Q3 2024 Gannett Co Inc Earnings Call

Mike Reed

Thank you, Matt, good morning and thanks for joining our third quarter call, we continued to make solid progress in the third quarter across our key priorities in Q3 adjusted EBITDA totaled approximately 63 million and grew nearly 6% year over year. Three out of four digital revenue categories saw strong growth and further trend improvement year over year. And as a result, total digital revenue surpassed 45% of total revenues representing an all time high.
We also generated approximately 20 million of free cash flow representing a significant increase of 168% compared to the prior year.
In Q3, our audience surpassed 200 million average monthly unique visitors for the first time in our history, reflecting growth of over 7% compared to the prior year.
This milestone of 200 million average monthly unique visitors demonstrates our ability to stay closely aligned with our audience’s preferences in the third quarter. A couple of drivers of audience for our network were political events, the Paris Olympics and the kickoff to football season.
We believe our audience results highlight our ability to create content that is both relevant and essential and that includes being a leading sports content organization and to further strengthen and leverage our market presence. We launched a partnership with BetMGM that is expected to provide additional content to our sports enthusiasts and enhance the monetization of our content platform.
Subsequent to the quarter end, we completed our debt refinancing transactions which extended our maturity runway, reduced potential future share dilution and simplified our capital structure.
We believe our ability to successfully refinance our debt reflects the strength of our long term strategy and the progress we have made executing against our plans especially this year as we have intentionally had stabilization at the forefront of our collective efforts.
That means we expect stabilizing revenue trends growing, adjusted EBITDA and free cash flow and improving margins.
2024 is an important step in Gannett’s trajectory which we believe positions us well for sustainable revenue adjusted EBITDA and free cash flow growth, which is expected to lead to significant value creation for our shareholders.
While we are pleased to see improvement across most digital categories. Our year over year total revenue was lower than expected resulting from the sale and unwind of some non strategic businesses and softer trends in our Newsquest and DMS segments.
However, we are encouraged that same store revenue trends showed consistent improvement throughout the quarter with September emerging as our strongest month and we believe that is a positive indicator for the fourth quarter.
Looking ahead to Q4, we believe we will drive improvement in total revenue trends as well as our digital revenue trends, bringing us closer to our expected revenue inflection point as a result, we are optimistic about finishing the year strong.
Now, I’d like to review some of the operational highlights of the third quarter.
We are committed to a diversified monetization strategy that is intended to maximize the revenue opportunity across our entire audience and to tailor that opportunity based on individual customer habits.
The outstanding audience results from Q3 have been instrumental in improving our top line trends and driving meaningful growth in three out of four digital revenue categories.
Importantly, we believe our highly engaged audience is a powerful leading indicator of future revenue opportunities. We are poised to unlock and as a result, we are well positioned to drive further trend improvement moving forward.
We also improved our engagement with that audience as we were able to achieve another quarter of double digit page view growth compared to the prior year.
We believe this heightened focus on monetizing the full spectrum of our audience through personalized experiences has driven significant wins across our digital business in Q3, one area worth highlighting is our digital only subscription business in Q3. We continued to achieve new highs with digital only subscription revenue, surpassing 50 million and digital only arpu climbing above $8.
We have shared previously that we believe we have significant upside in this digital revenue category through both volume growth and pricing which we saw in the third quarter.
Q3 marked another quarter of sequential growth in digital only paid subscriptions as well as the second consecutive quarter of year over year subscription growth.
Separately, our initiatives around audience expansion and increased engagement drove significant improvement in year over year digital advertising trends driving these fantastic audience results for Kristin Roberts is our Chief Content Officer Kristin Roberts.
I would like to turn the call over to Kris to provide deeper insights into our audience results for the quarter, Kris.

