Greetings and welcome to USA Today Co.'s third quarter 2026 earnings call. At this time, all participants are placed on a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Matt Esposito, Head of Relations with USA Today Co. Sir, the floor is yours.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss USA Today Co.'s Third Quarter Financial Results Mike Reed, Chairman and Chief Executive Officer Trisha Gosser, Chief Financial Officer Kristin Roberts, President of USA Today Media If you navigate to our website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance. Before we begin, please let me remind you that this call is being recorded. In addition, Certain statements made during this call are or may be deemed to be forward-looking statements as defined under the U.S. federal securities laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement, as well as the risk factors described in our filings made with the Securities and Exchange Commission. Please keep in mind, all comparisons are on a year-over-year basis unless otherwise noted. In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, total adjusted EBITDA, total adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin, and adjusted net income attributable to USA Today Co., Thank you, Matt.

Good morning, and thanks to all of you for joining our third quarter earnings column. In the third quarter, we saw encouraging underlying signals in the categories that we believe are most important to our future, even as we navigated the impacts of the changes in consumer search, along with some inflationary pressures. So when you look at the Q3 numbers, there are really two stories in our results, and it is important to understand both. The first is the industry-wide change in search behavior, which has had an outsized impact in the near term on a relatively small part of our business. The second is the continued momentum in the digital revenue categories that are central to our strategy and where we see the greatest opportunity to drive long-term growth. Today, I will walk you through both, along with the decisive steps we've already taken to strengthen the business including the implementation of a $100 million cost reduction program at the end of Q3 and why we believe we are well positioned to deliver a strong fourth quarter. Let me start with the first story. Changes in consumer search patents have been a headwind not just for our business but for many media organizations and more recently technology platforms. Over the past couple of quarters, These changes have had an outsized impact on one specific part of our digital advertising business, indirect advertising, which includes programmatic advertising and sponsored content recommendations. In the third quarter, we stabilized our audience, and through this, we're continuing to grow our direct sold digital advertising revenues. This reinforces an important point despite the changes in search. We're still delivering an audience that is highly valuable to advertisers with meaningful opportunities to further grow our premium advertising business. That said, these changes have pushed out our path to same-store total revenue growth by a few quarters. Now, I want to put that in context because it's important to understand just how much of our business touches search. Our digital advertising revenue is made up of two primary categories. Advertising sold directly by our sales teams, which as I mentioned earlier is growing, and indirect advertising. It's this indirect revenue, which represents about $100 million of revenue on an annualized basis, or less than 5% of our total business, that has seen the most impact. Declining 32% year-over-year in the third quarter. However, this part of the business has historically carried some of our lowest value advertising inventory, generating significantly lower CPMs than our premium direct sold advertising. So while the pressure is real right now, it is concentrated in a relatively small, lower value part of our business, and we do not view it as a permanent headwind. We also don't expect this revenue stream to go away entirely, but as we continue to shift towards premium sales and premium experiences and we improve the customer experiences across our products, it naturally becomes a less significant part of our revenue portfolio. And as we move through the next few quarters, we'll begin to lap some of the more notable impacts, which will help our year-over-year comparisons. This is the first story. We felt the impact, but it is limited and it does not change where we are headed. And that brings me to the second story, the one that really defines our future and the one we are most excited about. And it starts with our audience. In Q3, we continue to serve one of the largest digital audiences in the media industry. And importantly, we're starting to see signs of stabilization with sequential growth Over Q2 in both unique visitors and page views, as well as stronger engagement across newsletters, social, and video. That scale is a real advantage because it allows us to grow the digital revenue categories most important to our long-term growth, even as the search environment continues to change. We saw that play out in Q3 as those categories continued to improve for us. Let me walk through a few of those categories with you. Starting with digital advertising, our direct sold year-over-year revenue trends have seen solid momentum in 2026, highlighted by growth in Q3. And importantly, we expect stronger growth in Q4. Moving forward, we see several opportunities to accelerate this growth, including growing our base of high-value known users. Expanding our video offerings on and off platform to capture a larger share of growing video advertising budgets and scaling our AI discoverable branded content, which is a product we began rolling out in September. Next is our digital only subscription business and digital other business, which we believe are two important engines for sustainable growth, and they continue to perform well in the quarter. Specifically, digital-only subscription revenues posted its third consecutive quarter of year-over-year growth and also grew sequentially, while digital-only ARPU reached a new high. Digital-other also grew year-over-year in the quarter, and we expect sequential growth in this revenue category in Q4 as we sign additional AI licensing agreements and grow our commerce business. Third, our DMS revenue trends improved sequentially year over year in the quarter. And lastly, our engagement with Palantir continues to make solid progress with our first products now live and beginning to scale. Taken together, total digital revenue represented 48% of total revenues in Q3, up from 47% in Q2. and we also saw a sequential improvement in same-store total revenue trends in the quarter. And to support our long-term growth objectives, at the end of Q3, we implemented a new $100 million annualized cost reduction program. These targeted actions were put in place in late September, fully implemented by early October, and are already positively impacting our run rate in the fourth quarter. With these cost actions, and the green shoots we're seeing across our digital portfolio, we believe we are well positioned to deliver significant sequential growth in adjusted EBITDA and free cash flow, along with substantial margin expansion in Q4. And because these cost reductions are largely permanent, we expect the benefits to extend well into 2027. Beyond the operating results, our antitrust case against Google continues to advance. As you may have seen, Google's motion for summary judgment was recently denied, allowing our claims to move forward to a jury trial. And you may have also seen that our trial date has been scheduled five months from today, on April 5, 2027. The ruling also made public our damages calculation, which totaled $901 million through 2024. We expect to update that figure ahead of trial for additional damages incurred through the trial date. And importantly, that figure doesn't include the potential for treble damages. The trial date is approaching quickly. We feel good about where the case stands, and we look forward to our trial in April. So stepping back, when I look across the business, I'm encouraged by the underlying signals in the categories that are most important to our future. Our audience is stabilizing, engagement is getting stronger, and our cost base is lower. And despite the headwinds from search, the revenue categories most important to our future and to our same-store total revenue growth are growing. Put all this together and we see a clear path in 2027 to same-store total revenue growth along with adjusted EBITDA and free cash flow growth. The changes in search and indirect revenue have cost us some time but haven't altered our strategy and they haven't changed our confidence in where we're headed. Finally, we believe our current share price does not reflect the underlying value of our business or the opportunities ahead of us. And with that in mind, we have approximately $97 million available under our authorized stock repurchase plan. and we intend to be opportunistic in repurchasing shares in the fourth quarter. With that, I'll turn the call over to Kristin to discuss how we're putting our audience intelligence to work across the business, the early results and what we're working on next. Kristin?

