Great. Hello, everyone, and thank you for joining us at the Needham Tech and Media Conference in this year. I'm delighted to have the team from USA TODAY with me, CEO Mike Reed and CFO Tricia Gasser. USA TODAY, ticker TDAY, $1.1 billion market cap. What we're planning to do, like we've done in the past, is just Q&A, and we'll keep a check on if you have any questions, please feel free to let us know. Mike, Tricia, thank you for joining us again.
Yeah, Ryan, it's good to be here. Thanks for having us.
Excellent. Well, let's kick things off. Yeah, maybe Mike, for you, just a bigger picture. Maybe just start by outlining USA TODAY's strategy and your top priorities for 2026.
Yeah. Thanks, Ryan, and again, it's good to be with you. I don't know if this is year 6 or 7 in a row, since we brought New Media and Gannett together several years ago. One big thing since we talked last year is we rebranded. We're no longer Gannett, we're now USA TODAY Co. A big change, really important change for the company, positioning us, you know, as the digital company that we are today, but also really leveraging a brand that's known so well across the country, especially in the advertising community, it's been a great move for us with all constituents. You know, we've been able to bring about 30 new brands into our national advertising platform since we did that rebrand. We're really excited about that.
That happened in Q4. We're now a brand that many more people know than Gannett. Just taking a step back, you know, USA TODAY Co. is one of the largest media businesses in the U.S. as measured by total audience by Comscore. We complement that with the second-largest media business in the U.K. We're so large, we drive that audience with unique content that we create at scale every single day, both here in the U.S. and the U.K. That content is local, regional and national. What that drives is on average about 180 million monthly uniques to our platforms, and we're averaging about 1.4 billion page views per month.
We've focused the last several years, Ryan, on audience growth, but really with the scale we have today, the primary focus is shifting from growth to actually deepening engagement and driving more monetization or revenue on the platform for each user. We have such significant scale today that actually, the single biggest opportunity for us is to drive more revenue from the users on our platform. Doesn't mean we're not trying to grow more. Of course we are. The primary focus for us is shifting to engagement and driving revenue on the platform from our current users. Data and AI are the tools we're leveraging really to drive that engagement and to drive further audience growth as well. Deepening engagement really comes through content creation that audiences want.
Right now, we see that in sports, health, entertainment, games as examples of categories we're really focused on. Also improving the experience on the platform, things like speed, ease to navigate, payment options for consumers, being in the modern world with what consumers are used to paying with, making sure we accept those payments. Of course, ad placement is important, and we're navigating an experience on the platform into more commerce and affiliate revenue. What we're really doing is introducing multiple ways to monetize each user based on their tendencies, and that's really important here, and that's where AI steps in and data steps in as well, in addition to what content we should create. It's how do we monetize each individual consumer based on their tendencies. It's important that we have a very diversified digital revenue strategy.
We drive revenues from advertising. We drive revenues from affiliate and commerce. We drive revenues from subscription, as an example. Those are consumer revenues. Based on each consumer's tendency, we steer them towards the right revenue source from them. We also leverage our content importantly with that we're creating for consumers to bring them to our platform. We're leveraging that for licensing and syndication to other tech and AI companies. Of course, that's extremely high margin revenue 'cause we're already producing the content, in turn licensing it to others. We're pretty excited about that's a very high-level view of the strategy that we're deploying. It's both B2B and B2C. B2B, we have not only our content licensing business, but also our DMS business, where we're selling digital marketing services to businesses.
Of course, on the consumer side, it's all about content and how we monetize that content across advertising, commerce and subscription. you know, importantly, we're nearing a couple really important inflection points. I wanna think about how we create value for shareholders. We create value for shareholders in several ways. 1 is expanding the multiple that we trade at. 2 is growing the profitability, the EBITDA and the free cash flow of the company. 3 is continuing to improve the balance sheet, de-levering, reducing leverage, and of course, improving liquidity. Those are our 3 kinda primary big value drivers, the biggest being multiple expansion. We're nearing a couple really important inflection points.