Kristin Roberts

Thank you, Mike. Audience growth has been at the heart of our transformation by listening to our audience and studying their behavior on our platforms. We’ve gained exceptional clarity on the content our readers desire as a result, we have generated 14 consecutive months of at least 1 billion page views and both USA Today and the USA Today Network have become the industry leader in audience growth over the past year.
At USA. Today, we are committed to becoming the leading digital news and content destination in America to fully harness this potential. We have intentionally returned to our roots as a fax forward down the center survey of our nation.
There is a significantly underserved audience seeking a viewpoint that reflects the middle majority and we believe we are capturing this opportunity. Notably, our decision more than a year ago to only recommend candidates in local and state elections has resonated well with our audience resulting in record breaking engagement with our political content. Why did we make this decision? Because we believe America’s future is decided locally, one race at a time, our local editors across the network have the discretion to endorse at a state or local level. Many have decided not to endorse individual candidates but rather endorse key local and state issues on the ballot that impact the community. Our public service is to provide readers with the facts that matter and the trusted information. They need to make informed decisions. That is our commitment to the nation.
We also are building what we believe is the strongest sports coverage team in America through one team sports. Our ambition is to become the nation’s dominant sports content organization. The power of our coverage was evident during the Paris Olympics where USA today generated over 200 million page views, an increase of 45% compared to our reporting of the Tokyo Olympics. We also have experienced remarkable success with the NFL and this approach has generated notable increases in audience page views and readership per story. We believe sports continues to present a promising opportunity to expand our audience, create personalized and relevant experiences and develop journeys that are expected to maximize digital revenue per user and per visit.
Another key part of our mission is to remain essential and indispensable to the communities we serve especially during unprecedented natural disasters, our local newsrooms with support from USA today and the network provided our readers with critical information before during and now after hurricanes, Helene and Milton, our service approach to content prioritized their needs so that we were able to deliver life saving information such as availability of shelter, water sources and food distribution centers. We also recognize that in the disaster zones, the community had no wife and could not load web pages. So in addition to our regular coverage, the content team launched an SMS tech service in both English and Spanish to provide weather updates, connect readers with resources and answer any questions they might have.
We recognize that relief and recovery efforts will take time as these communities rebuild and heal and we will be there with them. We will be unwavering in our commitment to continue delivering on our public service mission back to you, Mike.

Mike Reed

Thank you, Kristen.
Congratulations to you and your team for your continued efforts in fulfilling our mission of service to our readers and viewers. As the trusted source of news and information, the scale of our audience really evidences the relevancy of the content the team is producing.
Now, let’s turn to our DMS business and for that, I’ll hand it over to Chris for an update on the Port Chris.

Chris Cho

Thank you, Mike. In Q3. A more cautious sentiment was expressed by larger advertisers that operate in our home services vertical.
We saw a contraction in the advertising spend rates from this cohort which coincided with the inherently cyclical nature of this vertical that typically benefits from lower interest rates through customer interactions. It was evident that these larger advertisers were sensitive to the economic uncertainty as the Federal Reserve had not yet enacted any rate cuts.
However, I am pleased to report that preliminary figures show that spending rates are improving. In October, we have also seen several external research and data that suggest the rebound in residential construction and renovation in the wake of recent RECS which we believe will present an opportunity to return to growth moving forward.
In addition to these positive catalysts, we have actions underway that further reinforce our optimism to drive trend improvement in Q4.
Earlier this year, we implemented a verticalization focus where we bring extensive knowledge and expertise in key verticals.
We are encouraged by the solid momentum from this program as we are successfully winning deals more effectively than last year.
This is a promising development and we expect to sustain this trajectory into Q4.
We also launched new incentive and loyalty programs for our customers. The initial results have already shown strong potential exemplified by record high sales productivity as well as improvements in customer retention.
Equally important, we made solid progress across several key metrics in the third quarter that highlight the resilience of our DMS business.
We continued to run our DMS business at high levels of profitability and in Q3 adjusted EBITDA totaled $11.7 million.
We are also pleased to see improvements in both client and budget retention.
While average customer count contracted in Q3, we continue to retain accounts that fit our ideal customer profile.
This is evident in our core platform ARPU which maintained its record high of approximately $2800 representing an increase of 5.3% year over year.
We are also excited to report strong momentum in Q3 with our AI powered solution dash.
Since its launch four months ago, we have experienced good demand and received overwhelmingly positive feedback from our customers which reinforces my confidence in its growth potential, especially considering new features and functionality that are expected to be deployed in Q4 and quarterly in 2025 overall. I am pleased with the resilience of our DMS business displayed in the third quarter.
When paired with our media offerings, we believe our local IQ platform delivers unmatched marketing solutions supported by a scaled sales force.
Our strategic plan involves executing on our core DMS solutions while simultaneously expanding dash which we believe will increase our total addressable market and increase core platform revenue.
We believe we have a significant opportunity ahead of us and I look forward to updating you in Q4, Mike.

