I'm Jason Bazinet, Citi Media and Entertainment Analyst. I'm very pleased to have Mike Reed, Chairman and CEO of Gannett, and Kris Barton, who I've never met before, who's President of DMS. Welcome. Thank you. Great to be here.
Thanks, Jas.
Absolutely. I think you guys are gonna start with just, maybe a handful of slides just to level set everyone.
Yep.
We'll go to Q&A.
Yeah.
All right.
Sounds good.
All right.
Thank you, Jason. For those on webcast, we're on slide three of the presentation. Just a quick summary of who Gannett is, especially for anybody that may be new to the company. We have three primary business lines, all primarily focused on. Well, I guess I would say we're a digitally focused content and business solution company, so we have B2C businesses and B2B businesses. We traffic really in three areas. We have one of the largest media companies focused on news in the country, as well as one of the largest in the U.K. We also have a very fast-growing and getting quite big digital marketing solutions business. We also have an events business, which we focus on local markets with both indoor and outdoor events.
Those are the three primary areas that we focus on. We have a little bit over $3 billion in revenue today, and about 1/3 of that, just over 1/3 of that is digital. We're nearing in on about $1.1 billion of digital revenues. We're doing about a 10% EBITDA margin today, although we do expect that to improve over the next three to five years into the mid- to high teens. We have one of the biggest reaches in the United States. We're one of the top five media companies in terms of audience every month as measured by Comscore. What's really unique about our business is we're the only national media company that also has a very strong local presence.
We have a very hyperlocal news business as well as a regional and national news business. Our primary areas of focus for growth are our digital subscription business, which is growing nicely, and we'll talk about that today, and our digital marketing solutions business, which we'll talk about today. That's what Kris Barton runs, and he's here to go into a lot more detail on that. If we wanna flip to slide four. You know, how are we gonna create value for shareholders? This is what we wake up thinking about, you know, every single day. I would start by saying, you know, our investment and our growth opportunities. We see significant addressable markets in the areas that we have real growth going on today. That's our digital subscription business and our digital marketing solutions business.
Those are continuing to grow nicely today despite, you know, macroeconomic pressures, and we continue to invest in those. Over the next couple of years, we see the digital revenues in our business, the growth in those being able to stabilize the overall revenues for the company, as our print revenues or the analog business continues to suffer from secular declines. We do see that the investment in our growth, the acceleration of the growth in our digital business, will stabilize the revenues in the next couple of years and then put us in a position to grow thereafter with a sustainable growth business, top and bottom line. That's job number one for us on creating value long term. Number two, we're aggressively paying down debt. That remains our primary focus with capital is to pay down debt.
We've paid down nearly $400 million of debt over the last 2.5 years. We expect to pay down about $150 million-$200 million of debt this year. That remains a high priority for us. Our goal is to get, you know, our leverage below one, moving towards zero. As we get to that level, we'll figure out whether the right number is zero or something between zero and 1x EBITDA. That remains a high priority for us and will create value for shareholders as we eliminate any overhang due to leverage and, you know, due to debt. Number three, right now, it's more near term. We are focused on cost reduction programs given the macro environment and the impact it's had on our legacy print business.
We are pretty aggressively reducing costs today. In fact, this is not in any of our LTM numbers through June, but in the Q3, we've moved on a cost reduction program that we estimate will be between $200 million and $240 million. We're in the midst of that program today, executing on that program today. You'll start to see that reflected in our numbers as we get into Q4 in 2023. I do expect that we'll continue to reduce costs again in 2023. The natural question would be, are we cutting too much? Are we cutting into the bone? The answer is no. What we're really doing is looking.
We're pulling forward cost actions we would have taken in future years that are associated with the declining parts of our business, and we're focusing, aligning our cost structure with where we're gonna be from a digital perspective over the next three to five years. Not cutting in the areas where we're gonna grow. As we pull forward future revenue losses with this tough environment we're in today, we're also pulling forward cost reductions we would have taken in the future. Beyond that, we are also looking at more automation and more third-party outsourcing. The things that are not core competencies of ours are things we're looking to outsource or automate so that we can improve efficiency, improve quality, lower the cost structure, and introduce more variability to our cost structure.
