USA TODAY Co., Inc. Q3 FY2024 earnings call

• Business progress: Adjusted EBITDA was ~$63 million in Q3, up nearly 6% year-over-year; digital revenues exceeded 45% of total revenues, a record high; average monthly unique visitors exceeded 200 million, up over 7% year-over-year; completed debt refinancing, extending maturity and simplifying capital structure.
• Operational highlights: Diversified monetization strategy; digital-only subscription revenue exceeded $50 million, ARPU above $8; strong sports coverage, with USA TODAY generating over 200 million page views during Paris Olympics, up 45% vs Tokyo Olympics; partnership with BetMGM to enhance sports content and monetization; AI application, partnership with Microsoft for content syndication in AI summarization, and actively engaging with other AI companies.
• Audience-related: 14 consecutive months of over 1 billion page views; USA TODAY and USA TODAY NETWORK as industry leaders in audience growth; local newsrooms provided critical info during hurricanes and launched SMS text service; building strong sports coverage team.
• DMS business: Adjusted EBITDA was $11.7 million in Q3, core platform ARPU maintained record high, AI-powered Dash product had good demand, with new features expected in Q4 and 2025.

In Q3, total digital revenues reached $277.4 million, accounting for 45.3% of total revenues. Digital advertising grew 4.9%. Digital-only subscription revenue was $50.1 million, up 25%, and digital-only ARPU was $8.16, up ~20% year-over-year. The domestic Gannett media segment had adjusted EBITDA of $46.3 million, up 13.6% year-over-year, with an adjusted EBITDA margin of 9.9%, a 190 basis points increase year-over-year. For Newsquest, adjusted EBITDA was nearly $14 million, up 3% year-over-year, with an adjusted EBITDA margin of 23.4%, a 50 basis points increase. In the digital marketing solutions (DMS) business, core platform total revenue was $119.2 million, adjusted EBITDA was $11.7 million with a margin of 9.8%, and core platform ARPU was ~$2,800, up 5.3% year-over-year.

• 2024 full year outlook remains relatively unchanged, with digital revenue growth expectation updated to 6%-7% to reflect DMS business trends; free cash flow expectation updated to reflect Q4 debt refinancing.
• 2025 is expected to have sustainable revenue growth, although the revenue inflection point is later than expected, but midterm guidance for 2025 revenue growth is maintained.

• Macro economic uncertainty, such as interest rate changes affecting advertising spending in DMS-related industries; uncertainty in asset sale timing, with some transactions possibly delayed to 2025; uncertainty related to Google advertising technology monopoly lawsuits, which may affect advertising revenue.

Q: How will the 200 million monthly unique visitors impact the business?

A: Scale drives more monetization, but engagement is more important as it drives enhanced monetization. Each page view presents an opportunity for tailored monetization. Audience and engagement are leading indicators, and improved revenue is seen as quarters go on based on the engaged audience.

Q: What is the impact of selling non-strategic businesses on revenue and EBITDA?

A: Q3 revenue was affected, but adjusted EBITDA was not significantly impacted. Asset sale proceeds expectation is $45-$50 million, although timing of some larger deals may shift to 2025.

Q: What are the industry trends for the DMS business?

A: The home renovation and improvement category was muted in Q3 due to interest rate environment, but recent rate cut is a positive catalyst. Internal actions like different customer acquisition approach, closer client touchpoint measurement, and aligning sales team compensation with client success will drive Q4 trends improvement.

Q: What are the revenue growth expectations for 2025?

A: Confident in 2025 revenue growth over 2024, driven by audience engagement, digital advertising improvement, digital subscription growth, partnerships, and syndication revenue growth, along with DMS returning to growth.

Q: What is different about the cooperation with Microsoft?

A: The partnership with Microsoft is a narrow use of content to understand value for that slice, and it shows how to slice and dice content to generate fair value, with expectation of broader deals to be fairly compensated for more content in the future.

Q: What is the impact of the election cycle on 203 million monthly uniques?

A: The vast majority of growth in uniques is not related to the political year; it's been additive. Steady growth is due to tactics based on user behavior data on the platform to understand user needs and wants.