Mike Reed

Thank you, Chris. It is nice to see the continued strong core platform Arup as well as the improved margins in our DMS business. I am confident that the actions your team are undertaking will return this business to top line growth shifting gears. We are excited about our new partnership with BetMGM, a leading sports betting and I gaming operator as the preferred online sports book casino partner for USA. Today, sports Bet MGM will provide sports betting odds and insights to our highly engaged sports audience. We believe that MGM is a strong complement to our existing portfolio of partners and presents a significant opportunity to drive further audience growth and engagement.
As a result, we expect this collaboration to enhance the monetization of our content platform. Further, we are optimistic about additional partnership opportunities that are expected to be announced in the fourth quarter.
Shifting gears again, a core component of our strategy is AI which we believe presents a promising opportunity for us by leveraging AI. We believe we can enhance operational efficiency and increase the monetization of both current and archived content.
The anticipated long term value from leveraging AI lies in forming strategic partnerships that align the unique strengths of Gannett with those of AI platforms through our flagship national brand USA today, our network of 220 local US properties and another 220 brands at Newsquest.
And that represents a vast source of historical factual content as well as relevant and essential current news and information that we believe represents a significant source of value in this new environment.
Additionally, AI platforms provide computing power and cutting edge technology we believe will be useful to accelerate the that’s ability to develop and fully maximize AI use for our business.
In the third quarter, we announced a partnership with Microsoft’s launch of Co Pilot Daily Briefing that leverages our content syndication for AI summarization.
While the monetary value is modest, we are pleased to partner with leading organizations that are actively expanding their AI product offerings and capabilities. And we expect this revenue stream to increase as companies continue to evolve in their AI journeys.
We believe our content provides immense value to the continued enhancement of these products.
Additionally, we are actively engaging with several I companies and anticipate forming additional partnerships that align closely with our strategic objectives, core values and help us preserve the long term value of our content.
With that. I’d now like to turn the call over to Doug to provide additional detail and color around our third quarter. Financials, as well as the details on our updated full year. 2024 guidance. Doug.