Two on for us on the top line that we really think will drive multiple expansion is driving more than 50% of our revenue from digital sources, and number 2 is creating sustainable total revenue growth as a company. 'Cause we still do have the legacy print business, which is declining and will continue to decline, but generating overall total revenue growth driven by our digital revenue growth. I cite those 2, sort, really important inflection points coming near. First, on total digital revenues in the first quarter, we saw 48% of total digital revenues coming or total revenues coming from digital sources, and that's important. It's been steadily growing. We're nearing that 50% inflection point. We were at about 45% at this time last year, ended Q1 at 48%.
We were at 47% in Q4 last year, so making steady progress, and you can see that 50% mark right around the corner. Second is total revenue growth. We were down 6.4% same-store basis in Q3 last year, and then we were down 3.9% same-store basis in Q4 last year, and we were down 1.8% in Q1 of this year on the same-store basis. You can see us nearing that inflection point as well. That inflection point draws nearer as we grow digital revenues and as print revenues become less a piece of the pie. An important part of our strategy to understand is we are diversified in terms of the revenue pursuit, B2B and B2C. Our digital revenue opportunities are wide, and we're pursuing all of them, so we're not overly dependent on any one revenue source.
I think that's important, especially sustaining through up and down cycles in different revenue categories. We're pursuing digital advertising, pursuing digital commerce and affiliate, digital subscription, digital advertising and marketing services, and a digital licensing and syndication business. Important to have that diversification, we believe, in our overall revenue strategy.
Wait, let me say one thing.
Yeah.
You hit on a good point. It caught my attention. That trajectory over the last 3 quarters, this most recent quarter, this 1 Q of down 1.8% on the same store was your best performance over the last 4 years. You gave to us, you know, it's 45% digital last year, 48 in. Are you saying you think sometime this year we inflect?
Yeah
yeah, what's the right way to think about it then? I'll jump over to Tricia just to talk about some of the digital stuff.
We do think later this year is the right way to think about both of those inflection points. As we close 2026, we should be at or just slightly above 50% total revenue from digital and right around that inflection point. Those are right around the corner. Last thing I'll say, Ryan, then we'll move on to the next Q&A, is just that what you're really seeing in our financial results is the results of the strategy we've been deploying for a couple few years now on audience and monetization and capital allocation. We've grown EBITDA 3 of the last 4 years. We've grown free cash flow 4 straight years, we expect double-digit free cash flow growth again this year.
Strong Q4 followed by a really strong Q1, the de-leveraging story has been phenomenal in our first lien net leverage at the end of Q1 was down to 2.3x, we expect to end this year right around that 2.0x mark. Making great progress on all parts of the strategy. What's right around the corner really is multiple expansion, profit growth, and continued a right sizing of the balance sheet, which we think results in really kinda significant upside to our share price from here.
Yeah.
We have the optionality of the Google litigation, which I'm sure we'll talk about today as well.
Yeah
That's a kind of a big enhancer to the stock price opportunity as well. I'll kick it back to you.
No, absolutely, great stuff. I do think it is important, Mike, to get to share that. We've been, like you said, 6 or 7 years to this point, but just highlighting doesn't just happen. There's a strategy. You're executing, I'll be the first one to say that having done, you know, sometimes 2 times a year with you guys, like, the execution has been fantastic and been really glad to see, especially some of those, the trajectory of the same-store sales revenue is quite a big of a accomplishment. Trisha, let's switch over to you if that works.
Yeah.
Let's talk about the digital subscription revenue growth from the quarter. Strong and improving seems to be driven by ARPU. How are you know, thinking about that business, those volumes, and how does that play into your outlook?
Yeah. Good morning, Ryan. You're right. Digital subscription has been a good story for us, and it's been driven by ARPU primarily over the last couple of quarters. I think that's a really good recognition of the value of the content that we're providing. We saw ARPU grow 40% year-over-year in Q1. It's up 5% sequentially. We still see a lot of meaningful headroom on pricing. I don't think we've found the ceiling yet, particularly around our annual subscription offer. We expect that we'll continue to have growth there in ARPU. That said, volumes are going to be an important piece of the long-term story, and we're really encouraged by the trends that we saw in Q1.
