Good morning, everyone. Thank you for joining us at the Needham Growth Conference again this year. I'm Ryan Vaughan, and I'm very pleased to be hosting a fireside chat for, I don't know, where are we, five, six, seven years now, with Mike Reed, Chief Executive Officer, and Trisha Gosser, the Chief Financial Officer. The plan is, like we've done in the past, just to go through a series of questions, to have a conversation. And if you do have any questions, feel free to post it in the webinar here. We will keep an eye on it and get to it toward the end. But first off, Mike and Trisha, thank you for joining us. Great to see you guys again. And thank you again for joining us at the conference again.
Yeah, thanks, Ryan. Thanks for having us again. I think this is like the sixth year in a row. It's great to be with you. And to all the investors who are tuning in this morning, thanks for taking the time to be with us as well.
Excellent. So let's kick things off. Maybe you can start out by just outlining USA TODAY's strategy, your priorities for 2026 amid the evolving media landscape.
Yeah, thanks, Ryan. So I'll start with USA TODAY Co.'s kind of key operating pillars, which are beyond 2026, but from which we've been operating for the last few years. And it really starts with content and audience. It moves into our diversified digital revenue streams and then strengthening our capital structure. So we really have three pillars. And starting with the first one, it's content and audience. And that's really the backbone of what we do. We're a news business, but we've expanded our content strategy immensely beyond news in order to be able to continue to attract a broader audience, but also, more importantly, to also be able to engage for longer periods of time with our audience and have that audience be more repetitive in coming back to our platform.
So we've achieved a lot of great success there, and we still see a lot of opportunity ahead. We're one of the largest now news media businesses in the U.S. in the digital ecosystem. We have about 187 million uniques on our platform every month. Fluctuates up and down a little bit, but we're averaging that. And so we're generally in the top three in terms of the U.S. from an audience perspective. And because it's digital, we know so much more about that audience, which gives us better revenue opportunities. So we're going to continue to build a content strategy that allows us to grow that audience. But that audience is already big. So more important than further growth is the engagement with that audience and how do we turn the touchpoints with that audience into revenue streams. Just a couple of examples on content.
We're really focusing on verticals around sports, entertainment, games, which we call PLAY, and events, a few things like that. So it's beyond news. Of course, we do news, but we're really focusing in on building really strong content strategies in areas where we know that consumers are interested and spend a lot of time based on the data we have from time on our platform. The second operating pillar is taking that engaged and growing audience and monetizing them, and for that, we have a very focused strategy on diversifying revenue streams in the digital ecosystem. We're not all in on one revenue stream. We're not all subscription. We're not all advertising. We actually have a strategy around digital advertising, around digital subscriptions, around e-commerce, digital marketing solutions for small businesses, and a new and kind of emerging and growing category for us is AI licensing and syndication.
We look at five different diversified or five different digital revenue streams, all of which have big potential, but also allows diversification not to be overexposed to one category that could take a left turn. We're really excited about the opportunity. We're excited about the diversification we're seeing today. Again, it's based on the backbone of a large audience and engaging with that audience. The third pillar is essentially strengthening our capital structure because we need to continue to reduce debt. We'd like to get debt down to about 1x EBITDA, maybe lower. We're getting closer to that. We've reduced debt by close to $1 billion since we did the merger of New Media Investment Group and Gannett back in 2019. We made tremendous progress on that. We also want more to invest. We want to continue to invest in the business.
So, strengthening the capital structure, making sure we have great liquidity, take advantage of situations that come our way, continue to deliver, and continue to be able to invest in the business. Those are really the three operating pillars. And I would just wrap this question by talking about how we think about creating value for shareholders, which people on the other end of this call want to hear. We are going through a transformation from a legacy print business to a digital business, right? And so legacy print businesses, as everybody knows, have declining revenues. We are focused on a digital growth story and a transformation that makes us a digital company. Our audience is there. 99% of our audience is digital. Our revenue is following. 47% of our revenue in Q3 this year was digital.