Thank you, Mike. Last quarter, we talked about how every visit, every story read, every video watched and every sign up creates a signal. And when we connect those signals, we can make smarter decisions about the content we create, how readers discover it, and how we monetize it. And in Q3, we started putting that intelligence to work. Let me start with our newsrooms, because that's where every audience relationship begins. Both domestically and internationally, we're developing AI-powered tools that help our journalists identify story opportunities faster and with greater predictability. Allowing us to produce more relevant and meaningful content for our readers. To be clear, this doesn't replace experience and judgment of our journalists. It amplifies it. And by pairing that judgment with predictive analytics based on what worked in the past, we can drive deeper engagement and stronger monetization across our platform. We also are putting that same intelligence to work in how readers discover our content, starting with newsletters. In select local markets, we've begun introducing more personalized newsletter content using available reader and behavioral signals to create a more directly relevant offering for each reader. The early results are encouraging with personalized newsletter pilots outperforming our non-personalized standard. Readers are seeing stories that are more engaging to them and aligned to their specific interests. The impact is significant both for the reader, A newsletter sign-up creates a direct relationship. It builds habit and brings readers back. And it begins the journey from anonymous to known users, which, as Mike mentioned, are higher-value users. Our next step is to expand personalized recommendations across USA Today and our sports-related newsletters. We're seeing that same intelligence pay off in commerce. Last quarter, I described how much of our affiliate business depended on manual work to connect relevant offers with our stories. And in Q3, we automated that process. When an eligible story is published, a relevant affiliate offer is identified and added automatically. We've now rolled this out across our local sports content, USA Today Sports, our sports wire sites, and most recently, entertainment. and across the network-wide rollout, affiliate clicks have increased 38%, which reinforces an important point. There is a significant amount of untapped value in the journalism we already produce, and we now have the tools to capture it at scale. Our next step involves working with our commerce team to integrate a much broader range of affiliate opportunities, moving beyond general offers to more specific product-level recommendations. Over time, we expect that to translate into more relevant shopping experiences for readers and more revenue from the content we create every day. Which brings me to digital-only subscriptions. The same intelligence that connects readers with the right content and products also can change how we acquire, engage, and retain subscribers. And moving forward, we're focused on three moments that matter. The first is the paywall. Not every reader wants the same thing. Some want an ongoing relationship with us. Others just want access to a single story. Our pay per article offering meets those readers on their terms and opens up a new revenue opportunity from audiences who are not ready for a full subscription. We've tested pay per article in the past, but we kept those tests small because we found it could cannibalize subscriptions. What's changed is that the audience intelligence we have today is much stronger, and as a result, We are confident we can scale it with precision to a broader audience in a way that allows us to both build a robust paper article offering and a strong digital subscription business. The second moment is the action, or what we call the next best action. Rather than showing every reader the same offer or opportunity, we'll use what we know about their interests and behavior to personalize the timing, the messaging, the placement, and the offer itself. Delivering the right engagement opportunity to the right reader at the right time Retention From a subscriber's first week, there are moments where a more personalized experience can make a meaningful difference. Getting those moments right can improve retention, increase lifetime value, and build a more durable subscription business. On that note, I'm encouraged by the continued year-over-year growth in digital-only subscription revenues. and the new highs achieved in digital-only ARPU. Over the past year, we've prioritized subscriber quality over raw volume, and as a result, we have a much healthier base. Now we can begin driving volume again from a much stronger position at the right price point, where incremental subscriber growth can translate more directly into revenue growth. This is an important distinction from the past, when volume was often driven by lower-priced subscriptions. As we head into 2027, our focus will be on growing that base by giving readers more reasons to come back every day. Overall, we are confident in the direction we're heading and believe we have the foundation in place for our next phase of digital growth. Our focus now is on scaling what's working across our network and translating that progress into stronger financial performance over time. Back to you, Mike.

