Hello. Hi, everyone. I'm Mike Reed, Chairman and CEO of Gannett, one of the largest media companies in the U.S. And we also have one of the largest media companies in the U.K. Currently operate in, you know, about 250 markets across the country with daily and weekly digital and print news publications, and of course, we have the USA TODAY here in the U.S. So our audience is primarily digital, and we're driving about 185 million uniques to our platform every month. And as you'll hear in the presentation today, about 40% of our revenue is now digital, and we expect that to grow or that percentage to climb pretty rapidly over the next couple of years.
So in terms of, of audience, we're one of the top five or six, generally, as, as scored by Comscore every single month. We're one of the top media companies in the U.S. Going through an evolution from a legacy print business to a, digital business, and we'll talk a little bit about that today. But first half of the year, we've gotten off to a great start, been really strong. We've hit a couple inflection points with regard to EBITDA and cash flow that we expect to be sustainable for, for quite a few years to come, and we're getting very close now to our inflection point on the top line.
In addition to a strong first half of the year, what really was, was, our best was the second quarter, when we saw EBITDA grow 40% over the prior year, and we saw free cash flow grow 200%. Revenue trends improved in the quarter from the same store perspective for the second consecutive quarter. We expect same store trends to continue to improve in Q3 and Q4, and we expect to hit our inflection point, where revenues grow sustainably, towards the end of next year, so we're just over about a year away from that. Notably, in the second quarter as well, digital revenues returned to growth. Many of you know, there's a lot of macro pressure on digital advertising that began about a year ago, second quarter of last year.
We, we saw digital revenues return to growth in the second quarter, and we expect that growth trend to improve in Q3 and Q4. 39% of total revenue in the second quarter came from digital sources, and we expect that to surpass 40% in the third quarter. As we get to our inflection point next year, we'll be a lot closer to 50% of total revenue being sourced from purely digital sources. We do expect EBITDA growth in Q3 and Q4 again this year, and we do expect to end the year with approximately $100 million of free cash flow versus a flat free cash flow next year. I'll get into the data a little bit more as we go here, too, but we're optimistic about the back half of the year.
Another real strong point of the first half of the year is debt repayment and leverage reduction. We've reduced First Lien Net Leverage from 2.68 at the end of the year to 2.26 at the end of the second quarter. That comes both through debt repayment as well as EBITDA growth. We do expect debt, first lien debt to fall meaningfully below 2.0x by the end of 2023. So we're making rapid improvement to the balance sheet through delevering. 4 key value drivers for the business, which we show on slide 3 of our small presentation, and they're all in line with evolving the business model from a legacy print business to a much broader, bigger digital business.
Both a digital marketing solutions business as well as a content business, and we'll talk about both of those today. The value drivers, stabilizing revenue trends. You know, we've been a melting ice cube for a long time now, and we are so close now to the edge of that inflection point where digital revenues are growing at a much faster pace than print's declining. We're harvesting print better now, stabilizing those trends a little bit, which puts us in a position to really stabilize the revenue trend next year and then see growth from there on. We're starting to see that march towards stabilization now. As I mentioned, we've had two consecutive quarters of revenue trend improvement, and we expect to see that again in Q3, Q4, and we expect that to continue into next year.
A big value driver for us is obviously stabilizing and then growing the revenues on a sustainable basis attached to sustainable EBITDA and free cash flow growth. So, inflection point sometime just over a year from now. We've already hit the inflection point with regard to EBITDA and free cash flow. Significant growth in the first half of the year. We'll see growth again in the second half of the year, and we expect that growth to continue for 2024 and beyond. Second real value driver is accelerating digital growth. Our real investment and our real future is in digital. As I mentioned, we returned to growth in the second quarter. We were so glad to see that with all the work we've been putting into that. 39% of total revenue is now digital.
We'll pass 40% here in the third quarter. We're focused on recurring digital revenue streams, but we're also focused on diversification of digital revenue streams. Our eggs are not all in one basket. We're focused on digital subscriptions. We're focused on digital affiliate and transaction revenues. We're focused on digital advertising revenues. We're focused on recurring digital marketing solution revenues. So we have a variety of buckets that we see significant upside for with all of them as we go forward, which gives us the confidence that we're not only gonna hit the inflection point next year, but that there's significant growth ahead for us. So on the media side, we're building a platform. There's 185 million uniques today.