We expect to surpass 50% of our revenue coming from digital in 2026, so that is one of the priorities you mentioned. What are our priorities for 2026? One is achieving 50% or more of our revenue coming from digital. What we think, though, as we transform, as we go from a print business to a digital business, our revenues will grow from an overall perspective, and that will help with the multiple that we're rated at on the street. And a great example is the New York Times. We went through this several years ago, and they now carry a much stronger multiple than we do, but they're a growing digital business. And we're on track for that, so we think there's a multiple rerate as we hit the milestone of being able to grow revenue sustainably in the future because it's digital.
We also are going to continue to grow. We've done this for a number of years now. Grow EBITDA and free cash flow. That allows us to continue to deliver, which we think is important and also gives us capital to invest in the business. And then we also are going to continue to deliver. And we think that helps from a multiple standpoint as well. There's less pressure from investors who might think that there's some kind of event to come if you carry too much debt and you're a legacy media company. So we're highly focused on delivering. As Ryan, as you know, we talk about it every year here. We've made massive strides in delivering from $1 billion to our first lien debts now just over $700 million. So we think that helps from a multiple perspective too.
So, transforming from print to digital and growing our revenue, growing EBITDA and free cash flow, delivering, we think, puts us in a position to trade at a multiple much higher than we do today, which gives us a lot of opportunity to create value for shareholders.
Great. Well, that's a good kickoff, Mike, because we're going to dig into a lot of those individually. So let's start with, obviously, one very important item that you just talked about. As you've transitioned the company, that digital revenue is now almost 50%, but will be heading toward above 50% this year. Yeah, for either of you, how are you thinking about that digital mix evolving? And then you've highlighted recently monetization opportunities in advertising and licensing. Are they the growth drivers going forward? Just anything you'd comment as far as that digital now being greater than 50%?
Yeah. Mike talked about this a little bit, about how important that transformation is for us to becoming a truly digital business. And we're right there on the cusp of that. So in Q3, Mike mentioned 47% of our revenues came from digital. We've guided that we think that that goes up in Q4 and that we cross that 50% mark sustainably in 2026. And that's really important. But I think equally as important is the fact that our digital mix is much more diverse than ever before. You mentioned AI licensing. We launched our biggest deal to date at the time with Perplexity in Q4 of last year. Since then, we have announced licensing agreements, AI licensing agreements with Meta on top of the agreements we have with Microsoft and Amazon. And we do expect more of these AI deals in the coming year.
But I think that what these deals really show is that we have the ability to develop new revenue streams and that it can be driven from content that we're already creating. We're creating content at scale. We have this massive audience that Mike has talked about. And we don't need to do anything different. We can just monetize the content that we're already producing in a really high-margin way. And so as these revenue streams grow, we still see that the digital revenue streams that were a piece of our portfolio will grow. We have a strong DMS business. We've made some investments in it. So you've seen things like AI Smart Bidding launch or our AI product, Dash, has been very successful, and that helps improve our DMS trends. Our digital-only circulation business is starting to grow.
And our ARPU, we've really been focused on high-value customers, long-term subscribers, and we continue to reach new highs in our ARPU every quarter. So that's been a strong business for us. And then digital advertising was really strong in all of 2025. We definitely see that in 2026 as well. One of the things that has been interesting to watch, but not unexpected over the past year, is there's been this real shift back to media and publishers from brand advertisers. Quality media companies like us, like USA TODAY, we've got such scale, and we have a much more brand-safe environment than, let's say, most social media platforms, which is where we've seen dollars shift over the past couple of decades. We're seeing that come back to us, and we're building really strong relationships with advertisers, large national advertisers.
And Mike talked about some of the areas that are important to us, but video is really important to us and verticals like sports and entertainment and lifestyle, and we're really strong there, and those are high CPMs. So I think our underlying revenue streams are going to grow. We've got this new AI licensing revenue stream that's really impactful. And then we see the opportunity here this year to cross over that 50% mark.
Excellent. One thing that Mike had mentioned in the beginning was PLAY, the focus on games, launched just a couple of months ago. How is that launch going? Are you seeing it bring in, touch different audiences, and just stronger engagement? Anything you can comment with your existing audience as well?