Thanks, Kristin. It's important to see how we are turning our audience data into actionable intelligence and, more importantly, putting that intelligence to work across our business. As we've outlined this morning, we're growing the parts of the business that matter most to our future. Premium advertising is growing, our digital-only subscription business is growing, and our digital other revenue is growing. That tells us we already have the scale we need to drive long-term revenue growth. Search referral traffic has historically been one of our lower value audience sources. So while the changes are creating some near-term pressure, the bigger picture is that the areas we've been focused on continue to move in the right direction. With that, I'll turn the call over to Trisha to walk through our third quarter financial results. Trisha?

Thank you, Mike. Good morning, everyone. Please keep in mind all comparisons are on a year-over-year basis unless otherwise noted. In the third quarter, total revenues were $519.2 million, a decrease of 7.4% or 5.8% on a same-store basis, which represents an improvement of 30 basis points over Q2's same-store trends. The pressure remained concentrated in digital advertising, where the continued shift in consumer behavior away from traditional search has had an outsized impact on indirect digital advertising revenues with programmatic advertising most affected. Importantly, this pressure is not broad-based and we saw improvement across several key areas of the business during the quarter. Direct sold advertising. Our digital advertising revenue outside of programmatic and sponsored link recommendations grew in Q3. This is our premium and classified revenue, and we believe our focus on known users, video forward experiences, and AI discoverability allows us to grow our direct revenue more substantially in future quarters. In addition, our digital marketing services revenue trends improve sequentially. Digital-only subscription and digital other revenue continue to grow year over year. and both print advertising and print circulation trends improved compared to the second quarter. In the third quarter, operating costs and SG&A expenses decreased approximately 4%, reflecting our continued focus on disciplined cost management. As Mike mentioned, toward the end of the quarter, we implemented a $100 million annualized cost reduction program, which included workforce reductions. The third quarter reflected only a partial month of savings from these actions, and we therefore expect a more substantial impact in Q4. We also continue to evaluate and lower our cost structure with opportunities to transition to lower-cost vendors and software in certain areas, which we believe will generate additional savings in 2027. Adjusted EBITDA totaled $36.6 million in the third quarter, down $20.6 million The decline was driven by lower revenue, most notably the digital advertising pressure I just described, along with elevated costs for raw materials, healthcare, and distribution. In Q3, we reported a net loss of $4.6 million, representing a year-over-year improvement of $34.6 million. Adjusted net income attributable to USA Today Co. was $1.4 million, an increase of $32.4 million year-over-year. Total digital revenues in the third quarter were $249.3 million, a decrease of 5.1% or 4.2% on a same-store basis, and represented 48% of total revenues. Digital advertising revenues decreased 13.9%, reflecting lower page views tied to the changes in consumer search, the continued impact of the loss of a programmatic advertising partner in the second quarter, and lower revenue from third-party vendors as a result of Google's spam policy, which continued to pressure indirect revenue. Within digital, the underlying growth engines continued to perform. Digital-only subscription revenues totaled $46 million, increasing 5.3% year-over-year, representing its third consecutive quarter of year-over-year growth. Digital-only ARPU also reached a record high of $10.82 in the third quarter, increasing 23% year-over-year. Our digital other revenues, which include revenues from our AI partnerships, content licensing agreements, and syndication, grew 24.8% year-over-year to $21.3 million, and we expect sequential growth in this category in Q4 as we further expand this revenue stream and our suite of licensing agreements. Turning to the USA Today media segment, segment-adjusted EBITDA totaled $23.8 million, representing a margin of 6.3%. Third-quarter revenue trends were primarily affected by the performance in digital advertising. Turning to the NewsQuest segment, revenue trends improved to slight growth over Q2, while segment-adjusted EBITDA totaled $13.8 million, reflecting a margin of 23.3%. And looking at our local IQ segment, for Q3, core platform revenue totaled $105.4 million. Segment-adjusted EBITDA totaled $7.3 million, and we ended the quarter with approximately 11,700 core platform average customer count. while core platform ARPU increased approximately 6% to a record quarterly high of approximately $3,000. Let's now turn to the balance sheet. At the end of the third quarter, our cash balance was $68.2 million and net debt was $884.7 million. In Q3, free cash flow totaled $4.3 million, relatively unchanged in raw dollars from Q3 of last