As we broaden the content play there, we expect to be able to grow that audience, but more importantly, we expect to be able to engage better with that audience. Growing three forms of revenue at a high level: digital subscriptions, digital advertising, and affiliate transaction revenues. And then we have our digital marketing solutions business, which is a B2B business. We have close to $500 million of revenue there today. We expect to be able to double that over the next five years. However, the growth will come more from the product software side than it will from the agency side. So we're pretty excited about that.
I'll mention it later, but we did hire a new president for that business, Chris Cho, and we're really excited about his, his strengths and his talents, and what he's gonna do for that business. So digital revenue is a key component of our overall growth strategy. Digital will allow us to achieve the first priority here, which is stabilizing growth. We feel really good about where we are today and what the second half of the year looks like. Third and fourth components go together a little bit, but growing strong, EBITDA and Free Cash Flow. We're focused on product profitability, we're focused on ARPU per customer, we're focused on better, customer acquisition, spend, and of course, cost optimization, focusing on the cost structure.
All of those things leading to increased profitability based on the revenues we have today and based on the revenues we expect to get in the future. And as a result of EBITDA growth over the coming years, we expect free cash flow growth as well. However, there's a really good point that's worth talking about there with regard to free cash flow. We're currently converting at about 30% rate from EBITDA to free cash flow. We expect that conversion rate to grow to 50%-60% over the next couple of years. Reason being is some of the cash expenditures we have below EBITDA, such as restructuring, severance costs, interest costs, pension costs, we expect those to come down significantly over the next couple of years, and we're starting to see that now.
So as those costs lower and EBITDA grows, and we grow our free cash flow conversion percentage to 50%-60%, we expect really significant free cash flow growth over the next few years. That puts us in a position to really strengthen the balance sheet. We'd like to come out of this with a pristine balance sheet in the next couple of years. We've made, as I mentioned, we've made significant progress in reducing debt so far this year. We're gonna continue on that path the rest of this year and next year. Our number one priority for capital from a capital allocation standpoint is debt repayment. And so we're highly focused on reducing that leverage to somewhere net leverage around 1x, maybe below 1x.
So we've made great progress going from, you know, just under 3x at the beginning of this year, first lien net leverage will be under 2x first lien net leverage as we end this year, and we'll make significant progress on that again next year. Matt, if you wanna go to slide four. four, five, six, and seven are just highlights of the four things I just captured. So slide four is our focus on stabilizing revenues. As I mentioned, the stabilization will really come through accelerated digital growth, combined with better maintenance of print. We've had two consecutive quarters of trend improvement. We expect that to continue the back half of this year. We expect to reach our inflection point late 2024. Growth will really come from digital.
We have a lot of different digital undertakings where we are already creating significant businesses and see real growth ahead. So we're pretty excited about how this revenue picture will unfold over the next six quarters, putting us in a position to grow sustainably over the long term. Matt, if you wanna go to slide five. It's really... This is the focus on our digital growth and the position we're in today. As you can see, we have significant audience, significant customer account, and huge opportunity. I think the important takeaway here for us is that we have a diversified approach to revenue growth. Our eggs are not in one basket. We're not all in on a digital subs growth, and if it doesn't happen, we fail. We have a digital subs plan, growth plan.
We have a digital advertising plan that's both premium sales and programmatic sales. We have a partnership program that's generating affiliate and transaction revenues that's well underway. We see big opportunity there. So the real nuts and bolts of the work that will drive all three of these is our work on the content side. To drive a broader content plan that brings in a broader audience, but also allows us to engage more with the audience we have today, which is there for news. We're really excited about that opportunity. We hired a Chief Content Officer about four months ago. She's off to a great start. We're already seeing significant growth in audience and page views as a result of the work she's doing. And the next...
There's gonna be many next steps in her journey, but engaging with our consumers on a broader basis beyond news is gonna be critical to us growing all of these revenue streams as we bring people on our platform and keep them for a longer period of time. And then our digital marketing solutions business is another one. We're almost half a billion today. We see that doubling over the next five years. Our penetration rates are still low. This is a $300 billion marketplace growing at about 9%. Our penetration, as I said, is low. We have a new president of this particular group who's helping us build out our SaaS part of the business, which is already launched.
