USA TODAY Co., Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Progress: Q2 total adjusted EBITDA was $64.2 million, a 27% sequential increase. Free cash flow was $17.6 million, a 73% sequential growth. $23.4 million in debt was repaid in Q2, with $100 million repaid in the first half of the year.
• Audience Reach: Maintained 181 million average monthly unique visitors and saw page view growth year-over-year.
• Digital Advertising: Returned to year-over-year growth, benefiting from scaled audience and engagement, with potential for premium direct campaigns.
• Digital-Only Subscriptions: Reset focus on high-value subscribers, localizing pricing, and seeing positive ARPU growth; moving to annual subscriptions and exploring pay-per-article options.
• AI Initiatives: Partnered with Perplexity to license content; launched Taboola's Deeper Dive in USA TODAY; onboarding to Snowflake Marketplace; measures to prevent unauthorized data scraping.
• DMS Business: Solid quarter with sequential growth in core platform revenue, segment adjusted EBITDA, and client count; record high core platform ARPU; initiatives include strengthening search optimization, CRM integration, and a conversational AI voice agent.

Segment Performance

• Domestic Gannett Media: In Q2, segment adjusted EBITDA was $43.2 million, a 30.3% increase from Q1. Segment adjusted EBITDA margins were 9.8%, up 230 basis points sequentially.
• Newsquest: Revenue trends in Q2 saw slight growth due to favorable currency rates. Segment adjusted EBITDA was $14.9 million, up 5.3% year-over-year, with margins at 24.3%.
• Digital Marketing Solutions (DMS): Revenue was lower year-over-year but showed sequential improvement in Q2. Total core platform revenue was $116.9 million, up 8.1%. Segment adjusted EBITDA was $11.5 million, up 35.8%. Core platform ARPU reached a new quarterly high of $2,830, up 5.1%.
• Digital Revenues: Total digital revenues were $265.4 million, down 4.6% year-over-year but 2.8% on a same-store basis, accounting for over 45% of total revenues. Digital advertising returned to year-over-year growth, and digital-only subscription revenues were $42.7 million with ARPU at $7.79, showing sequential and year-over-year growth.

Guidance

• Revenue: Expect digital revenue to be roughly flat on a same-store basis for the full year 2025, with 3%-5% growth in the last 6 months. Total same-store revenues are projected to decrease in the low to mid single-digit range in 2025, low single-digits in the back half, and be flat in early 2026.
• EBITDA: Anticipate year-over-year improvement in adjusted EBITDA, with growth in the back half of 2025 and 2026. Total adjusted EBITDA is expected to grow in full year 2025 over 2024.
• Free Cash Flow: Forecast to increase roughly 30% vs 2024, though slightly trimmed due to cost initiatives; expect 100% growth in the back half of 2025.
• Cost Reduction: A $100 million cost reduction program focused on automation, outsourcing, and reducing duplication; shuttering 2 print facilities, moving to mail delivery where economic, and leveraging AI for efficiency.

Risks

• Advertising Marketplace: Uncertainties in the broader advertising marketplace could impact growth.
• AI Partnerships: Changes in industry dynamics and unauthorized data scraping could affect partnership outcomes.
• Legal Cases: Ad tech antitrust cases with Google and others have uncertainties in timing and outcomes.
• Subscriber Base: Shifting subscriber acquisition strategies could lead to short-term pain before long-term gains.

Question and Answer

Q: When do you think revenues will turn flat?

A: Mike Reed said expect revenues flat in early 2026, with the back half of 2025 and 2026 strong due to revenue trends and cost reduction.

Q: Details on cost reduction program?

A: Trisha Gosser said the cost program is focused on automation, outsourcing, reducing duplication; shuttering print facilities, moving to mail delivery, and leveraging AI for efficiency.

Q: Experience with AI search traffic?

A: Kristin Roberts said continued audience and page view growth; proactive with blocking unauthorized scraping, and partnership with Perplexity for fair content licensing.

Q: Updates on ad tech antitrust case with Google?

A: Michael Reed said the judge ruled in favor of the DOJ in April; remedies hearing in September, Texas trial pushed to Q4, and Gannett's case scheduled for 2026.

Q: When will digital subscriber revenue return to year-over-year growth?

A: Kristin Roberts said an intentional acquisition strategy is leading to sequential growth in Q3/Q4, with overall growth next year; positive signs in Q2 with ARPU growth.

Q: Trends in AI content partnership deals?

A: Michael Reed said there's a momentum shift towards publishers; partnerships with Snowflake, Perplexity, Cloudflare; more fair deals expected in the next 12 months.

Q: DMS business strategy?

A: Trisha Gosser said initiatives include AI smart bidding, CRM integration, and a voice agent; sales focus on expanding verticals and integrating media and DMS sales teams.

Q: Affiliate revenue post-Google changes?

A: Michael Reed said affiliate revenue is in the rearview mirror; focusing on new partnerships like AddressUSA for higher opportunities.