year. While cash provided by operating activities grew year-over-year by 9.9% to $16.7 million. We ended Q3 with $952.9 million of total debt, reflecting $17.7 million of total debt pay down in the quarter. While debt pay down remains our primary focus of capital allocation, we continue to have authorization under our stock repurchase program and expect to make open market purchases in the fourth quarter including through the use of incremental term loans. In early November, we amended our existing 2029 term loan facility to provide access to up to 50 million of incremental debt financing from funds managed by affiliates of Apollo Global Management. This financing is available during the fourth quarter of 2026 and is specifically designated for share repurchases within the quarter. We intend to utilize these funds to repurchase shares of our common stock before year-end. We have also obtained the necessary lender consent to move forward with these repurchases. We are also updating our full-year guidance to reflect the impact of search-driven audience declines and continued pressure on programmatic advertising revenue, both of which we believe stabilized in the third quarter. We now expect same-store revenue to decline in the mid-single digits Compared to our previous expectation of a low single digit decline, with digital revenue reaching 50% of total revenues in 2027 rather than 2026. We expect a significant sequential improvement in adjusted EBITDA and free cash flow in the fourth quarter, although both are now expected to decline for the full year compared to 2025. While these pressures have delayed our return to overall revenue growth, we believe we are building a foundation for improved performance. We believe that stabilizing our audience, better connecting our audience data and signals to revenue opportunities, and realizing the benefits of our cost reduction initiatives position us to deliver stronger results in the fourth quarter and to build on that progress in 2027. I will now hand it back to the operator for questions and then we'll go back to Mike for some closing thoughts.

Thank you. Ladies and gentlemen, at this time we'll be conducting our question and answer session. If we'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Giuliano Bologna with Compass Point. Your line is live.

Good morning. Thanks for taking my question. As a first question, you mentioned consumer behavior changing around search, which has been seen throughout the industry. How should we think about that trend going forward, and how should we think about that trend in terms of the financial impact on the business?

Yeah. Hey, Giuliano. Thanks. The changes in search behavior definitely have had an outsized impact on our financial statements for the last couple quarters, and you're seeing that really on a broader basis across the media industry, but also now into the tech industry. However, what I mentioned on the call that I really think is worth emphasizing here is that we see that impact really through one specific Revenue Line, and that's our indirect revenue category, which is programmatic advertising primarily. And that advertising category for us is about $100 million. So we don't believe that category is going to zero. So our exposure is somewhat less than that. But I think there's important context around this particular search issue right now that is worth talking about. One is we are seeing lower search traffic. We saw that in Q2. We saw it again in Q3. That's lower search traffic versus the prior year. I think it's important to note we did not see any sequential declines from Q2 to Q3. That's an important factor. And I think it's also important from a context perspective to talk about the fact that these are our anonymous users. It's our lowest-value user on the platform with the lowest CPMs attached to any advertising that we sell. And with our long-term strategy that we've been talking about for the last couple years, these anonymous users with low-value CPMs really start to go away and become much less of a factor in our overall revenue picture on a go-forward basis. There's definitely a pull forward here. It's happening a little faster than we would have liked, but over the long term, our strategy moved us away from these users. As we grow our known users and engage more with our known users, that's where the on-platform and off-platform high-value CPMs come from. And I also mentioned on the call our digital premium advertising that our sales reps sell. is a $200 million growth category that returned to growth in the third quarter, and we see accelerated growth in the fourth quarter. That's the category in our digital advertising space that we're really most focused on. So it's painful right now, but our exposure is limited. It's a $100 million revenue category. It's not going to zero, so our exposure is less than that. As we grow our premium digital advertising, we become less dependent. on this programmatic channel. And then finally, we did take $100 million of costs out at the very end of Q3 to help us mitigate the near-term financial impact of the changes of search. So I mentioned on the phone, on the earnings call, it's not a permanent headwind for us, but it's definitely been a challenge just in the last couple quarters.