We went from zero to about 150,000 freemium users on the SaaS platform over the first year. So we're excited about continuing to build that out, turning those customers into better-paying customers, and bringing them on to the other part of our DMS platform. So lots of opportunities with digital. Look, it's about 40% of our revenue today, so it's just over $1 billion of revenue, and we see that we see the opportunities for digital revenue growth being material over the next few years. Slide seven, Matt. Just a quick recap on EBITDA. You can see here, EBITDA has returned to moving in the right direction, along with free cash flow. We see that continuing in the second half of the year and into next year.
We have been able to take significant costs out. We are working on other cost optimization programs. We're seeing some easing in some of the key inflation pressure areas, such as newsprint, raw materials. So we do expect with improving revenue trends that get to flat by the end of next year, combined with existing cost programs, we'll be able to grow EBITDA and Free Cash Flow again next year. And as I mentioned, Free Cash Flow growth will also benefit from lower pension costs, lower interest costs, lower restructuring and severance costs. That then leads us into the next slide, having healthy generation of Free Cash Flow to continue to significantly pay down debt. And that's a big opportunity for us. We want, we wanna get first- firstly, net leverage below one. We'll work...
Then we have to work on the converts, but taking leverage out of the equation of the discussion with regard to it being a pressure point on valuation for the company is a goal over the next 12 months. We're making great progress and expect to be there by the end of next year. So, a couple of things I would say is, as I wrap, we've made some recent additions to the team in the key areas that we see for growth, where we needed some upgrades. As I mentioned, Kristin Roberts is our Chief Content Officer, Imtiaz Patel is our Chief Consumer Officer, Chris Cho is the President of the DMS business, and Jason Taylor is our new Chief Sales Officer. Great talent. They've all hit the ground running over the last two, three, four months.
We're seeing the results of their contributions already, but we're in the first inning of what they're gonna do for us. Great first half of the year, very optimistic about the second half of the year, reducing debt and leverage fast. We see lots of opportunity to create value for shareholders. The truth is, we think the equity is mispriced today. Enterprise value of, you know, $1.5 billion seems incredibly low when you look at how fast we're delevering, how fast EBITDA is growing, what the free cash flow profile looks like, and being so close to the inflection point on revenue, with increasing or improving revenue trends as we speak today, driven by our long-term growth opportunity in revenue, which is digital, which return to growth.
So we think the equity is mispriced, and there's, as we continue to execute on our strategy and our financial results prove out, there'll be significant upside for our shareholders. So with that, maybe I'll move to questions with Jason.
How's it? Yeah. Well, great summary. I'm also joined by Doug Horne, CFO of Gannett. Thank you both for coming.
Absolutely. Thank you for having us.
Yeah, yeah. So, I just heard you articulate your strategy to pivot, you know, from a legacy analog print-centric business to something that is much more digitally centric. If you just had to give sort of the, maybe the three, let's pick three, main vectors that are gonna allow you to achieve that, what, what would those three vectors be?
Yeah, so it really starts on the... I'll look at two vectors, really.
Okay.
On the content side, it's diversification of the content that we produce beyond news, so that we're reaching a broader, younger audience, and we're engaging better, not only with that audience, but with our existing audience. So there are 185 million people that are coming to us for news. What else can we do from a content perspective that keeps those folks engaged with us? Obviously, we know what they're consuming, what they're looking at. The benefit of artificial intelligence and data collection and analysis puts us in a position to be able to do things with those consumers that allow us to engage with them longer.
To put some meat around that bone, we're thinking about things that are more bigger in the sports area, bigger in financial services, bigger in health services, bigger in entertainment. Things that we know will drive audience and keep audiences engaged, where we can, through partnership or through ourselves, get that content and have that content, and have it be the kind of content we're proud to serve on our platform. So on the media side, it's really diversification of content, so we have a broader, more engaged audience, which leads to all of those revenue opportunities I talked about, whether subscription, affiliate transaction, or advertising. On the digital marketing solution side, it's developing further our SaaS products.
Right now, the majority of our revenue comes from more of a digital agency model where we're selling, and we have great algorithms that allow us to do great media spend for our customers, and our retention rates are, you know, above 90% in that business. So what we do for them works, but our ARPU is high, it's $2,600 a month. There are 32 million SMBs, you know, 29 million of them don't spend $2,600 a month. So for us to really penetrate the SMBs across the country and in our media markets, we have to have products that are more affordable. But the things we're doing for the bigger SMBs that can spend $2,600 a month are the same things the small businesses need.