We're pretty excited about the programs we're working on today. I anticipate them to be significant, as you can see from the numbers here, $200 million-$240 million plus additional work that we'll do next year. You know, as we continue to focus on the business, right-sizing our cost structure to fit with where our revenues will be in the future, important part of what we're undergoing to create value, aggressively paying down debt. Big value creator for us for shareholders over the long term. Most importantly, stabilizing and growing the revenues by investing in the growth areas for our business, all of which we're in the early innings of the opportunity. Our addressable markets are big.
We have a management team that's been through a lot of various economic cycles over the years, so a very experienced management team that knows how to weather downturns. We're working on creating a very robust balance sheet. I feel good about, you know, our position today. Feel good about our future. I would say that's evidenced by the fact that just a couple weeks ago, I bought 500,000 shares of stock in Gannett because I believe so much in the future. Quickly before I turn it to Kris, if we could go to slide six, I believe. This is one of our primary growth strategies. We have North Stars that we work with every day. We have five North Stars.
This is North Star number one or pillar number one, and that's accelerating our digital subscription business. We're nearing in on 2 million paid digital subscribers. There's no overlap with print. Our print subscribers are automatically all access, so they have digital access as well. We have another 1.8 million paid print subscribers, but this is just purely digital. We're growing at about 35% per year. Our aspirations are to get this number to 10 million, and then we'll reset, you know, where we go from there. I would say there are four primary drivers for our future, especially in the next year or two in this particular area. One is data, one is technology, one is new product launches, and one is third-party partnerships where we expose our products to much broader audiences than we do today.
Data obviously drives how we create content, what kind of content we're delivering, how we write it, and also delivering a more personalized product to our consumers. Technology is really aligned around how do we make the consumer experience from the beginning to the end the best that we possibly can, leveraging technology to do that. New product development. We launched a crossword app last year. We launched USA TODAY Sports+ this year. We've expanded our crossword app. We're working on other things. Those are just examples of new products to come. We took the USA TODAY from free to paid last year. We just surpassed 100,000 paid subscribers with the USA TODAY. Lots of things like that in the pipeline. Fourth, partnerships.
We have an opportunity to bring our product offering, subscription offering to broader audiences as a value add to others. For example, we launched something with T-Mobile in the Q3 of 2022, and we also launched something with The Weather Channel, 2022. Continuing to pursue opportunities where we can get our product and our offering in front of more consumers is part of our growth strategy. We're pretty excited about the digital subscription opportunity for us. The big thing I would say is we have 165 million consumers, uniques, that come to us every single month. Only two million are paying today, thereabouts. That's why our opportunity is so big.
We've surpassed 10 million registered users, either registered for our platform or are registered for our newsletter offerings. Those folks convert at a much higher rate into paid, so we're excited about the growth there. The growth there is fast as well as our subscription growth. Continuing to engage with the anonymous users, converting them to registered and eventually converting them to paid gives us the comfort that reaching 10 million paid digital subscribers is totally within the realm of possibility, given we're reaching 165 million every single month today. Our relevance is there. It's shown by the number of folks that come to us. Excited about that. Really excited about our digital marketing solutions business. It's growing. Great EBITDA, great margin, good growth, good customer growth.
Again, we're just in the early stages 'cause we have so much opportunity from an addressable market standpoint. Kris Barton runs that business for us. He's here to talk about it today. Kris, take it away.
Great. Thanks, Mike. Yeah, excited to talk a little bit about the digital marketing solutions business that we have. I'll kind of try and lay out what it is in a little more color, why it's different, and what we think some of the big opportunities and then some of the numbers are behind it. If we go on to slide eight here, one of the things that we see is the overview of what this digital marketing solutions business is. We are ultimately trying to help local businesses seize their growth potential and do that by providing a marketing platform that helps them do exactly that. This business is 100% digital, and it's natively digital, meaning that it is a business that was always digital. There's no transformation there.
We're really just continuing to push forward in this space. You can see on this slide and overall that what we do is we offer a suite of products that all work seamlessly together, and these products are organized in three main categories of functionality. The first is helping these businesses really digitize themselves and have a local digital presence. That means things like having a strong website that's e-commerce enabled, that's optimized for conversion for mobile and different devices. Ensuring that they're found on all the different listings and directories that exist, maps that exist, so that they're easy to find and access. And then getting them their social presence and their organic search presence also dialed in and optimized. That's the first sort of category is this area we call Find.