That's helpful. And maybe as a second related question, you mentioned direct sold advertising returning to year-over-year growth and, you know, they expect that to accelerate going forward. Can you expand on that once you mentioned around that and on the call and why are you thinking that direct sold advertising will accelerate?

Yeah, I think thanks for that question. It's because it is really important to talk about. And it's a $200 million revenue category. It is the category that we where we monetize our engaged and known users and we're starting to develop that engagement off platform on our social channels as well. But I talked about three underlying principles on the earnings call that will drive that growth for us going forward. First is that deepening engagement with consumers. We're doing things on platform to really convert users to known users to engage more with those known users on our platform that's the work we're doing with Palantir to put the signals from our users to turn those signals into actionable intelligence and then the work we're doing with newsletters and our social strategy all of those things and improving the experience on platform for our consumers all of those things will deepen our engagement with consumers. It will grow our known users. We saw pretty significant known user growth in the third quarter, which was nice to see, so we know this stuff is working. And all of that will lead to better CPMs, more advertisers on our platform, and we're already seeing that with the growth we saw in Q3 and our pipeline for growth in Q4, which gives us the confidence to say that that growth will accelerate in the fourth quarter. Second is our focus on video advertising. It's definitely one of the fastest growing digital revenue categories in the ecosystem, and it's a category that's ripe for growth for us, both on and off platform again, on our platform and on the social platforms where we have quite large audiences. We're using AI to help us expand our video capabilities, and it really starts with making all of our content available in video format as well as text. We know consumers increasingly want to consume content in video form. Making our content available in video form is a top priority for us. And then it also is creating more premium video advertising inventory for which to monetize. And video advertising comes with much higher CPMs. So the overall video opportunity for us in creating content, leveraging AI to help us do that better and quicker, and creating more premium space will allow us to grow the video advertising category significantly. And as I said, that's the fastest growing digital advertising category in the ecosystem and a very small category for us today. So we see a lot of upside there. And then third is a new product area for us. And it's AI driven discovery for what I'll call it. We're finding that brands want advertising content on trusted platforms like ours that is also AI discoverable. We're perfectly suited to take advantage of this new developing revenue category and to grow it. We're creating new engagement opportunities for our advertisers on our own platform as well through our AI answer engine with deeper dives. So as this marketplace continues to grow because there's so much crap and untrusted content out there, on the AI platforms. It's a real opportunity for us to partner with brands to create trusted messaging and to make that discoverable on AI platforms. So we're pretty excited about the potential growth for that. So as we continue to improve the customer experience on platform, grow our known users, grow our engagement, we see significant opportunity to grow our premium digital advertising. And importantly, all of that makes us less dependent on programmatic and that less valuable consumer that used to come to us through search.

That's very helpful. Maybe switching topics a little bit. On the concept, you mentioned the $100 million cost reduction plan that was now fully in place. Are there more cost reduction on programs or opportunities that you can see in 2027 and beyond, or is this really the big final cost reduction plan?

Hey, good morning, Giuliano. This is Trisha, and I'll take that. So you heard that we put in $100 million annualized cost reduction program in the third quarter. That was put in place in late September. We had it fully implemented by early October. So what you're seeing is a pretty limited impact in the third quarter, but we're absolutely already seeing that scale on having a really positive impact on our fourth quarter run rate. With these actions, our intent was to be targeted. We did need to lower our cost structure, but also really protect the areas that are the most important to our long-term strategy. We were able in these cost reductions to do things like leveraging automation, outsourcing, using technology to make the more significant structural changes in our cost base. And that still allowed us to keep our resources aligned with a part of the business where we think we're going to see the strongest returns. Those are going to carry into 2027, so we're going to see a large piece of this cost reduction program benefiting well into 2027. It's part of the reason we feel really comfortable that we're going to get to adjusted EBITDA and free cash flow growth next year and in the fourth quarter as well. But to the second part of your question, or the main part of your question, Whether there's more to come in 2027, we absolutely believe we continue to have opportunities to improve our cost structure over time. I think I mentioned this on the call, but we've already identified opportunities where we can lower our vendor spend through things like consolidating systems or our technology platforms next year. We'll continue to optimize our outsourcing agreements. will continue to optimize and streamline our print operations as that business evolves, continuing to automate across the business. So there really are areas where we see some really meaningful opportunities to continue to simplify our operations like we did in the third quarter. So you'll see the flow through of the 2026 actions, but we think we have the ability to carry some of that into 2027 as well.