So we just need to develop those in more of a SaaS model, where they can be purchased much more economically by small businesses. So that's the main reason we brought Chris Cho in. So the two vectors, Jason, are developing that SaaS business on the DMS side that will really allow us to open the Pandora's box in terms of the potential customers. And on the media side, it's opening and engaging with more consumers through a diversified content play.
What would be sort of a practical example of a SaaS product on DMS?
Yeah.
Like, if I'm a small business-
Yes, you're-
You're gonna come sell me on a recurring basis.
Yeah. So, you can put into the— You can buy a product that allows you to allocate, tell how much you want to spend, what kind of lead expectations you have, how much you want to spend. We can help you allocate that through our algorithms without you ever talking to anybody. Plug in... You answer certain questions, plug in certain data, and it's all done for you, and then the marketing is done for you-
Okay
... through our platform.
Okay, that's super helpful. What, interestingly, as we talk about this pivot, this digital pivot, you didn't spend a lot of time talking about, stemming the declines on the legacy part of the business.
Yeah.
Is that because you feel like that's sort of a, more of a known known, you sort of have, you know what the trends are, doesn't take a lot of energy?
No. No. You only gave me 10 minutes.
Okay. Right.
No, it's, it is an important part of the strategy. It is definitely worth more conversation. We've made a lot of progress actually over the last 18 months in improving the trends, both in the print advertising world as well as the print circulation world and single copy circulation world. So it's an important piece of the strategy, and we're making progress on it. It's not easy. It's definitely hard, but it's not where the growth comes from.
Right.
Growth comes from digital, obviously, but it's an important piece-
Okay
... and, you know, achieving our inflection point quicker-
Right
... will happen if we are more successful with stabilizing print.
Can you just remind me, how many? I feel like it was maybe two years ago, maybe it's more, when you first picked the tail end.
Twenty-four
... of 2024 to hit that inflection point. Do you remember how long ago you first articulated it?
I think it was about two years ago.
Okay.
Yeah.
And so what gave you the... I mean, that's a, that's a long way to look into the future, to say, "Okay, it's 18 months from now," and you said it two years ago, so we're going on almost 4 years.
Yeah. Well-
You haven't changed it.
No, it's the modeling we've done based on the product orientation we were developing in the DMS business, in the media business, the projects we've been working on to stabilize the print side of the business. All of those things in a model gave us confidence around an inflection point of 2024. Now, everything's not perfect. Digital advertising slowed a lot last year. You know, the macro environment that hit digital advertising-
Right
... and there's still pressure on CPMs in digital advertising. So digital advertising in the fourth quarter of 2024 will be a little bit less than what was in our model two years ago.
Okay.
But what we are, what we've developed that we didn't have in the model back then, is our partnerships and affiliate transaction revenue.
Okay.
So our partnership with Forbes on financial services, our partnership with Gambling.com, we've just signed for another five years, and enhanced our partnership with Taboola. So there's new revenue opportunities that we think are significant, actually, probably more significant than digital advertising in the long run, that have come into the mix. So we still have a lot of confidence. I wish I could say it's exactly the way we modelled it in 2024. It's not. We've had some things-
Happens to me too. It's okay.
Some things have gone better than we thought, some things have gone worse, and we've had some new things develop.
Okay. So can I talk, can I shift gears and talk about capital allocation?
Yeah.
You, you mentioned the 100 million-ish of free cash flow. You talked about the EBITDA free cash flow conversion improving. But for bystanders that are out there that are thinking about the quantum of free cash flow that they should think about for debt reduction, is it as simple as just taking $100 million and maybe, I don't know, $50-$60 million of asset sales? Or could there be- could it be bigger than that, as people are thinking about sort of debt reduction?
Yeah, I think, I think they can think about it being bigger than that. And I think the way to think about it is, you know, our guidance out there. I think the midpoint is around $300 million for EBITDA.
Okay.
So if you pick that, and then you say, "Okay, the company's forecasting growth there," so you can pick your number, whatever you want it to be-
Okay
... 5, 5%, 10%, 20%, whatever you want it to be, pick a number. But then also look at the Free Cash Flow conversion going from 30% to 50 to 60.
Okay.
Even if EBITDA stayed at $300 million for the next three years, free cash flow is gonna grow much more significantly, 'cause if your conversion rate goes from 30-60-
Yep
... you're gonna go from $100 million-$200 million.
