, we'll be up 30%. Next year with a lower debt balance and lower interest rates as well as the improving trends in our revenue and our EBITDA, we'll have a significant amount of free cash flow to address our debt. So there's always something in our portfolio. But I think from the real estate perspective, we've got one more small chunk, and then we've largely monetized that.

Your next question is from [ William Kavaler ] with [ Odeon Capital ].

Going back to licensing, this is obviously becoming a critical or is expected to become a critical revenue stream. Do you guys have any intention of breaking out that licensing revenue so that we can kind of look at that, say, like a library cash flow kind of revenue stream?

Yes. Great question. I think 2 thoughts there. One, and Kristin mentioned this earlier too, is the business model for our AI partners is still developing. And I think the long-term play for us on how we monetize the AI partnerships with the most upside is still developing. And so I think we want to see how those 2 things develop, and it does have to become a bit more of a meaningful piece of our overall revenue streams. But the short answer to your question is, yes, I could see us breaking licensing fees out at the right time as it becomes a more significant part of our overall digital revenue stream and as we have more confidence in what the sustainable revenue model is for us.

We have reached the end of the question-and-answer session, and I will now turn the call back over to Mike for closing remarks.

Yes. Thank you, and thanks for being with us today. And as we part, let me leave you with a few thoughts to wrap up this morning.

As you heard from us this morning, we're very optimistic about a strong fourth quarter, and we're nearing a month into that quarter, and we're encouraged by what we're seeing in October.

To summarize, we had some clients shift digital spend from Q3 into Q4, and we'll realize the full benefit of our $100 million cost reduction program in the quarter. And that's all on top of what is typically a strong quarter for us from a seasonality standpoint. So high expectations for the fourth quarter. We're thrilled to have our Perplexity licensing deal up and running now in October and also really excited to be able to announce our next licensing deal with Microsoft this morning. And as I mentioned on the call, we do expect to announce a couple more AI partnerships over the next couple of months or a couple of quarters. We're encouraged by the pipeline there.

And also, this came up just a minute ago, but we're really excited about how we continue to strengthen the balance sheet and continue to reduce debt. we're particularly excited to see our total gross debt drop below $1 billion. And with interest rates declining and lower debt balances, Trisha just mentioned, we expect that to lower our interest costs quite a bit in 2026, and that will be a big contributor to our free cash flow growth next year, which that free cash flow growth will allow us to continue to pay down debt above and beyond what our normal amortization is.

And then final thought is just we're pleased, as you might expect, to see Judge Castell's ruling on Tuesday in favor of our partial summary judgment filing in our case against Google. This establishes liability for Google and moves our case an upcoming trial to a damages case for our key claims. And we're hoping a trial date gets set very soon. Although we think -- altogether, we think this sets us up for a strong fourth quarter and a strong future, and we look forward to updating you on the fourth quarter results early next year. Thanks for joining us today.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.