That's helpful. Let's go over to the share repurchase program. Can you elaborate on why you've decided to start a share repurchase program? And when I think about that program, are there any timing limitations around how fast you can deploy the share repurchase program?

Yeah. The answer on why, Julian, is pretty simple. We think that where our shares are trading today, the company is significantly undervalued. We see We see what's going on in the business. We see all the opportunities ahead. We talked about a lot of them on the call today. And we think that the market is not valuing the equity correctly. And so it's an opportunity for us to purchase shares at a significant discount to where the company should be trading. We've also done, I think, a really terrific job over the last five, six years on improving the balance sheet. We've taken our first lien leverage from $1.8 billion in 2020 down to about $700 million on a net basis down closer to $600 million. And so we've delevered really significantly. And it puts us in the position to have a little more flexibility with capital allocation to take advantage of a mispriced equity like this. So we feel good about our kind of A move to allocate a little bit of capital to the share repurchase plan. As far as how quickly or when we can do that, share repurchase plan is already authorized and in place. We have about $97 million available on it. I think trading window is open a couple days after earnings release. So, you know, we can be in the market most of the fourth quarter with share repurchase.

That's helpful. And then, you know, as a final one, it seems like there's been a lot that's happened in the last three months related to the Google litigation. Can you update us on this and, you know, your expectations around timing and, you know, and also around the, you know, anything that is, you know, topical around this?

Yeah, sure. So, yeah, there's been a lot of movement since our Q2 earnings call. We talked on the Q2 earnings call about two significant items ahead of us, one being the judge ruling on Google's summary judgment filing and number two was getting a trial date set. Both of those have occurred since our last earnings call, which is great progress. At the end of September, the judge ruled against most all of Google's summary judgment, which was favorable to us and was great to see. and then a few days after that the judge actually set the trial date for April 5th so we were glad to see that it's a speedy trial in that we're only five months away from that right now. The judge also in his summary judgment ruling made public the damages so it's the first time the damages have been public. They were 901 million and that was the damages that were part of the are filing as of 2024. So those damages will roll forward to the trial date and be higher than the $901 million. And I think it's also important to note that because it's an antitrust case, the damages are subject to trebling as well. And that's three times damages. So we're pretty excited. We remain really firm Thank you. Our next question is coming from Matt Condon with Citizens Bank. Your line is live.

Thank you for taking my questions. My first one is on digital subscriptions. It seems things need to go well there. Just wanted an update. What's going well and what are the opportunities ahead?

Mike, I'll take this one if you don't mind. Yeah, absolutely. Thanks. So what's going well there is an ARPU story from 2026. You know, we believe we can return to subscriber growth while maintaining the progress that we've made in R2. We've been really deliberate.

As you know, we've talked about it for a few quarters now.

We've been very deliberate in prioritizing subscriber quality, in prioritizing long-term value over simply growing volume. And we moved away from all of those heavily discounted promotional offers, and we focused on building what we see as a healthier and far more valuable subscriber base. And that strategy is delivering results. You can see it in Q3. The digital-only subscription revenue grew 5.3% year-over-year, and that was our third consecutive quarter of growth. Our pool increased 23%. We hit a record $10.82. We think that puts us in a stronger position to start growing subscriber volumes again without really relying on deep discounting strategies of the past. I also think it's important to add here that that's where our work with Palantir is becoming particularly important. It's about personalization and relevance. We're developing more personalized acquisition and engagement capabilities. Those are the things that are allowing us to better understand individual users, to understand their consumption intent, and that in turn allows us to deliver the right offer at the right time. It includes more dynamic subscription offers, pay per article options, personalized content experiences, All of it is designed to improve conversion and protect the value of the existing subscriber base. Then the other thing I would throw in is around retention. Our confidence comes from our ability to build stronger relationships with our subscribers through more relevant content, increased engagement, better personalization. And we're also developing capabilities to identify subscribers who might be at risk of canceling so that we can engage them with more targeted retention offers. I think those tools can help improve retention and increase lifetime subscriber value over time. When I'm thinking about 2027, our focus for 2027 is on combining the ARPA improvements that we've already achieved with a return to subscriber volume growth. We really don't expect that transition to happen overnight. But we believe we now have a much stronger foundation to drive sustainable growth in both subscribers and in revenue.