Yeah. We're really excited about PLAY. It's been a solid audience metric since we've launched last year. So we are definitely seeing it bring in new audiences to our platform. But again, as Mike mentioned, we have an incredibly large audience. For us, it's more about deepening the engagement than it is necessarily bringing significantly more new people to our platforms. And so we're already seeing that PLAY is creating a deepening engagement across the people who are already visiting our platforms. One thing that we see, two things that we see really is a lift in registrations and a lift in subscriptions. And I think that's a clear example that we're providing value to the consumers, and they'll trade that for their information. And that allows us to both better serve the consumer and continue that flywheel of increasing engagement.
PLAY is a great example of, as we increase engagement, there's real dollars there. If we can get 1% more of our audience to be on PLAY, that's an additional $10 million annually. That's a vertical that is going to be widely appealing to our audiences. It confirms that things like games and verticals outside of content can be a really meaningful growth driver for us. It just underscores the fact that we have this deliberate strategy to broaden our engagement beyond just traditional news, which is really important while we still leverage this trust of the USA TODAY brand.
Excellent. Switching over to the licensing side. So USA TODAY has been active in licensing its content for AI use cases. How are AI applications impacting the media industry? Big picture. Do you believe it's a net positive? And then part two of that, just can you elaborate on these partnerships you had highlighted earlier? And do they translate into monetization and/or what are the next steps there?
Yeah, Ryan, I think that all of the AI, the applications can be a net positive for not only our company, but for the publishing industry at large. I don't know that I would say we're there yet as a net positive because there's still an enormous amount of theft of news that's copyright-protected content by the AI companies who are building out their own business and products, and so I think that's obviously a negative, but I do believe it can be a net positive, and there are tons of use cases inside of our company where we're using AI to be more efficient, to be smarter. The AI tools that are out there today allow us to operate not only more efficiently, but faster and more accurately in a lot of different tasks across the company.
We're using AI in so many different places now inside of our company, but it's helpful. Trisha mentioned some of our newest products for small businesses in the DMS business are AI-related. And we're using AI now to help us with lead gen. We're using AI to help us build sales and marketing presentations for customers. We're using AI on the content side to help us make sure that our headlines and our stories are as well written in terms of how consumers will read them. I do think it's important to note that we do not publish AI-only generated content. Everything we publish has the human eye and human touch on it. But there are lots of use cases in the company that I think can continue to expand. And we're starting to cut some licensing deals, as Trisha talked about.
And that, I think in the long run, we can turn this into a net positive. We still do have a big issue to sort out as an industry with those who don't believe they have to pay for this content. But there are some great big companies that are setting great examples like Microsoft and Meta and Amazon and Apple, and they're signing AI licensing deals with companies like ours. And I think that's a great step in the right direction. A lot of that's really happened over the last 12 months. And then the other thing that we're doing, which I think is going to be helpful, Ryan, is we've actually employed through our partner, Fastly. Cloudflare is another one out there that has this technology where we block the AI bots now.
As the scrapers like OpenAI and ChatGPT come to our site to scrape, we're blocking them. If you're not doing a licensing deal with us, we're blocking you from scraping our content to build your models. We started that back in July. The amount of bots that we're blocking every month is mind-boggling, and the amount of scraping that's going on out there is mind-boggling. That's been a good tool, and one that publishers should deploy. With the blocking technology we have in place, the AI deals that we've started to cut with AI companies, and the use of it inside the company that we're using to create efficiencies and speed and accuracy, this will become more than a net positive. It'll be a great asset for the company.
But the single biggest thing really is how this licensing marketplace plays out over the next few years in the general adoption of the fact that our content has to be paid for if you're going to use it in your AI model. I think the fact that we've done deals with Perplexity, Microsoft, Amazon, Meta really speaks to how valuable our content is. Those companies see it, and they are licensing it from us. So I do think it's going to be a real positive for us, and we're marching towards that now.
That's great. That's great. Switching gears a little bit, the Google lawsuit. Can you give us, you know, many know about it, but maybe for some that don't, just a little bit of a background there? And just what are the long-term impacts on USA TODAY and the ad tech space more broadly?