Do you-
More asset sales.
Understood.
So-
Do you anticipate a lot more asset sales? I mean, I think you've penciled in $60 million or something, was the-
I think $65 million-$75 million was our guidance for this year.
Okay.
With the announcement we made in July, where we sold about $42 million, I think, and we actually bought back $47 million of debt. We've been opportunistic in picking off debt, trading below par in the market. But with that asset sale, combined with what we did through the first half of the year, we're pretty close to that $65 now.
Okay.
We do have a few more assets we'll sell the remainder of the year, which gives us a lot of confidence that we not only will hit our target, but we may-
Okay
... outperform that target. So going forward, though, I think for 2024, you could think about $50 million-$75 million of asset sales.
Oh, wow!
But I think after that-
You're pretty much done.
... with non-strategic and with real estate.
Okay.
... so Free Cash Flow, Free Cash Flow generation will service our, will make our debt-
Okay.
-payment.
That's super helpful. Now, I wanna, I wanna go back to these partnerships, 'cause I feel like you, you have a fair number of them. It's sort of a new part of the narrative. You've reinforced it here by talking about how you wanna broaden your content away from news. So can we just, can we just pick off a few of these, and just you unpack them a little bit?
No.
I think the most recent one was from Gambling.com-
Right
... if I remember correctly. So what, what is that? So you have this partnership with Gambling.com, what happens?
Gambling.com actually prepares the content that we actually put on our platform.
Okay.
Drives audience to our platform, and gives our existing audience content that is more specific to things around gambling on sports. So it's not an investment we need to make in content. Obviously, picking the partner that we trust, the content they're gonna put on our platform was important, but Gambling.com prepares content around games, leagues, whatever, whatever you can bet on, whatever you can imagine, they prepare really good content around it that introduces betting, and lines, and sports books to readers of this particular content. On the other end, Gambling.com has relationships with all of the sports books. So when a reader-
Is it like a DraftKings? Is that, is it like that?
With a DraftKings-
Okay
... with a FanDuel-
Okay
... with BetMGM-
Okay
... with hundreds, actually-
Right
... around the world. So we're agnostic to what sports book a customer of ours or reader of ours may choose. Doesn't really matter, as long as they find it, and they click on a link on our platform-
Yep
... we're gonna share 50/50 in the revenue with Gambling.com that they have with
With the sports book.
With the sports book.
Okay.
So it's a pretty interesting play because we, you know, we have to do a lot of work to make sure we understand and trust the content that's going on our site-
Yep
... so that we don't diminish the integrity of the site. But once that's done, and we start to run their content, any revenue we get, I mean, it's not costing us a thing.
Right.
Right? So any revenue we get is 100% margin.
Understood. You're bringing a big audience.
Yeah.
Okay. You wanna pick another one?
Well, the Forbes.com, Forbes Marketplace deal, we call it, is a bigger one, because that's around financial services. So you think about all of the... you know, every consumer that has to make financial services decisions from time to time, whether it's interest rates on credit cards, interest rates on a potential mortgage, what kind of credit card do I wanna use? What kind of life insurance should I buy? Who should I look at?
Yep.
What's the right... You know, think about all the financial services out there. Forbes creates incredible content. It gets displayed on our platform, our 185 million people see it. They click on a link to take an action, we get paid. Same thing, we split the money with Forbes. That category is so much bigger because there are so many financial transactions and so many relationships that are in the mix, that we think that, and that by itself is a $200 million revenue opportunity over five years.
And this is... Maybe just explain for a second, why is this better than Gambling.com or Forbes.com just buying some advertising space on your properties? Like, what is it that makes this better for you, and what is it that makes it better for your partners?
Well, it's better for us 'cause our, we share in the act- we think that our audience will perform.
Okay.
We trust that our audience will perform. So it's better for us because our upside's uncapped.
Okay.
Right? It's better for Forbes because they don't spend... They're already spending money to produce the content. Distribution would be in a whole other cost stream.
Got it.
Then the risk would be, does the platform where they're distributing it and paying for that distribution, does it work?
Okay
... or by advertising? So.
Got it. So it reduces their sort of upfront cost-
Right
... but then uncaps your-
It reduces their upfront cost, it also reduces their risk, right?
Yep.
If it doesn't perform, they're not paying us.
Understood. Okay.
Our upside's untapped.
