TDAY

• Product & Content Strategy

  • The company is executing a deliberate strategy of trading raw page views for higher audience engagement and higher-value subscription revenue, building out a stacked premium product model.
  • Marvel Comics was added to the Play platform this quarter, extending the offering beyond puzzles and games; the majority of users engaging with Marvel content are new to the company's portfolio, demonstrating ability to acquire new audiences and drive long-term subscription growth.
  • The company is meeting audiences where they engage: off-platform social and video reached 3 billion off-platform views in H1 2026, serving as a discovery channel and on-ramp to convert audiences to direct on-platform relationships.
  • Content is being reformatted to be machine-readable to unlock higher value from AI content licensing deals, while the company continues to block unauthorized content scraping.

• AI & Technology Initiatives

  • Deeper Dive, the company's generative AI answer engine launched in September 2025, has exceeded 50 million total user questions with over 390,000 average daily interactions. Testing shows Deeper Dive increases time on site, advertising revenue per session, and subscription intent, and the company is rolling it out across its full network of properties.
  • The company has entered a strategic partnership with Palantir to leverage Palantir's AI/software platform to turn the company's large first-party audience data into real-time actionable intelligence, to optimize content delivery, advertising targeting, subscription offers, and convert anonymous interactions to known user relationships. All data and intellectual property remain controlled by the company, and the partnership accelerates development timelines compared to building in-house.

• Operational & Financial Discipline

  • Expense management remains a top priority: Q2 operating expenses decreased 7.8% year-over-year, and the company will align expenses with revenue trends while protecting growth-focused investments.
  • Key subscription metrics improved sequentially: subscriber volume declines moderated, the start-to-stop ratio improved, and churn fell, building sustainable momentum for future sequential growth. ARPU growth is driven by improved subscriber mix, reduced discounting, and removal of low-value subscribers, not just broad price increases.
  • Balance sheet remains healthy: cash balance was $86.7 million at quarter end, net debt fell to $883.8 million, and $17.7 million of debt was paid down in Q2.

• Management reaffirmed the full-year 2026 business outlook, with no changes to prior guidance.
• Management expects meaningful improvement in full-year same-store revenue trends compared to 2025, driven by growth in digital-only subscriptions, digital other revenue, and improving digital advertising trends in the second half of 2026.
• Full-year expected outcomes include year-over-year adjusted EBITDA growth, solid net income growth, and double-digit free cash flow growth (the fourth consecutive year of free cash flow growth).
• The company expects to reach majority digital revenue (over 50% of total revenue) in the second half of 2026.
• No upside from potential Google litigation outcomes or Palantir partnership financial gains are included in the 2026 guidance, so all potential benefits from these initiatives are incremental upside.

Total company Q2 2026 revenue was $536.3 million, down 8.3% year-over-year (6.1% on a same-store basis). Total adjusted EBITDA was $56.9 million, with a 10.6% margin. Net income was $9.1 million (adjusted net income was $11 million), marking the second consecutive positive net income quarter. Free cash flow was $19.6 million, up 11.2% year-over-year.

• Digital Segment: Total digital revenues were $254.3 million, down 4.2% year-over-year (3.6% same-store), representing 47.4% of total company revenue. Digital advertising revenue fell 9.2% due to lower page views and a lost programmatic partner. Digital-only subscription revenue grew 6.8% to $45.6 million, with a record high ARPU of $10.47 (up 34.4% year-over-year). Digital other revenue (AI partnerships, content licensing, syndication) grew 20.2% to $20.4 million.
• USA Today Media Segment: Segment-adjusted EBITDA totaled $42 million, with a 10.6% margin. Revenue was primarily impacted by softer digital advertising performance.
• NewsQuest Segment: Segment-adjusted EBITDA totaled $14.3 million, with a 24.2% margin. Revenue was impacted by an expected timing shift for a revenue-generating conference, but the segment continues to deliver strong digital growth.
• Local IQ Segment: Core platform revenue was $106.3 million, up 7% sequentially from Q1. Segment-adjusted EBITDA was $13.2 million, with margins expanding 560 basis points to 12.4%. Average customer count increased 2.8% (300 customers), and core platform ARPU grew 4.1% to a record quarterly high of $2,908. While full year revenue remains lower year-over-year, the segment delivered sequential growth in both core revenue and adjusted EBITDA.

• Quarterly results are expected to continue to experience variability as the company shifts its revenue mix and adapts to changing audience discovery behavior and search industry dynamics.
• Digital advertising continues to face pressure from reduced search referral traffic from Google, loss of a programmatic partner, and platform policy changes impacting sponsored link partners.
• The AI content licensing ecosystem is still evolving, creating uncertainty around the timing and size of future deal opportunities.
• Outcome of ongoing Google litigation remains uncertain, with pending rulings expected in the near term, though no upside from litigation has been baked into current guidance.

Q: Can you elaborate on the Palantir partnership opportunity?

A: The partnership combines Palantir's best-in-class AI platform with the company's large proprietary first-party audience data to generate real-time actionable intelligence. This allows optimized delivery of content, ads, commerce opportunities, and subscription offers, and converts anonymous interactions to known user relationships, which increases data and monetization potential. The partnership accelerates development timelines compared to building in-house, and all data and IP remain the company's property. Management expects to share specific financial upside details over the next two quarters, and no upside is currently included in guidance.

Q: Is off-platform social audience a potential new revenue stream?

A: Yes, social and video are increasingly important primary discovery channels, with the company generating 3 billion off-platform video views in H1 2026. Social audiences can be directly monetized via revenue sharing, sponsorships, and branded content. More importantly, social acts as an on-ramp to build direct relationships and drive users back to the company's owned platforms, where they can be monetized at higher values across subscriptions, advertising, and commerce.

Q: How does Google's AI search push impact the business, and have search trends stabilized?

A: The company's strategy is to prioritize direct, known, engaged audiences that deliver better, more reliable economics over low-value anonymous search traffic. Q2 digital advertising headwinds came from three equal-sized factors: search impact, a lost programmatic partner, and a platform policy change for a sponsored link partner. Encouragingly, premium ad sales grew year-over-year and RPMs improved through the quarter, showing progress in areas the company controls. The company is diversifying discovery channels to reduce reliance on search.

Q: Would you consider blocking Google crawlers to negotiate better AI licensing deals, and when could that happen?

A: The company's preferred path is a negotiated fair licensing deal that allows Google to use its content in both traditional search and AI summaries. However, management confirms blocking crawlers is a feasible option that they are willing to pursue if needed. Search revenue is already small, and most search traffic is low-value one-time visits that are not highly monetizable. Management expects that the day when blocking makes strategic sense is coming much sooner than previously expected, likely within the next 9 to 15 months.