Yeah. So a few years ago now, we filed a lawsuit against Google for antitrust violations in the digital advertising ecosystem. And essentially, our claim is that Google controls the entire process for publisher sites from the beginning of when an ad's placed to who can bid on it, what it costs to the placement of the ad. And so most all the money was made by Google. Very little was made by the publishers who were actually creating the content on the platform and driving the audience, but we're not receiving the revenue from the digital advertising. The DOJ had filed a similar lawsuit against Google for antitrust violations in the ad tech ecosystem. And last summer, the DOJ won their case against Google in this particular area. And then we filed for summary judgment, and the judge awarded us summary judgment, which was really positive.
That was in the fall. And so now, as we move forward, we feel like we're in a really good position with our argument here, with our litigation. And we feel like the fact that the DOJ has already won the case is very helpful. There's some big milestones ahead here in 2026. It should be a year, Ryan, where we get a lot more clarity on our litigation. First of all, coming here in the first court, we think there's going to be an issue by the judge for the remedy hearings were held last year. We think that's a helpful thing when the judge rules on what the remedies are for Google. Number two, there's a very similar case to ours that has been filed against Google several years ago by the state of Texas and 17 states attached on to the Texas case.
And that's slated to go to trial here sometime early in 2026. And we believe since the case is very similar to the DOJ and that Texas is in a good position, and we're hopeful that that case goes to trial and Texas has a favorable outcome, helps us again. And then the third big kind of milestone for us or event for us this year is our judge to set a trial date. Once we set a trial date, we'll know, okay, now we're marching toward a specific timeframe for which we can go to trial and prove our case. And so we think the three big steps this year are the DOJ remedies being issued, the Texas case going to trial, and then our trial date being set.
We feel good about our litigation, feel good about where we are today, and are excited to get to court to be able to prove our case. As far as the long-term impacts for this, our hope is that we create a level playing field. That's all we really have wanted, and it would have been great to have from the beginning is a level playing field. We want to be able to have more control of the process on our platform and be able to receive a better percentage of the ad dollars that are being placed on our platform. So a truly level playing field that gives everybody a fair shot is really all that we're hoping for here. But we think the impacts of that, Ryan, are huge.
We do $300 plus million in digital advertising per year today, and you got to think about how suppressed that is because Google makes most of the money. And so we think our upside on that $300 million is enormous if we have a level playing field. It's hard to put an exact number on it, but it's significant. And so that's what our long-term hope here is that what comes out of the DOJ case, the Texas case, our case is a level playing field for all publishers, including ourselves.
I don't think you're asking for too much, Mike. Thank you for that. That's helpful to get that update. We'll monitor a couple of those as well as when we get a trial date for your case as well. Maybe just touch on the rebranding to USA TODAY. Just what drove that? I'm a big fan. What was behind that?
Yeah. So we've actually talked about it for a few years now. We actually talked about it back in 2019 when I was at New Media and we acquired Gannett. And we talked at that time about whether we should just keep the USA TODAY name and get rid of New Media and get rid of Gannett. In all honesty, at that time in 2019, we weren't exactly sure as we acquired the company how strong USA TODAY was and/or whether that was an asset we might sell pretty quickly to try to pay down some debt. So we shied away from a rebrand back in 2019. But it's something we've talked about over the last couple of years again.
And I think this particular year, one of the items that really threw me over the edge to recommend the change to our board now was I was at the big global media conference, media and advertising conference in Cannes, France, back in the summer, I think back in June. And I was invited to a lunch by the CEO of Stagwell. And at that lunch were 10 of the biggest global brands in the world, all based in the U.S. And it was the chief marketing officer for every single one of those companies. And so I was at a table of 12 with those 10. I was the only media company, and I was able to tell our story. And what really stuck with me is that the table thought the USA TODAY was a print newspaper.
When I was able to tell the story of our digital audience and the reach we have and the content we produce and what we call the things like that, they were blown away. As the lunch ended, I got business cards from almost every one of them saying, "We need to talk. You could be a platform for us." We had no idea. It really occurred to me that they think Gannett, they thought Gannett was just a print newspaper company. They didn't really know what USA TODAY was, and we weren't telling that story. I came away, came back from that conference, and immediately got with some of our leadership team and said, "We should pursue the new change now." It wasn't just that conference, though, Ryan. I got that a lot. I introduced myself as the CEO of Gannett.