Great. And then maybe a follow-up just on AI licensing. Just across the industry, it seems like there's been a little bit of slowdown in just the pace of new agreements being announced. Just what are you seeing in the pipeline, and what should we expect here in 4Q and then heading into 2027?

Yeah. Hey, Matt. It's Mike. Fair observation. We've seen the same. There's been a little bit of a slowdown in the number of deals being signed across media businesses and AI platforms this year, really. We actually still believe we will announce at least one, possibly two, this year before the end of the fourth quarter. Stay tuned on that. We do have a pipeline and we do have some negotiations going on. And so we're fairly confident that we'll have at least one, maybe two announced this year. But if I take a step back and look at the general landscape for AI licensing deals, we still believe long term that this is a significant revenue category. But we do think it's the long game that we have to play to get there, continuing to block content, block the scrapers. And I think, you know, we continue to see signs every day that there's real value in the content we create. And I think just just yesterday, there's news in the marketplace that Anthropic signed its first licensing deal with the Associated Press to have real time election update content on its platform. And I think that's significant because it really speaks to the value of real time news and information. How important it is to the AI platforms, and that's at the heart of what we do, right? We're the largest producer of content in the U.S., and so I think that the opportunity will unfold, but I do think there's a bit of a long game here. Anthropic did, and its S-1 is now public, and they did say in their S-1, no surprise to anybody, that they claim fair use for their content. for use of copyright protected content. However, that could change based on the marketplace, based on legal rulings, et cetera. So we believe in copyright protection and believe in the long run AI licensing will prevail. And we believe the value of the content really speaks for itself. And that ultimately is what will allow us to prevail with a robust AI licensing revenue opportunity.

Great, that's very helpful. And then just the final one here, obviously with the announcement of the Shuri Purchase Program and leverage coming in here over the last several years, I'd love just to get an update on what are your capital allocation priorities here as we look out over the next several years? Thank you so much.

Yeah, I'd say three things, Matt. One, reducing debt and reducing leverage remains A top priority, a number one priority for capital allocation when I look out over the next two or three years, investment in the business to accelerate growth in all the areas that we talked about today is a second priority for capital allocation. And then with reduced leverage where we have it today, we do have the opportunity to be opportunistic in repurchase shares when When the market dictates, like we're in right now, where the equity is mispriced. And so those are our priorities for capital allocation. Again, summarized reduction of debt, investment in the business, and opportunistic share repurchases.

Thank you. Our next question is coming from Burton Crockett with Rosenblatt Securities. Your line is live.

Okay, thanks for taking the question. I just wanted to dive a little bit deeper into the search environment that you're describing and trying to understand what changed specifically in the third quarter versus the second quarter, because I'm hearing mixed statements from you that things, you know, didn't change, but they did. So I'm just wondering if you could be a little bit more specific, you know, was there actually something different in the third quarter than you were seeing in the second quarter?

No, no, nothing different. We started to see the declines in the second quarter, and they continued into the third quarter from a year-over-year perspective, which, Barton, I think I said on the call, from a year-over-year perspective, we saw declines in both Q2 and Q3. What I said was encouraging is we didn't see further erosion in the audience from Q2 to Q3. So we saw a stabilization at the levels we're at now which I think is important and speaks to our underlying strategy of engaging with the users that are on our platform, engaging with users through our newsletter and social strategies in that we continue to have very significant scale post what's happened with search and that we didn't see further erosion from Q2 to Q3. So that might be the confusion, but Q2 and Q3 both saw similar year over year declines but we didn't see any further erosion or degradation in audience and importantly or encouragingly that audience remains significant in scale. We had 158 million uniques on our platform in Q2. We had 161 million uniques on our platform in Q3. One other thing that maybe you're thinking about in the revenue environment that happened is in Q2, And I'll use the layman's term, but as you know, the back button issue that Google started to consider spam, that happened towards late Q2. So it had a much less impact on Q2. We had the full impact of that in Q3. Our exposure there going forward is a couple more quarters, but it's relatively small. But overall, there's no change.

But one thing that did change is your guidance. So what is it, you know, how is it that this is the quarter when you're changing the guidance versus, you know, the trends being apparent last quarter? You know, just a little bit of discussion of the process there would be helpful. Yeah, go ahead, Trisha.