Doug Horne

Thank you, Mike and good morning everyone. As Mike highlighted, we produced another quarter of strong financial results for Q3 total operating revenues were $612.4 million and decrease of 6.2%.
However, it’s important to note that some of our strategic decisions impacted revenue this quarter such as the intentional closure or divestiture of certain businesses in our portfolio. But these actions were in line with our long term strategy and did not negatively impact our adjusted ebita performance while same store revenues declined 5.3%. This was relatively in line with our performance in the first half of the year and a significant improvement of 310 basis points over last year’s Q3 revenue trend.
Also within that overall result, we experienced strong growth in digital advertising, digital only subscription and our digital other category.
Our DMS results did not experience the trend improvement we expected for the reasons that Chris mentioned. We believe the growth in digital only subscription and digital advertising combined with the actions that are being taken to improve the DMS trends will result in improvements and top line trends to close out the year.
Additionally, we believe that this perspective is supported by the fact that September marked our best performing month of the quarter. Further reinforcing our optimism as we head into Q4 adjusted EBITDA totaled $62.9 million in the third quarter. An increase of 5.6% or $3.4 million adjusted EBITDA margin was 10.3% in Q3 compared to 9.1% in the prior quarter.
The growth and adjusted EBITDA was fueled by the improved year over year revenue trends and strategic cost controls.
Expense management remains a critical priority and in Q3 operating costs decreased 9.7% compared to the prior year.
Total digital revenues in Q3 reached $277.4 million representing an increase of over 500 basis points. And accounting for 45.3% of total revenues in our digital business. Three out of the four digital revenue categories improved year over year. Notably, digital advertising sustained its solid performance in Q3 up 4.9% driven by continued growth in page views and programmatic revenue.
Our digital only subscription business also recorded its strongest quarterly performance with robust growth across all key metrics.
Digital only subscription revenue reached a new high of $50.1 million growing 25%. Digital only Arpu also saw a new high of $8.16 increasing approximately 20% compared to the prior year period.
Importantly, we achieved these results while also growing digital only paid subscriptions sequentially as well as year over year.
Looking at the domestic in net media segment in Q3 adjusted EBITDA in the segment was $46.3 million. Up 13.6% over the prior year period adjusted EBITDA margins expanded year over year by increasing by 190 basis points to 9.9%.
Revenue. Trends in Q3 on a reported basis declined as compared to Q2. However, this is fully attributable to the impact of businesses we sold or shut down including action printing, imagine and review dotcom. As a reminder, these actions do not have a meaningful impact on the adjusted EBITDA results of the segment.
Turning to Newsquest for Q3, our top line growth is muted as a result of the temporary slowdown in print trends reflective of the local economy. However, we are pleased with our continued success in driving strong profitability within the segment in Q3 adjusted even to reach nearly $14 million up 3% over the prior year. While adjusted even to margins increased 50 basis points to 23.4%.
In our digital marketing solutions business. Total core platform revenue in the quarter totaled $119.2 million DMS revenue declined slightly versus the prior year as a result of the continued impact of churn from lower spending accounts and added uncertainty in the home improvement sector due to the broader economic environment adjusted EBITDA for the segment totaled $11.7 million representing a margin of 9.8%.
We had approximately 14,300 core platform customers with core platform Arpu reaching approximately $2800 which is up 5.3% over the prior year.
Let’s now shift to the balance sheet at the end of the third quarter. Our cash balance stood at $101.8 million resulting in net debt of $959.6 million. Cash provided by operating activities totaled $33.7 million an increase of $13.1 million. We also generated $19.8 million of free cash flow, bringing our year-to-date free cash flow to $54.6 million which is up $10.9 million from the prior year period.
We ended Q3 with approximately $1.06 billion of total debt that pay down remains a high priority and we continue to make meaningful progress during the period.
In Q3, we repaid $28.5 million of debt, which combined with our adjusted ebita growth reduced our first lien net leverage to 1.76 times.
In Q3, we completed four real estate and asset sales totaling $13.4 million bringing our year-to-date total to $19.3 million.
We continue to have a number of asset sales in the pipeline. However, it is possible that some of these transactions may shift out of 2024 as the timing of potential deals remains fluid as we continue to stabilize our business and build the foundation for sustainable revenue growth. We have also created a more balanced capital structure.
Subsequent to the end of the third quarter, we successfully completed a comprehensive debt refinancing that extended the maturities of virtually all of our first lien debt to 2029.
Furthermore, we effectively reduced the potential dilutive impact of the 2027 convertible notes by approximately 46% which we believe has been an overhang on our share price.
Also, we extended the maturity of 85% of the remaining convertible notes to 2031.
As a result of the transaction. We expect to see an increase to our first lien net leverage due to a portion of our outstanding convertible notes shifting to first lien.
We believe the opportunity to extend our maturity profile and the benefit of eliminating future dilution significantly outweighs the change in firstly net leverage debt repayment remains our number one capital allocation priority. And we are still targeting first lien net leverage below one times overall. We believe our ability to successfully refinance our debt is an important step in our long term strategic plan.
Turning now to guidance our 2024 full year outlook remains relatively unchanged. We are updating our expectation for total digital revenue growth to 6% to 7% to reflect current trends in our D MS business. We are also updating our 2024 free cash flow to reflect the impact of our Q4 debt refinancing beyond 24 we believe that we are well positioned for sustainable growth in all key financial metrics. And although the revenue inflection point is anticipated to come later than expected, we continue to project total revenue growth in 2025 which is consistent with our previous mid term guidance.
We believe our results in the third quarter serve as a testament to the strength of our strategy and the progress we have made in stabilizing our business. We have shown resilience across various operating environments and as a result, we are confident that we will close out the year strong with our continued strong execution. We believe we can create sustainable growth and significant value for our shareholders. I will now hand it back to the operator for questions and then we will go back to Mike for some closing thoughts.

Operator

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, you may press star two. If you would like 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 pull for questions.
Your first question for today is from Giuliano Bologna with Compass point.

Giuliano Bologna

Well, good morning. You know, it’s great to see the progress. So you involved in the platform you know moving forward towards your all the milestones you laid out you know, as a first question you know you’re you’ve seen some pretty good growth in monthly active users and you’re now surpassing 200 million monthly active monthly unique visitors that you know that seems like a you know a very big milestone for the platform. I’m curious how you think that will impact your business and your forward opportunities.