The second one is about scaling that business once they've got that those foundational elements in place through advertising. We do all kinds of advertising, search, social, display, video, email, you name it. One of the things that make us so different is our ability with this unique feature set that we built and product that we built called Cross-Media Optimization, which really takes the complexity of all those different channels out, allows you with a single budget to decide your goal, and the technology handles it all for you. This is, that's a really important element of what we do with scale, and part of our portfolio. Then the last one, which is really critical, is how do you communicate with those customers? If you're a business, how do you communicate with them?
You've got a great website and presence online. You're advertising really well. How do you ensure that the customers that are coming in, those leads that are coming in, you know who they are, you're converting them to paying customers. If they're customers already, you wanna find more opportunities to monetize them and engage with them and track that and see it very clearly through the analytics, what's working and what's not. That's a key part of what we do. Now, what makes this business also so interesting, it is not just a single engagement. It is a recurring subscription revenue opportunity. This is, today, our last 12 months have been $458 million in revenue, and over 60% of our customers are recurring evergreen customers.
What that means is they have an initial contract term, but then after that, they are staying on and repeating their existing revenue and budgets with us every single month without end. That's a really exciting part of this business. If we go on to slide nine, a little bit of the overview of what makes us different. This is a huge opportunity. It's a $282 billion TAM, total available market that we have. We are just in the early stages of helping these businesses digitize themselves and really capture market share. Likewise, this business is growing at about 9% year-on-year. We think there's great opportunity, and we're very excited about it. Now, what makes us different? This platform is cloud-based, and like we said, it's very subscription-oriented.
Some of the things that make us different is really four key highlights we call out. One is there's really zero configuration. These small businesses, we're talking about plumbers, we're talking about dentists. We're talking about people that you go to restaurants in your local community on a regular basis. They don't have developers and engineers. They need something that's simple to set up. We have a very simple configuration. You can copy and paste, and you're set up and good to go. There's no customization or configuration. That's one thing that really differentiates us from a lot of our competitors.
Second main differentiator is our patent-based, patent-pending bidding engines that we have, which really allow us. Like I mentioned before, there's all this complexity of where do you advertise, how does that work, how are the budgets being allocated and spent, and are you getting the right return on your investment? Our technology handles all that for you. You state a goal, and then it optimizes and works automatically for you, based on the millions of campaigns that we've run in the past and the large datasets. We're one of the largest providers of a solution like this. We have large datasets that we can optimize and learn against and really get the best result for each of our customers. The third element is this integrated suite of communication.
With all that going on, you can communicate with your customers, understand where they're at in their buying journey, and also target specific segments of them to get the best results. Then the last element is this customizable reporting interface that we have that really makes it easy for customers to see exactly what is important to them. You can do that again with just a few minutes of setup. It doesn't require any engineering or any special skill set to do that. You just decide what you wanna see, and you can do that easily. Now, as an example of this, we have a lot of customers that are seeing great success, and many that are seeing great results from this. One I would just highlight is an interesting one.
It's a waterfront property, a customer in the Southern U.S. They're a resort sort of property, but they're an interesting case in that they have condos they rent out, so they're almost like a hotel. They have a bunch of restaurants on property, so they have sort of that side of the business. They also have a bunch of recreational activities that you can do as well, like kayaking and all that. You sign up for those and do that.
They came to us with an interesting proposition of, they're sort of multiple businesses in one, and how do they understand what's working, understand the different customer segments that they might have that they wanna market to, and then even be able to target those customers when they're on premise, when they're maybe staying at the property, you know, to target them to go to the restaurant that night for dinner and do things like that. Using the LocaliQ platform, they were able to see significant improvement over 40% improvements in their acquisition of existing customers and significant engagement improvement that really made it easy for them to see what was working and differentiate between all these different sort of mini businesses within their business.
That's a customer that's spending about $7,000 a month with us, and they get a solution that grows with them, and they're able to modify it to their needs using the LocaliQ platform. If we go to slide 10, I wanna just share some of the numbers quickly to kind of give a view of what this business looks like. We're really excited about it. You can see. Revenues in Q2 hit an all-time high of $116 million. We've got great recurring revenue, as I mentioned. Over 60% of that is recurring. Our goal is to drive that number up to the 80s% and continue to have this really strong just recurring SaaS-like subscription recurring revenue business. Our customer count continues to grow as well.