Decline started to slow materially, and we're starting to see that parity between the starts and the stops, and I think that is really a signal that the actions that we took last year are working and that our subscriber base is stabilizing. As we look forward, you know, digital subscription revenue has been growing sequentially. We grew in Q1, and we think that that continues to grow, and it's driven by both ARPU and volume. We did a lot of work last year. It was intentional. It was tough. It was hard work. I think it's really put us in a place where we can grow both volume and ARPU and have meaningful growth in our subscription business. One thing I'd highlight is that we introduced stacked products, and that's going to be a piece of this. It's still very early days.
Only a very small fraction of our base is stacking products. What we see is that it leads to higher engagement. We see better retention. We see overall better revenue. And as we add more products to that mix, we think there's an even greater impact. Short term, still a lot of growth in ARPU, but I think you'll start to see that growth be driven by both the ARPU and volume, and I think that gives us even more potential on the revenue side.
Great. Maybe switch over to another digital category. The digital other was a strong growth driver. I was talking to the team about that last week. Believe it reflects some of the AI licensing deals that you've done. Can you talk about, you know, how you see that opportunity?
Yeah
over the coming quarters and years?
Yeah. For sure. There was strong growth in that category in really the last couple quarters. I think in Q4, digital other was up $10 million year-over-year, and in the first quarter was up $19 million year-over-year. Two things are important to highlight there, Ryan. The digital other category for us has two big growth drivers. One is AI licensing, and the other is our commerce affiliate revenue strategy is in there as well. When I look at just the first quarter, for example, of $19 million of year-over-year growth, not all of it's AI licensing. A good chunk of it is, but also the commerce and affiliate revenue growth is captured there and is part of that $19 million of growth.
You know, we do expect this category to be a really significant and continued contributor to our growth this year, but for many years to come. You know, I mentioned on my last 2 earnings calls that I've offered some caution in terms of not to get too excited about $19 million of growth in 1 quarter year-over-year. I do think that this category, as I said, is a significant growth driver, and when I look out over the next 3 or 4 years, I see a lot more deals in our portfolio than we have today. Today, we have deals with Meta, Microsoft, Amazon, and Perplexity. I see a lot more deals over the next 3 or 4 years, but I do think they'll be a bit lumpy.
I can't tell you exactly when we'll bring the deals in. I definitely want investors to take a longer-term approach to how they look at this category. 'Cause I think the growth's significant. Think there's a lot more deals to come, but I can't tell you exactly when they're gonna come. A lot of our AI partners, tech partners are still trying to figure out their own business strategies. There's a lot of puts and takes and shifts going on there. As their business strategies become more clear, our content and how it fits in becomes more clear, and it's gonna be easier to recognize or enter into deals. We have the pipeline right now. We have more deals to come.
I feel very confident about it, and I think this category is a huge one for us. Couple things we're doing that really position us from a strategy perspective. One, we're continuing to digitize more of our really extensive archived content, and we believe there's real untapped value in that. Part of the deals we've entered into, like with Meta, for example, part of what they're doing is buying our archived content in addition to our current real-time content. We're digitizing more and more of that extensive archived content, which will unlock value for us in these AI licensing deals. Think about all the major tech companies out there that I didn't name when I just said who we have deals with, and there are new entrants to that.
The opportunity for us to do a lot more deals because the playing field is big is huge. Our pipeline remains active. We're blocking all of those tech AI companies that are trying to get our content that aren't licensing it from us. We see every month how extensive that blocking is. We produce unique content that we know is incredibly valuable, we feel really good about this opportunity. I don't wanna dampen the outlook folks have for this opportunity by being cautious, but I think when I look at 1 quarter to the next to the next, I wanna be a little cautious there.
When I look out over the next three or four years, the opportunity is really significant.
That makes sense. And glad to hear about the blocking as well. I feel like that's, I'm glad you guys are on top of that. Let's continue talking about a very strong 1Q. Maybe, Trisha, you wanna talk to us about, you know, sustainability and anything you can tell us, you know, going into the second quarter here.
Yeah, you're right. We had a really strong Q1, I think all of the key tenets that we saw in Q1 play out again in Q2. Q2 really is a continuation of the progress we made in Q1. I think we started this call talking about how we've seen steady improvement throughout our business for many years, we see that happening again in Q2. You'll see the same things in Q1, that sustained and improving top-line momentum, our ongoing growth in our digital revenues, with digital nearing that 50% mark that we've been talking about. Adjusted EBITDA continues to grow year-over-year, that comes from that revenue improvement that we've been driving, as well as the cost work that we did last year.