Mike Reed

Yeah. Hi Giuliano. Great to hear from you And thanks for the question. Obviously, we’re very pleased to see a $200 million number in the third quarter. That was fantastic and exceeded our expectations for the quarter. And you know, our uniques which we do report on every quarter are an important indicator for us because it represents the scale of our audience. And that’s important because that really reflects the total addressable market and the opportunity the more scale we have the bigger our opportunity is. But what becomes even more important is actually engagement because that drives enhanced monetization beyond just the scale of our audience. So obviously, scale drives more monetization but engagement is even more. So, as it drives enhanced monetization each page view represents an opportunity to deliver a tailored monetization with whether through programmatic ads premium ads from our local teams, our digital only subscription offers our recently launched Wine Club or our partner e-commerce experience through our affiliate agreement. So as engagement grows, we can further customize these offerings which will create a relevant journey for every single one of those monthly uniques. Our audience and unique visitors, for example, the 200 million in the third quarter that will bounce around a little bit based on new cycles, you know, we did as we indicated, have some favorable news cycles in the third quarter.
You know, the fourth quarter sets up well with the elections as well. but what becomes more important is as I’m mentioning here is our engagement that will really start to drive enhanced revenue.
So the other thing that’s really important Giuliano that I want to mention is that audience and engagement are both leading indicators and we’re seeing improved revenue as quarters go on based on the rep on the audience that we’ve been engaging with and driving. And so we’re encouraged by the audience numbers we’ve seen in Q2, Q3 and expect in Q4 and those will be leading indicators for improved revenue trends in the digital category in 2025. So overall, very pleased with, with the third quarter performance in and being able to post a $200 million monthly unique number.
That’s great. And then, you know maybe shifting gears a little bit, you know you sold and closing businesses this year, they’re not you know non strategic. I’m curious how you think about the assets that were sold kind of related to the revenue and I contribution from those businesses and how that would turn going forward. And maybe as a slight addition to that, I’m curious if there’s you know where things stand on potential other asset sales and you know the timing of other asset sales.

Doug Horne

Yeah, I can take that good morning.
So during the quarter we made and actually you know really throughout the year we’ve made decisions to shutter or sell various businesses that did not fit well with that long term strategy that we’ve outlined for a number of different reasons.
And I would say coming into the year you know when you look at the aggregate of everything, we have taken action on our expectations in terms of top line would have been about $65 million on an annualized basis, that would have broken down about 40% digital, about 60% non digital in terms of the type of revenue. And again, that would have had a minimal kind of expectation in terms of EBITDA. And I do think it’s important to kind of reinforce that these businesses, you know we’re not at all core to our strategy. And just to give a couple examples, one was a commercial printing business which really had no connection with our core operations. And one was something that was very dependent upon the Google algorithms and the changes that happened there. So we feel that you know selling these allowed us to kind of generate cash proceeds and we were able to pay down debt. And it allows us to focus especially on those parts of the strategy where we expect growth going forward in terms of asset sales, you know, year-to-date, we’ve completed about $20 million of asset sales. And that includes obviously some of the things that we did this quarter and you know, in terms of pipeline, we have a number of deals in the pipeline, I would say some are, you know, on the smaller side, some are a little bit larger and, you know, the smaller ones tend to be a little bit more predictable in terms of timing to close. The larger ones are a bit more variable. And so, you know, that’s why we did kind of talk a little bit about the fact that timing could shift into 2025 but certainly we came into the year expecting, you know, I would say $45million to $50 million in asset sale proceeds. And, you know, our objective and the objective we’re still working towards is to achieve or exceed that level. Although the timing may flex a bit.

Giuliano Bologna

Got it. That’s very helpful. Then maybe P into DMS, you know there you guys highlighted, you know a few specific sector trends that impact DMS this quarter. Did you do this more color on those comments and how those trends are evolving?

Mike Reed

Yeah, I’ll jump in on that one. You know we did the whole home renovation category and in home improvement category was a bit muted in the third quarter, we believe the you know, the continued heightened interest rate environment and the lagging home sales environment, you know we’re big contributors to softer spend in the quarter. And that really caused a couple points of degradation in our revenue. We do see that as temporary and we actually see the recent rates rate cut that the fed enacted as a positive catalyst for that sector. There are actually a number of, of reasons that we’re really optimistic about the DMS business going forward. Some macro and, and some company specific from a macro perspective, you know based on the first rate cut we’re already seeing some increased spending from a couple of our larger customers in home services vertical. That’s really encouraging and should help Q4. And there’s potential for more momentum that in that regard as we see further rate cuts separately, kind of turning to internal catalysts. We have several internal actions underway that we expect to further accelerate the business. A few examples. You know these we’re taking a different approach to win customers ensuring the campaigns create results more quickly.
We’re measuring the success of each client touch point more closely which we believe will improve retention the current customer base. And then we’re starting to align compensation for our sales teams a little more to incentivize success of our clients. So trying to tie compensation for our internal folks touching the clients with our client’s success. We think that all of these actions along with the improving macro environment will lead to a better better Q4 trends, but certainly growth again. As we look out into the future.

