USA TODAY Co., Inc. 2026 Q2 Earnings Call

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 Michael 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'll 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'll 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 audiocast 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 Michael 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. 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 two audiences, human readers and the AI platforms that surface our work to them. 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. 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.

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 continued to pay down debt and maintain a solid cash position. Our Digital-only Subscription business and Digital Other business, which we believe are two 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. 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. 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. With that, I'd like to discuss some of the key operational highlights from the second quarter in a little bit more detail.

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. 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. 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 is 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.