We do have seasonality in our customer count, so sometimes there will be some ebbs and flows. One of the strategic initiatives that we're focused on right now is really ensuring that even our seasonal customers. For example, we have customers that do, you know, air conditioning businesses, which are obviously hot in the summer, not so much in the winter, or even insect, you know, repellent and pest control companies and whatnot who have certain seasonal aspects. Education's a big vertical for us, which enrollment cycles they have. We do have this sort of seasonality, but what we're doing is we're offering solutions to our customers that allow them to stay on year-round and focus on different goals of their business.
Maybe building out a brand in the off-season or having insights to their business of promotions and things that they can run. Our ARPU is really strong, as you can see as well on this slide. Over $2,300 and much higher. That shows just a great growth and a vast portfolio on this platform that our customers can buy from. Our typical customer stays with us multiple years and will buy more and more over time as they see the value delivered to them. Then the last thing I would mention is we have best-in-class customer retention. You can see we're in the mid-90s% of our budget retention here.
Really, when we look at different cohorts of our business, we see even better results the longer someone stays with us, the more loyal they're gonna be to our brand and to the platform. These are elements of the business we're really excited about. We look forward to continuing to see growth in this space. There's a little bit of an overview of LocaliQ digital marketing solutions.
Kris, Jason, I just would want to close that with one thought.
Yeah.
If you forgot about Gannett for a second and forgot about the newspapers and the media business, and you didn't know anything and you just said you didn't know anything about the business, and I said, "I'm gonna present to you today a business that has $500 million in revenue, growing its customer base and its revenue by double digits, throwing off positive cash flow, retains its customers in the mid-nineties percentile, and is penetrating around the world, has customers around the world, with a growing ARPU," you would immediately think that business is gonna trade at 4x-6x revenue, maybe more. You know, evergreen contracts, I should have mentioned. So it's got a SaaS-like perspective to it.
Not knowing anything about the business and separating it from Gannett, you would say that business, which we run independently of the newspaper company, the media company, is worth at least $2 billion. That's more than the enterprise value of our entire company today. You have the largest local and national media company in the U.S. throwing off close to $300 million of EBITDA and, you know, $2.6 billion of revenue. Then you have this DMS business, which is completely standalone, run by Kris, that I, you know, I'd argue is worth $2 billion-plus, growing at, you know, more than 10% per annum. I think there's a real opportunity for people to pull back the layers of the onion here to see real value opportunity in this company if you focus on where our growth actually is.
Do you mind if I just ask a follow-up question on that last point?
Sure.
To what extent are the salespeople that would go out and sell advertising on the print or digital side of your business that are knocking on doors?
Yeah.
Being used to sort of help the sales process on DMS? You said it was managed independently, but there must be some-
Yeah.
benefit that you're getting from it.
Again, Kris can speak to this better, but there's four or five sales channels for Kris in the DMS business. One of those sales channels is the media sales force, and they're doing maybe $135 million.
Yeah.
About $135 million of sales. The rest of that is done by independently through the sales channels that are simply inside of our LocaliQ business. Inside sales, outside sales.
Okay.
Of course, do DIY stuff that we're starting to do.
Okay.
We have the media business as a sales channel. If this DMS business was separated completely from Gannett and standalone, you'd still hire them as a sales channel.
Right.
We're looking at other companies that could be extended sales channels for us as well.
Okay.
I don't really view it as we're dependent on it at all.
Okay.
It's a sales channel. It's good for the media company to be able to have this product.
Of course.
Product offering in their toolkit, but we could, you know...
Yeah. I got it.
Yeah.
We think there's so much potential there too. You know, today there's just single-digit percentage of our customers who buy our print and are owned and operated, which are the digital ads that show up on our news properties, buy our DMS suite as well. We think there's a great opportunity to continue to expand there in addition to the market itself, which is growing and just great opportunity.
Understood. Okay. My first question before I got sidetracked with my own distraction was really more about your strategy and the tactics that you're pursuing, but you addressed all of that in your slides. The one thing that I think might be helpful for investors is there must be some analog that's out there that you guys are using to say, "Hey, people have been down this path before of trying to digitize their business." What should the investors sort of think about if they're trying to benchmark your progress versus what it looks like maybe if it's further down the road?
Yeah.
In terms of evolution than you guys are? What's the best?
Yeah. Great question. The benchmark we look at a lot, honestly, is The New York Times.
Okay.