Giuliano Bologna

That’s very helpful and, you know there’s some commentary about 2025 revenue growth. And I’m curious, given the expectations are laid out, can you give us, you know your thoughts on the milestones and what the inflection points could look like in 25?

Mike Reed

Yeah, absolutely. You know, we’re very confident that we are so close to the inflection point and we’re really happy this morning based on current trends you know and how the fourth quarter started that you know we were able to re reaffirm or reiterate our midterm guidance, which was for 25 and 26 which does call for full year 2025 revenue growth over 2024. So we’re really confident in where we are in our journey and in hitting that inflection point sometime in the first half of 2025 some of the metrics that really give us confidence on this inflection point is our audience engagement is driving positive momentum really across our digital business. We talked a lot about that on the call and then, you know on my previous answer on the 200 million unique. So, driving digital advertising improvement digital subscription improvement digital other partnerships and syndication revenue are all experiencing steady growth. Each quarter we’re adding new monetization opportunities to the platform which will further accelerate growth in 25 and reinforcing our digital flywheel that Christian talks about our digital pricing strategy continues to be effective. Our pool is growing up 20% year over year and our digital subscriber base is growing. So we have a lot of confidence in in further growth in 25 in that category. And so with the monetization of our platform improving as we go into 2025 and returning DMS to growth, we are very confident in our ability to have full year revenue growth next year. And Giuliano that’s really the most important thing is you know an inflection point for one month of revenue, it is not as important as full year. And if we can grow 2025 revenue, which our forecast show we will over 2024. That’s a real monumental inflection point for this company is to post annual revenue growth year over year. So we’re excited about what we see for next year and excited about where we are from an execution standpoint.

Giuliano Bologna

Very helpful. And then as a final one I’m curious if there’s any update around the DJ has against Google and you know, template stations or potential return to your case.

Doug Horne

Sure I can take that one.
Obviously given our case you know, we closely follow the DOJS ad tech case against Google. And I would say overall, you know we believe that did an outstanding job of putting on its case. And, you know we believe they presented a very strong and compelling argument as to Google’s monopolistic behavior. And in fact you know I think it’s interesting to note that one of our own employees, Tim Wolf who is a senior Vice President of revenue operations for was in fact the DOJS first witness in their case in terms of that action the closing arguments are scheduled for Monday before Thanksgiving. And the judge has indicated that you know she hopes to issue a decision on liability by year end and obviously kind of the remedies phase of that would follow post year end.
And also importantly the ad tech case being brought by Texas and 17 other states is scheduled to begin on March 31st of next year.
You know, overall I think all of these things bring to light the Google and Google controls how publishers sell their ad slots and you know it forces publishers to sell increasing shares of that ad space to Google at depressed prices. And you know, as a result, there’s been dramatically less revenue for publishers of the rivals to Google ad tech business. And all you know, all along through that Google is enjoying exorbitant monopoly profits. So, you know, overall the DOJ the state AG and Gannett, we’re all seeking to restore competition that you know, ultimately will allow journalism to flourish and you know, on an overall basis we feel good about the progress to date.

Giuliano Bologna

That’s very helpful. I appreciate it and then I will jump back in with you. Thank you.

Operator

Thanks Joel.
Your next question for today is from Matthew Condon with Citizens JMP.

Matthew Condon

Thank you for taking my question. My first one is just on the Microsoft deal that you guys announced in the quarter. I just wanted to find out what was different about your conversations with Microsoft as far as recognizing the value of your content that maybe got you over the hurdle that you didn’t see in your conversations with other AI companies in the past.