We'll see positive net income again in the quarter, and we also expect to see significantly higher free cash flow generation quarter-over-quarter. All of that leads to us reaffirming our guidance for 2026, where we see free cash flow growth year-over-year for another year, profit growth on the back of those improving revenue trends. What we saw in Q1, you know, those core tenets we think we see again in Q2.
Excellent. Couple things I heard in there from Mike earlier. He talked about obviously the growth in EBITDA 3 to 4 years, but also the double-digit free cash flow growth this year. Can you just maybe Tricia just talk to some of that, what's driving the free cash flow growth, maybe over the last couple of years and what to expect going forward.
Yeah, absolutely. There's 2 things that are working in our favor on free cash flow. Certainly, the biggest is going to be that continued shift to higher margin digital revenues, particularly things like subscription and AI licensing, along with just overall better monetization of our audience. On the advertising side, at the same time, I think you've heard we're being very disciplined on costs, which is also helping us drive margin expansion. As our business improves, it naturally flows down to free cash flow. You think about the significant amount of debt that we've repaid year after year. We secured a lower interest rate last year, we should incur lower cash interest as well.
As you put that all together, it's led to free cash flow growth for the past couple of years, and it really gives us confidence that we can deliver strong free cash flow growth again this year and into the future.
That's great. Talk about, obviously Mike mentioned the first lien debt leverage of 2.3 times. I think you said by the end of the year, 2.0 times ±. Yeah, maybe just talk about I mean, look, I know how far you've come, but I mean, now we're just, you know, to be at these levels, particularly on the first lien is fantastic. Yeah, just how you're thinking about that use of free cash flow, how you'll deploy that over the medium term.
We have, you know, appreciate you calling that out. We have made a lot of progress. When we did the acquisition 6 or years ago or so, it was $1.09 billion in debt. We sit, you know, well below $1 billion at this point. We've made a lot of progress on deleveraging. Our first lien, as you said, net leverage now sits at 2.3 times. I think our capital allocation priorities remain consistent, and they will again this year. First and foremost, we're focused on debt reduction, and that comes from the free cash flow generation and the continued EBITDA growth that we just talked about. We will still make targeted investments in our business. We did a small investment in Q1 in The Detroit News, for example. We'll make investments that's really gonna drive future growth, things like data, product, AI.
You know, we wanna make sure we're supporting long-term growth. You know, overall, our focus is very balanced. It's very disciplined. We're gonna invest in the business for growth, but we're gonna use our capital allocation to reduce our leverage and continue to strengthen our balance sheet over time.
Excellent. Well, yeah, keep up the great work. I mean, just phenomenal, especially starting to where we are, but I also know, going forward that number's gonna continue to come down.
Absolutely.
Which leads me to Mike. I assume you probably wanna take this one. Yeah, can you just update us the latest on Google, the ad tech case, the timeline, just what's the best way to think about potential remedies, or the financial impact?
Yeah. You know, Ryan, when we filed the lawsuit a little bit over three years ago. This always seemed like an event that was way out in the future.
We're actually getting really, really close, we hope, to the finish line here. We feel, you know, I'll start by saying, you know, something I've consistently said for the last couple years, we feel really good about a case, our case, and we have one of the best antitrust law firms in the world that took this on contingency and they feel extremely good about it. Feel really good about the case. It's progressing nicely, and we actually expect a lot more clarity in the coming months.
You know, we won our summary judgment against Once the DOJ won their case against Google in the same, for the same thing last summer, we filed for summary judgment, moving our case from having to prove wrongdoing to just a damages discussion, 'cause Google was already found guilty of the wrongdoing. We won that summary judgment. A good chunk of our case now is not proving it, but it's negotiating or discussing damages. We feel good about that. What's really next for us is there's, not specifically to our case, but the DOJ case against Google, there's a remedies hearing last year around Thanksgiving. We're waiting for a judge to give the remedies results. That could be any day now.