You look through. If you went back, you know, 10 years or so, you'd see The New York Times went through a process where they sold all their non-strategic assets. They paid down their debt. Put them in a situation to really be able to invest and make long-term decisions around their digital subscription growth strategy, because they got rid of the noise of leverage and so forth, they've been quite successful. If you really look at quarter to quarter over the last 10 years, it's not linear. There's a lot of ups and downs, but I think that's a great example of what we can do. I like our opportunity a little better for two reasons. One, we have a unique local content offering that's appealing to people around the country.
The New York Times doesn't have that.
Right.
We have this growing DMS business that
Okay.
That's also gonna contribute to revenue growth.
Okay, that's super helpful. Can we talk about top-line trends? I'm gonna confess, in my years of doing this Q2 was the weirdest quarter that I can remember. That's even with the dotcom crash and the GFC and COVID. What I mean by that is, we saw some companies where the street was sort of bearish, the ad agencies, you know, put up double-digit growth, like, out of nowhere. Then we saw companies where people are very animated, a lot of the digital advertising names, you know, struggle mightily, right? Then a lot of the just sort of, I'll just call them plain vanilla, traditional media companies. You know, it wasn't great, it wasn't bad, it was just sort of right down the center of the fairway. That's really confusing in my seat.
I would love for you to just give a little bit of color both on your sort of tactical trends in terms of what you're seeing and this is maybe too much to ask, but what sort of narrative would you put around that what seems to me to be a highly divergent set of results that are coming out of very different business models, very different companies, but all ad-centric?
Yeah. You know, Jason, we saw that within our own company 'cause.
Okay.
The media business, especially on the print side, experienced some real challenges in the Q2 that weren't there in March.
Mm.
That were all of a sudden there in April. We saw a real degradation in the consumer, in April. our DMS business performed great in the Q2.
Mm.
Didn't miss a beat, performed on plan. Even within our own company, we saw diverging trends.
Interesting.
We saw really two areas of weakness that hit us really hard, really fast on the revenue side. One is the digital advertising revenue that you mentioned. We saw a slowdown in programmatic. We saw reduced spend from some categories that you would expect to reduce spend given their troubles, like some of the wireless guys and the streamers.
Yep.
We also saw some changes that Google made around data privacy that prevented the delivery of advertising on third-party affiliate sites, which is a big part of our sports media group, where we do a lot with third-party sites from a content and advertising perspective, and that advertising was no longer able to be delivered. That hit us as well. The combination of effects hit us on digital advertising in the media business. No impact on the DMS business. The bigger piece was print circulation.
Okay.
We saw a six-point change in trend from March to April.
Wow.
That was big. It's really twofold. One is the consumer squeeze. Consumer's feeling the pinch in discretionary spend.
Because of inflation, you're saying?
Inflation.
Yep. Okay.
Yep. For us, what we saw that impacted us was the jobs pressure, the inability to hire people hurt our carrier force. It's hard to hire people to deliver the paper.
Mm.
With that comes disruption in service, and with that comes some increased stops. We saw those two things really in the Q2 accelerate. It was hard to hire carriers, saw disruption, and that caused accelerated stops. We saw the consumer get squeezed, as well. The carrier piece, the good thing about that is that's something we can deal with, and we're dealing with it right now, and we're making the investments we need to make sure we have carriers. We do expect our trends to improve in Q3, Q4, and next year, 'cause we can do something about that. Might cost us a little more, but we can do something about it. The macro environment on the consumer is a cycle that, you know, we have to to continue to ride through.
The digital advertising is obviously something we're being proactive about too, and how do we improve our own sell-through rates from our own sales force versus being reliant on programmatic.
Would it be fair to say then that if, in your seat, the best-case scenario is no recession, inflation begins to moderate and sort of ticks down, and we just get back to normal? Is that, is that what?
Yeah.
Gannett shareholders should be hoping for?
Yeah.
Rooting for?
Yeah.
What's the worst scenario? Recession with inflation? Is that the?...
Yeah. I think the real recession like a severe recession.
Okay.
Where inflation is persistent is a worst-case scenario.
Okay.
You know, I don't think that that's necessarily off the table at this point.
Yeah. Yeah.
I don't think the pinch the consumer is feeling has really made it all its way to the demand side yet for a lot of companies. A lot of companies that have pricing power are raising prices. That's gonna stop.
That's gonna stop?
It's gonna have to stop. There's a point where they're not gonna be able to raise prices anymore.
Okay.
That's where we have to get to the finish line on inflation before we get to that point where 'cause then it's just gonna get worse everywhere.