Yeah, Barton, there's a couple of things that we adjusted our guidance around. The first is that Even though our audience and our page views really did stabilize Q2 to Q3, we did see a little bit further of an erosion in that programmatic and sponsored links revenue year over year. I think that took a little bit of time to catch up. We had expectations that our direct sold revenue would improve in the third quarter. It did, but not at enough of a pace to outpace that indirect revenue decline in the third quarter. The other thing I would say is that We're still confident that we will have new AI licensing deals to sign and announce here in the fourth quarter. We did have some expectation that we would see a benefit of that earlier in Q3 and earlier in Q4. So really, that's just a shift of timing to later in the year. And I'd say those are the two biggest impacts that caused us to adjust our guidance here in the third quarter.

Okay. All right. One other thing, we're talking a lot about referral from search, but another issue that propped up yesterday with Taboola is the circumstance that people are spending less time on some web pages generating fewer ad impressions. Is that something that you're seeing as well? If you could discuss that, I'd be interested.

Yeah, we're not seeing that. We're not seeing a decline in the amount of time people are spending on our platform. We are not seeing a decline in the impressions per page that we are delivering. So we haven't experienced that yet, but did see that commentary yesterday. But we are, you know, as Mike has mentioned today, we're holding our audience both just in raw dollars and in their attention quarter over quarter.

Okay. All right, that's very helpful. Thank you.

Thank you. As we have no further questions in queue at this time, I would like to turn the call back over to Mr. Reed for any closing remarks.

Yeah, thank you. Let me close with some observations or highlights that I think are important for investors. Our last two quarters have definitely been disrupted by consumer search. We've talked a lot about that today. and the changes and some of the inflationary pressure too. That's the bad news. However, we're fairly confident the worst is behind us. And the good news is these near-term disruptions have not changed our long-term growth strategy. With the disruption to search, we have still returned our premium direct digital advertising revenue to growth year over year in the third quarter, as you heard today, and We've continued to grow our digital subscription revenues along with our digital commerce and our licensing revenues. In addition, our audience remains very large. And as you heard today, our audience didn't decline further from Q2 to Q3. And our engagement with that audience has held firm in the third quarter compared to the second quarter. So we're pleased with that. We believe this will continue to lead to growth in our key long-term digital growth strategies, which We did see in the third quarter, we saw growth, as you heard, in our digital subscription business, our digital other business, and our digital premium advertising business. We also took 100 million of costs out of our infrastructure in late Q3, so we'll really see the benefit of that in Q4 and through the first three quarters of next year. And as you heard today, we're not done. We're going to continue to find more ways to lower our cost base as we head into 2027. which gives us a lot of confidence in our ability to grow EBITDA and free cash flow in 2027. As you heard today, the pressure on revenue we've seen in the near term is very specific, primarily search-related changes impacting indirect revenue. I just want to highlight one more time, this revenue stream is now about $100 million annualized. It's a small percentage of our overall business, so our exposure here is not limitless. We do not believe this category is going to zero. Our cost actions will help mitigate near-term pressure on this indirect revenue category. Our investments in growth, such as the work we're doing with Palantir that you heard about today, are expected to improve engagement with our audience and accelerate revenue growth in our most important digital categories in Q4 and in 2027. 2027 will be a year with adjusted EBITDA and free cash flow growth, driven by improving revenue trends and our significant cost reductions in So while the search disruption has pushed out our inflection point a couple quarters, our confidence in our strategy leading to same-store revenue growth in the future has not changed. And finally, we're also pleased with the judge's summary judgment ruling in the ad tech litigation and that the ruling also disclosed our damages. The market now has that. And we're really happy that the trial date's been set for April 5th. So that's right around the corner for us. And finally, As I mentioned on the call and in Q&A, we believe our current share price does not reflect the underlying value of the business or the opportunities that are ahead for us. And with that in mind, we have $97 million available under our authorized share repurchase plan, and we intend to be opportunistic here in the fourth quarter repurchasing shares. As I mentioned earlier, we have received a commitment from our great partner and friend in Apollo for a $50 million incremental financing. specifically for share repurchases in the fourth quarter. So while we remain focused on reducing leverage, this additional flexibility allows us to take advantage of what we believe is a meaningful gap between our current share price and the underlying value of the business. We look forward to getting back together at the end of the fourth quarter to update you on progress across all of these initiatives and we'll be excited to give you that update. Thanks everybody for your time and your support. We look forward to Thank you.

Ladies and gentlemen, this does conclude today's conference and you may disconnect your lines at this time. We thank you for your participation.