People are like, especially younger people, "Who's that?" I say, "Well, do you know the USA TODAY?" "Oh, yeah, yeah, I know that," so as soon as you say you're with USA TODAY, people know what your business is. When you say you're with Gannett, they're not so sure, and so USA TODAY has so much more brand equity than Gannett in today's world, and we also needed a reason and an opportunity to retell the USA TODAY Network story, and so the name change was perfect for all of that, so it's been well received, Ryan, everywhere and every constituent you go to, whether it's investors or advertisers or consumers or our own employees. It's been incredibly well received. We should have done it earlier, but I'm glad we did it, and it's going to be a real helpful tool for us, actually for revenue growth.
So it's not just a name and a thing and to be excited or a sexy thing. It's going to open up national advertising revenue opportunities for us. It already is because we're out there now under the USA TODAY co-brand selling that USA TODAY digital strategy, and we're already seeing the national advertising opportunities roll in. So it's going to be a revenue growth driver for us in 2026.
Look, I can tell you right now, not having even connected it, but I see that name a lot more now in searches, whether it's news, whether it's sports. It's constantly USA TODAY versus you would never see the other name otherwise. So I think you guys have done a good job. And also, it's great timing, as Trisha was telling us, as the business is becoming a much greater or majority digital company. So just in the interest of time, I got a few more questions to go through here. I'll try to do them a little bit quickly so we can head out all of them because I do think they are all important. Number one, the $100 million cost savings program that was identified, mentioned on the third quarter call.
You could just talk about that and how that should flow through for the fourth quarter and any sort of update, how we should think about margins going into 2026. Maybe just start there.
Sure. Yeah. The cost takeout program was really all about sustainability. How do we sustainably grow our EBITDA? How do we create growth in EBITDA? How do we sustainably grow our free cash flow? How do we create capacity to invest in the business so that we have sustainably growing revenue, and there was a real opportunity last year. Our focus was all about automation and outsourcing, and you always find still some duplication within your operations. And so our focus was on taking those things out and really adding into our operations even more variability into our cost structure, particularly in places where we're not making massive investments going forward. That's things like print and manufacturing, so the actions that we took include things like shuttering two of our largest production facilities and consolidating them where we had capacity elsewhere in the country.
That's been a really successful change in operation for us for many years now. We continue to transition our delivery of our product to mail versus carrier delivery when it makes sense. It's a great experience for the consumer. It's significantly less money for us, and we've been doing this for a couple of years. We've learned a lot through that, and we took a bigger step last year, and then certainly, we've talked a lot about AI today, how it's impacting our revenue. We're absolutely getting process improvements and workflow efficiencies as we start to add AI tools more broadly across our organization, and certainly, payroll was a component, but through all of this, it was really about how do we become more efficient and how do we become more sustainable, so yes, it will have a positive impact on our margins.
But I think even more important is the type of revenue that we're adding to our portfolio. That's going to have a big impact on our margins going forward too. As you start to monetize the work that you're already doing in new and different ways, that's very accretive on the bottom line too.
Makes sense. Talk about the c apital allocation. Mike, you alluded to it. And look, I love when you bring that up because I do remember that in 2019 and how large that piece was, how expensive that piece. And then fast forward to where you are today, totally different situation. But that's been a priority for either of you, just how you're thinking about that as you talked about the EBITDA to free cash, how you're thinking about that leverage. I know eventually one time, but maybe just comment more near- term how you're thinking about capital allocation.
Yeah. I think it'll come as no surprise to anyone that debt repayment remains our highest priority. Look, we think our debt is very manageable, but we also think it's really important to bring our debt down. We've been aggressively doing that, as Mike said, since the acquisition a number of years ago. I think through Q3 of last year, we had repaid well over $100 million of debt, and we had guided to over $135 million of debt in 2025. That's a really solid year of progress on paying down debt. We'll continue to do that here going forward. I alluded to the fact that we see sustainably growing free cash flow. We continue to have some asset sales. We'll continue to use those funds to pay down debt. You talked a little bit about leverage. We did see our leverage go up slightly.