That's super interesting. I think the consensus has inflation sort of moderating pretty aggressively as we move through this year, and I think.
Yeah.
I think it's down to, like, 2%-3% by Q4 next year. So?
Yeah.
Let's hope that's true.
I mean, Jason, we're not seeing it get worse at this point.
Okay.
You know, I'd say on the margin, slightly better because gas prices have come down.
Yeah.
That helps us with our distribution costs and our transportation costs.
Sure.
We're hauling papers from a press room to a market, and of course, we're reimbursing gas for employees that are traveling, and of course, we're paying gas for carriers, you know, per piece that they're delivering to the house. As gas prices have come down, we've seen some moderation there. Raw material costs are still high, but I don't think they're gonna get worse.
Okay.
You know, who knows? I don't have a crystal ball, and from March to April, things changed a lot, so they could change again. As we sit here today, inflation has moderated a little bit for us.
Okay, that's great. Can I ask about digital ads and marketing services? You know, your same-store sales growth did really well here, both all through 2021 and the first half of 2022, high single digit. I think of this in sort of three components. There's the DMS part that you talked about, call it half.
Mm-hmm.
Digital media 40%, and digital classified 10%. You sound very enthusiastic about DMS. I got that. How should investors feel about digital media and digital classifieds? Is it better than the legacy print business but not as good as DMS? Is that the right way to bookend it?
Yeah, I'd say that's probably right.
Okay.
I do think it's much better than the legacy print business and has growth in front of it.
Okay.
Our audiences, as they continue to grow, we'll be able to continue to sell more digital advertising.
Okay.
As we see recovery in the housing and automotive markets, we'll see some recovery in some of our classified and, of course, our legal and obituary revenue categories, which are inside classified and are the biggest pieces of classified, continue to perform well.
Continue to perform well. Okay, well, I'm not gonna go there, but that business seems to have a much longer duration to it, the classified business, than I would have thought.
Yeah.
Is that how you sort of think about it, this has a long, long runway?
Yeah. We've had actually a good year with digital classifieds this year. It's been one of our stronger categories.
Okay.
It has had good legs. I mean, the makeup changed, Jason, dramatically. If you went back 15 years, classified, 80% of it was from automotive, real estate, and jobs.
Yep.
Now 60% of it is legal and obituaries.
60%, so that's why it's so sticky.
Yeah.
That's why.
I think we've, you know, kind of bottomed there, and we're now growing. Which, you know, I think from an overall perspective, that's what will happen with Gannett. You know, we're gonna hit a bottom on the secular side with the analog business, then our growth businesses will take over, and that will lead to long-term sustainable revenue growth.
Right.
We've already seen that really in classified.
When do you have a date, like a target date internally in terms of when we hit crossover?
2024.
2024?
Yeah, two years.
Okay, two years.
Yeah.
That'd be exciting. That should be good for the multiple, right?
Yeah.
One other thing I'd add to that too is, as we think about DMS and sort of just the purely digital side of how that feeds and works together with our other elements of our business, we currently today, when we think about DMS, we had always targeted this what we call premium SMB. There's about 1.2 million of those in the U.S.
Out of what? Like 30 million? Is that the right number of small and medium businesses total?
Yeah. Yeah, that's still about 30 million, 31 million, 32 million.
Okay.
Yeah, yeah.
1.2 million. We're talking 3%.
Yeah, 1.2 million is sort of this sweet spot that we had gone after. They're spending between $12,000 and $240,000 a year on their marketing. We've gone after that. One of the things that we've opened up recently, though, is we've said the majority of the small businesses, getting to your number, about almost 31 million of them, are actually very small. They're small businesses. They spend less than $12,000. We didn't really have an offering for them at that price point. Also the go-to-market for them with costs and all that were just different.
We'd recently have expanded and created pure do it yourself offerings that are a much lower price point, that are all direct online purchased and buy through a premium acquisition model that we've launched recently. We're getting great success there, but that's really an answer for us to target that other segment, expand our available market, and be able to have some additional crossover with maybe smaller businesses or customers who are doing small print budget or a very small offering, and we're able to sort of bring in and target them now as well. We think that's gonna create more opportunity, more revenue for the business.
We could see some degradation in the ARPU or something like that, but the customer count will go up, and the revenues would be better. Is that right if this works?