We expect a case that Texas has filed, along with 17 other states against Google, to go to trial within about 60 days of the remedies being disclosed by Judge Brinkema in the DOJ case. Those are two things outside of our case but that, you know, could have an impact on our case. On our case specifically, or not on our case, but the DOJ remedies is important because the remedies that are put onto Google, we think will improve our business opportunity going forward. Realizing more digital advertising from a more fair playing field in the digital advertising ecosystem is something we're excited about. Over the long term, that's a huge win for the media industry and would be a huge win for us, so we're anxious to see those remedies.
On our case specifically, Google filed a summary judgment earlier this year. We expect the ruling to be in our favor on that. There's not much in it that has substance and so, we knew Google was gonna do it. We expected it. We expect the judge to rule in our favor. That in the next couple months we think will happen. Then we expect our trial date to get set in the next couple months, and that trial date we think will be set probably for Q1 next year. Could be as early as Q4 this year, but I think more likely Q1 next year. That's an important milestone because once the trial date's set, as you get closer to the trial, you could potentially have settlement discussions that come up.
you know, we think our When we look at the impairment to our business over the last, you know, 10 years or so, we had billions of dollars of advertising revenue impaired. We haven't publicly disclosed exactly what our damages are, but when you think about the how our business was impaired, it's a good way to think about what the opportunity for us is in the litigation here. It's quite large. Could be meaningful obviously to our share price. The capital if we're and once we get to that point, you know, would be valuable from an investment standpoint, continued de-levering, as well as potentially share repurchases and things of that nature. It would be a real value enhancer for the company for sure. We feel really good about it, Ryan.
It's around the corner now. It's not far away, and we're kind of excited to wrap this up too.
Yeah. Well, gosh, I'm sure you could find some things to do with that money, and Tricia obviously can figure out some things as well. Yeah, maybe Mike, just in closing, I know you hit on a lot of things early on. I mean, the company's obviously come a long way and a huge credit to you and all the employees there. Yeah, maybe just to wrap maybe a couple things, one or two things. We're sitting here in May.
Yeah.
Just what we should be looking for, what investors should be looking for over the next, you know, let's call it, quarter or two in particular.
Yeah.
When we'll see or hear from you again.
One thing I would point out, Ryan, because a lot of these meetings we seem to end them on the Google case. While the Google, you know, litigation is an opportunity for us, it's not I don't want investors' takeaway to be that the Google litigation is, has to happen. Our strategy is going to create real value for shareholders from where we sit today by expanding that multiple, growing that EBITDA number that we trade off of, continued de-leveraging and shifting enterprise value from debt to equity.
There are so many things in the pipeline just operationally that will create significant value from here as we go, That's a really important takeaway I think for investors, is the Google litigation is optionality that would be like the syrup on top of the ice cream. The real opportunity for us is that actually the business we're running and the expansion from here. The multiple expansion could be quite significant. For those that follow The New York Times, they went from trading at 5 times EBITDA, now they trade at 19 or 20 times EBITDA with a similar strategy. They sold non-strategic assets. They paid down debt. They de-levered to basically zero. They pursued a digital strategy primarily centered around subscriptions.
More than 60% of their revenue now comes from digital, they have a sustainable top line, they're growing profit. They're now buying back shares they've gone from 5x EBITDA to close to 20x EBITDA. I think a great example of the opportunity that's in front of us, we have a more diversified digital revenue strategy, which I like. We're not solely focused on subscriptions. There are other things, that multiple expansion opportunity combined with profit growth, combined with de-levering I think creates real value creation opportunity for us from here over the next few years. Over the next couple quarters, Ryan, specifically I think what investors should get excited about is hitting those inflection points.
Yeah.
You know. Hit getting to 2.0 times leverage, get first lien leverage, getting to same-store revenue growth and getting to more than 50% of digital revenue. Those things are right around the corner over the next couple quarters. You know, we're pretty excited and pretty bullish about where we sit today.
Yeah. Well, absolutely. Yeah, I mean, shareholders obviously taking notice and, especially with the continued improvement numbers. I mean, it's pretty fantastic. Let's wrap it there. I think we hit on just about everything. Big credit to you and the team. Yeah, look forward to doing this again, and I'm sure we'll have some more updates and maybe some, you know, shifts in, what the greater part of the business is and I look forward to that.
Yep. Thanks for having us, Ryan.
Yeah. Thank you, Ryan.
Thank you.