Okay. From the last time we met a year ago, you guys, like, filed a lawsuit against Google. Maybe you can just talk a little bit about what you think Google has done that broke the law, or is doing that broke the law, and what is the best outcome from, from Gannett, from Gannett shareholders' perspective as it relates to this lawsuit?
So yeah, we did file the lawsuit. It created a few headlines. I don't wanna litigate the case here, and I don't wanna, you know,
Might be a few jury members here, so you -
Expected outcome out there. What I would say is that, a couple things, Jason. One is that, at the simplest level, Google has a monopoly on digital advertising, and they control almost really every facet of the process-
Yep
... from the delivery of the ad to the bidding process, the auction process, who gets to bid, who doesn't get to bid, who sees pricing. And so, the delivery of the advertising, everything goes through there. And they've bought a bunch of different companies and built this infrastructure-
Sure
... created this monopoly. So what that's done is it's put a lot of different industries, but let's just stick with publishing. Publishers who spend, and we spend, you know, over $300 million a year creating content that, you know, is incredibly vital to our communities and to the country.
Yep.
You know, a lot of people say that without a free press and without what we do, there's the democracy, democracy's at risk. We spend a lot of money doing that.
It dies in darkness, they say.
Democracy dies in darkness. I think in markets where there's no newspaper today, they're seeing more corruption or chaos. What's happened is publishers spend, in the U.S. for example, more than $300 million in content. Well, they control the digital advertising marketplace, top to bottom, start to finish. So we make very little money off the digital ads that are served on our platform.
Right.
Where, you know, on other platforms and in other mediums, we have much more say in the advertising and a much more fair share of it.
Yeah.
To the number, these are rounded, but $30 million of advertising, digital advertising on publisher platforms across the country last year, and publishers ended up with, like, $6 billion of it.
Okay.
So, um-
Twenty percent?
Yeah.
Okay.
And so the businesses aren't sustainable if we don't have a fair marketplace for us to be able to sell digital advertising and realize more value from the digital advertising that we're selling. I mean, it's our platform, it's our content creation-
Yeah
... but in order to actually monetize it in the digital ecosystem-
Right
Google controls the ads. Now, this isn't just a Gannett position, right? Obviously, the DOJ has filed a lawsuit against Google for the same thing.
Right.
That lawsuit starts to see the light of day in court in March of next year. Theoretically, that's supposed to.
Okay.
There's also 34 states that are part of class action against Google as well, and then the European Union has also filed a suit. So we actually did it after the DOJ, after the 34 states, and after the EU. So it's not just a Gannett view that, you know, we, we got screwed.
Yep.
It's a general view that they violated antitrust laws-
Right
... over the past decade or more. The value that we see that's been destroyed inside us is billions. And so, you know, what that ultimately looks like if the courts decide that we're right and they violated antitrust laws, could be really significant.
So, just from a... I just don't know enough about the law to know, but let's say that these state attorneys general come out and they file this lawsuit, and the courts agree that Google has violated the law. Do you just sort of piggyback on whatever that settlement is because now you filed your lawsuit, or is it a separate sort of legal claim that has to be adjudicated in the court of law that's separate and apart from what the states are doing, or the EU?
Yeah, ours is separate.
So separate.
Be adjudicated separately. However, it's the same thesis.
Okay. The same claim.
Mm-hmm.
Okay.
I would think that if the DOJ or the states have whatever ruling they get, we'll be in line for the same.
Okay. And would you, I mean, do you have any sense of timing? Like, if you're a Gannett shareholder or creditor, what would be your best case for when this all, when we get resolution to this court?
Yeah. You know, my guess is the DOJ and the states are first. They filed first-
Okay
... and they'll be first, and so those, those things will happen over the next 12-24 months.
Okay.
I think the timing of ours will depend a lot actually on what happens in those other cases.
Okay. Do investors need to pay attention? Like, the U.K. is not part of the E.U., so they need to pay attention to the E.U. case at all? They do.
I think so, yeah. I mean, I, I would pay attention to all three.
Okay, just as a directional indication of whether or not the courts find it's-
Yeah.
Okay.
We have a big media business in the UK too.
Okay.
With lots of digital advertising.
But not part of the E.U., that's why I asked, right? Like, is it... But still relevant, you'd say.
Yeah, still relevant.
Okay. All right. Very good. Do you wanna add anything?
No, I think you, I think you guys have covered these topics very well.
We've nailed it so far? Okay.