Yeah. I think we wanna be mindful of that and talk about them in cohorts, 'cause they're ultimately different groups. But yeah, absolutely. It would be a balance of customer count going significantly up with some degradation to ARPU, but the ARPU would be growing over time as well, right?
Yeah, yeah. Understood.
Great opportunity.
I guess the contribution margin is probably higher on these self-serve or...
Absolutely.
Okay.
Yeah, that's one of the exciting things too.
Okay.
It allows us to be very direct and specific and understand the economics, our acquisition costs, our lifetime value of those customers, and invest appropriately in marketing activity to drive or throttle back as we see the results we want there.
Okay. Can I get?
Jason, can I have one thought on your previous question? 'Cause I know there's a lot of skepticism around it, and you and I have known each other for a long time. You've been covering me for a long time.
Sure.
You know, we have about $3.1 billion today. So say we got second half of this year, next year, we have some declines in front of us. We're doing pretty aggressive cost work, so we feel like we're gonna put us in a position to start to grow EBITDA again. But let's say by the, as we get to 2024, we have $2.9 billion of revenue, right? And $1.3 billion is digital growing at 10%. That's $130 million of growth. You have $1.6 billion of print declining at 7%-8%. The math. That's the simple math.
Right.
We crossed that inflection point in 2024.
Okay.
Remember, print is not all just advertising insert. We have a $200 million+, very stable, slightly growing commercial print and distribution business.
Sure.
That's part of that. You know, declining 7%-8% is a fair number, and so the math is that simple. You take $1.6 billion declining at 7%-8%, and you take $1.3 billion of digital growing at 10%, and you see overall a stabilization and it starts to grow.
Right. What, inside that 10% growth on the digital part of the business, is most of that coming from DMS? Which is-
Digital subscription revenue.
Digital subscription.
That's about $120 million business today growing at 35%.
When I looked at those subscription numbers, I think you said you had 1.87 million digital-
1.87 million, yeah.
Yeah. It almost looks like that line is sort of starting to stabilize a bit, but you sounded very confident about this 10 million number that you're gonna go to. What is it that I'm, when I just look as a layman at the chart that says, seems like it's sort of not accelerating.
Yeah. The most near-term opportunities are around data and technology. Technology improving the product experience from start to finish for a consumer. We have a lot of opportunity to improve that. That will accelerate growth for folks that fall off in our process today. Then second is data and really understanding, you know, what consumers want, how they want it, so that we can convert much more of our anonymous users into either registered users or paid users through the personalization aspect.
Okay.
We have more and more first-party data now that we're using to drive that. I think you see some stabilization 'cause the number's getting bigger. We're still growing at over 100,000 new digital subscribers per quarter. Our net adds have been over 100,000 per quarter. In a worst case environment, we're gonna grow probably 400,000-500,000 next year over where we end this year. Through technology and data, we would expect to be able to accelerate that raw net number from what we're doing today.
Okay. Have you ever, I think on that 10 million number, set a sort of goal that 10 million by 2020-something, or is it just that 10 million is sort of the aspiration?
That's the aspirational goal.
Okay.
We've set a $6 million, you know, target for 2025, 2026, 'cause that's our internal goal. We've talked about that publicly, but our aspirational goal is $10 million.
Okay.
Which I believe is achievable. It's less than 10% of our audience today that's with us.
Right. On the cost side.
Yeah.
I know you guys always had a reputation for actually taking care of editorial, taking care of the staff, not being sort of very aggressive with cost cuts. You mentioned earlier now you're sort of pulling some of these costs, cost cuts forward in anticipation of this mix shift happening. I think I heard you correctly. How far forward are you pulling costs? Is it anticipation of the 2023 mix of business that you expect? 2024 mix of business?
Yeah. We're really looking at kinda 2024, 2025, 2026.
Okay.
Where we are, you know, predominantly more of a digital revenue, digital-oriented company and pulling forward costs that and also costs, Jason, that are not core competencies of ours, like IT.
Okay.
Accounting, customer service, things like that we can have improved quality at lower costs with variability in the costs by moving those to third parties.
Okay.
We're not focused on, you know, newsroom cost cuts. We understand content's a big part of our growth strategy. You know, we've had to do some work in that area given this environment, but it's a small part of the overall cost reduction program we have in place is actually in the newsroom. It's very small.
Okay. Well, that was always your reputation. Michael, Kris, thank you very much.
Thank you, Jason.
Yeah.
Great to be here.
Yeah, absolutely.