Mike Reed

Yeah. Hi, Matthew. Good to hear from you and thanks for being with us today. I think 11 of the things about the Microsoft deal is that there was a very narrow slice of content that we were able to understand what the use of the content was and what kind of value we were getting for that. And I and so as we go forward, the Microsoft deal is a great indicator of, of how we can slice and slice our content, use stuff much more narrowly to generate fair value for a slice of content. And also we expect to do broader deals where we’re fairly compensated for much more of our content. But you know the partnership with Microsoft, while it’s modest from a revenue perspective, it’s a good example of the type of partnerships we’re looking to strike. Look, we have a long standing relationship with Microsoft across our business. We’re deploying co pilot licenses, for example, across the significant portion of employees. And we’ve participated in hackathons to prototype tools in our organization. And we, we ideate with Microsoft about ways we can go deeper into A I. So this licensing agreement we have with them allows our content to feed their A I summarized co pilot briefings which include links back to our original source content.
It’s currently, as I said, a narrow use of our content but allows us to work with a long standing partner to deepen our relationship and maintain the value of our content. Importantly, so we’re confident in our ability to bring additional partnerships. Given what we believe is a very rich, unique, diverse nature of our content in our archives. And also because of our readiness and activity over the past year to build out A I products in house. So we have been working with a wide range of A I partners large and small and we do expect to continue to announce deals as we go forward. So excited about this and it’s just just the beginning.

Matthew Condon

That’s very helpful. And then my next one is just on the 203 million monthly uniques. You know, I just wanted to ask you know how do you know how much of that is coming in because of the election cycle? And then what tools do you guys have at your disposal? Just to retain those users as they come in and think about next year. You know, just obviously we pass through the election cycle.

Mike Reed

Kristen, are you on, do you want to take that?

Kristin Roberts

I’d be happy to take that, you know, the vast majority of what we’ve been seeing in our unique over the course of the entire year is actually not related to politics. We’ve had a huge boost in the, in our political readership and also our viewership there. But what we’ve been doing over the course of the last year is finding opportunities to grow other segments of our readership base so that these large news events become additive to what we consider to be our foundation, right? And so you will see over the course of the last year and a half, steady growth both in monthly page views, but also in monthly average uniques and then large jumps where we have big moments like election or a natural you know, natural disaster or Olympics. And so the results from 2024 are in fact not dependent on the political year. It’s simply been additive. And so we continue to see that the tactics we’re using that are all built on the data we’re studying on a daily basis to understand the behavior of our users on our platform to understand what they need and want from us. That’s what’s contributing to the steady, persistent predictable repeatable growth that we’re seeing in audience, not just these one off news events.

Chris Cho

That’s very helpful.

Matthew Condon

Thank you so much.

Operator

We have reached the end of the question and answer session and I will now turn the call over to Mike Reed for closing remarks.

Mike Reed

Thank you. So, thanks again everybody for joining. I just would close with mentioning. We’re we did have a solid third quarter. We had strong execution across most all of our key priorities and we’re really optimistic as we head into Q4. You know, as I mentioned earlier in my remarks that you know, we do expect pretty broad based improvement in trends across our financial metrics in the fourth quarter. Some final thoughts on Q3 that give us that optimism as we look forward. Number one, we generated again, year over year adjusted ebita growth.
It was our highest growth trend percentage of the year and we generated significant free cash flow. And as you heard from Doug, our free cash flow is up significantly over prior year.
Our adjusted net loss in the third quarter was 6.1 million and that improved 16.6 million over the prior year. Third quarter. We expect trend improvement again there in the fourth quarter.
We have sustained digital revenue growth with three out of our four digital revenue categories showing year over year trend improvement. We’re excited about what the fourth quarter holds there as we just discussed quite a bit. We surpassed 200 million in average monthly uniques in the for the first time in the company’s history. In the quarter, we continued to delever through both adjusted ebit growth and debt repayment, further reducing first lien net leverage.
We continue to maintain good liquidity with over 100 million in cash at the end of the quarter.
In addition, as as most of you know, subsequent to the third quarter being completed, we did successfully complete a comprehensive debt refinancing that extended our debt maturities and significantly reduced future dilution from the impact of our convertible notes. So we were really pleased to get that done.
Each of these items really reinforces our confidence as we head into the quarter and as we head into 25 as we stand here today, we believe we are well positioned to drive long term value for our shareholders and the opportunity for growth is vast and we’re just excited about what the future holds. Thanks for your time today and we look forward to updating you again on how the fourth quarter goes and how we close out the year. Thanks everyone.

Operator

This concludes today’s conference and you may disconnect your lines at this time. Thank you. For your participation.