Since you're supervising.
Well, we have 3.5 minutes. Are there any questions in the audience? 'Cause if there are, more than happy to take any audience questions. If there aren't, I wanna ask a question about circulation revenues, just 'cause it's such a big part of your total revenues, maybe about 35%. Maybe I'm wrong, but I feel like, I don't know how long ago, one year or two years ago, you had sort of an aspiration to get 10 million digital subs. And I felt like your belief about where the growth is gonna come from has shifted a little bit, where now it's less about sub growth and much more about ARPU. So is that a correct characterization? That's the first question. And then second, how should investors th...
If it is correct, how should investors think about the ARPU upside relative to what you're doing today, if that's-
Yeah
... the right vector?
It is the correct assumption.
Okay.
But it doesn't, Jason, it doesn't mean we have less belief in digital subs growth.
Okay.
But what we've looked at, are a couple things. One, the marketplace in general for media businesses has really penalized those that were all in on digital subscriptions, right? And they've had to... Netflix has made a good pivot, and they've, they've done some things that are helping them, but obviously, they've moved into advertising.
Yep.
Uber's moved into advertising. The streamers are starting to focus on, "Are we ever gonna make money? Are we chasing subscribers that are never gonna-
Right
... allow us to make money?" And so the landscape changed. But, and so that was a little factor in it, Jason, but what we really looked at is, we said, "185 million people come into our platform every month"... and we know only a small percentage of them are ever gonna pay for news.
Okay.
And so what else can we do to monetize that? How do we think about ARPU for the entire base of consumers coming to our platform? And that's what's really led us into these two affiliate deals we launched with Forbes Marketplace and with Gambling.com.
Yeah.
It's forced, it caused us to go redo our Taboola deal and do a new five-year deal with Taboola that has a lot more upside from us. So from artificial intelligence as well as digital advertising. And so I- when we think about, you know, say we have a $1 billion of revenue just around and say $500 million is DMS, so there's a $500 million that's coming from our media platform.
Yep.
You have, you know, close to 200 million users.
Mm-hmm.
So our ARPU is just over $2 a year-
Right
... per user.
Right.
It should be five.
Right.
And then 7.
Right.
How do we do that? We can't do that all on subscriptions.
Understood.
We felt like by going all in on digital subscriptions, we were actually too narrowly focused, and we needed to embrace the bigger opportunity.
I see
... which was everybody there.
Okay.
How do we monetize everybody?
Super helpful.
Although I would say that we have considerable upside on ARPU for our digital-only subscriptions. So within that model, we feel like relative to kind of our competitive set, there's room for us to grow in line with our content strategy. So we see upside there and also the upside Mike mentioned in terms of broader monetization.
Okay, so a little bit upside in terms of what the consumer pays, augmented by the partnerships?
Yeah.
Okay.
Although I think the upside from what the consumer pays is more than a little.
Okay.
Right now, our ARPU is not even quite $7, right, Doug? 6-
Like 6:35.
35, and, and the industry is closer to 14.
What would you say explain that gap? Is that more promotional stuff that you're doing today, or is it more just-
Promotional stuff.
Promotional. Okay.
So our ability to take... You know, over the last two quarters, we, you, you know, as, as you've paid attention to our numbers, instead of our digital subscriber numbers going like this, they've kind of flattened-
Yep
... maybe even declined a little bit.
Yep.
Our ARPU is starting to grow.
Yep.
We're focused on letting that churn happen for those subscribers that don't have any propensity to really subscribe. They came in on some special promotion.
Yep.
Letting that churn. Also understanding, by, through the data, what consumers and what content, what content and what consumers are the most likely to have the highest propensity to subscribe, and let's reallocate our marketing spend to go find more of those people.
Understood.
So what you'll see as we go forward later this year, next year, is digital subs will grow again 'cause we'll churn out all those bad subscribers-
Yep
... for lack of a better word. ARPU will grow 'cause we have lots of rate upside, and we're gonna bring on better subscribers. So we won't grow as fast-
Yep
... but we'll grow our revenue faster than our ARPU. So when you think about, we have about $140 million-ish of digital subscription revenue today, and just doubling the ARPU with a stable subscriber base puts us close to $300 million over the next two or three years.
Perfect. Make sure there's one last call for questions. Any questions? All right. Michael, Doug, thank you very much.
Thank you.
Thank you.
All right. Thank you.