I think it's Q3 2024. And that's because we brought in our second lien convertible notes into our first lien facility when we refinanced. But that was such a great opportunity for us to both extend our maturities and also eliminate the future dilution potential from those convertible notes. So getting down to two times in the near future is a priority. Getting closer to one-time first lien net leverage is a focus for us. I think at that point, it takes a lot of pressure off of our share price, and we'll have a lot more flexibility in our capital allocation. So we can do things like address the remaining convertible notes, invest back in the business, potentially share buybacks. So getting closer to that one time is certainly still a priority for us.
Makes sense. And yeah, I guess too, and by the way, if there are any questions, please let me know. I'll get to that. Just I guess, Mike, we hit on a lot of stuff. You got a lot of very favorable, positive, some good tailwinds, the inflection, talking about some of the monetization opportunities, leveling the playing field with Google, just some of these things. But yeah, just maybe in the interest of the last couple of minutes, just highlighting a few things going into 2026 or we're here in 2026, just additional things to reinforce to investors, your top priorities, your focuses, insights, and especially maybe even over the next couple of quarters.
Yeah. Yeah, Ryan, well, I think for investors who may be new to our story, but even for investors who've been following along or are invested with us, I think one point I think that's important is a transformation like we've gone through, we are going through is not easy. There's not very many out there that you can point to that have really transitioned from a declining print business to a growing digital business, so it's not easy, and there are wins and losses along the way, and over the last five or six years, we take a couple of steps forward and one back and a couple forward and one back, and so I think what I would say to investors who are looking at us now is that we're close to the end of the transformation, and that's a real positive, right?
There was a lot of work to do. When you look back a number of years ago, and our digital revenue was 30% of the total, and we didn't have as diversified of a revenue stream as we do now. We didn't have the licensing opportunity that we have now, and so the e-commerce wasn't as strong of an opportunity as it is now, so I think what I would say to investors that hopefully is an exciting thing is we're close to the end of the transformation, which then puts us in a position to really not only grow, of course, grow, but trade at a better multiple, so I think there's still lots of upside to our share price. Look, our share price is up over 150% from over the last three years.
But we have a lot of upside in front of us because of multiple re-rating and because of growth versus just managing a slow decline. So I think the other message that I would give to investors is because it's a transformation and it has ups and downs, and there are always macro factors too. The best investors are those who are not playing the quarterly casino that the stock market has become. We talk about NVIDIA's earnings the exact minute they're going to be published for like a week and the market's up or down, whatever. It's like a casino sometimes. The investors that are making a lot of money with us are those who invested and are patient and understand where we're going and look at things more on a long-term basis. Are we making progress on a long-term basis as to where we want to go?
That's the kind of company we are. There's a tremendous amount of money for shareholders to make. Those that came in three years ago have made a ton of money, and even coming in now, there's a ton of money to be made. But you really do have to take a longer-term view. It's not a quarterly casino type. We're not that kind of company, but we're really excited about the opportunities. I do think, as Trisha mentioned, the margin from some of the new revenue streams is high. We have five different revenue streams inside digital that we all think can grow over the next 10 years, and one of the hardest things for a business to do, Ryan, is build scale. That's why so many businesses fail is they can't get scale. They might have a great product. They might have a great idea. They can't get scale.
We have scale. We're reaching more than one in two adults in the U.S. every single month. We have that scale. What we need to do now is monetize and engage more with that, the audience that's coming to us. We're going to continue to deliver, as Trisha mentioned. We're going to continue to invest in the business. We're really confident in what we're doing, and we're really excited about where the next three or four years will be for us. We're also hopeful that we get a favorable outcome with the courts, and there's a level playing field on the digital advertising ecosystem. With or without that, we're so bullish about the future and where we've made investments. We think we've got a great management team. I think we're bullish on the future. Couldn't be more bullish right now on the future.
That's amazing, and yeah, being along the ride with you guys, big credit to the team, and excited for this year, just as you are kind of digital first now. Whether it's 47 or 53, but it does make a difference. It does help. Then actually just how far you've come with the leverage. It's a big credit to the team. With that, let me just double-check. Make sure we don't have anything here. Yeah, I guess that means we must have covered everything. Trisha, Mike, thank you guys for joining us again this year. All the best to you in 2026. I'm sure we'll be talking throughout the year.
Yeah. Thanks for having us.
Yeah. Thank you, Ryan. It's great to be with you again.
Great. Thank you.
Thank you.