People (Tokyo:7865) Q3 2026 Earnings Call

0:00 Good day and welcome to the People Incorporated third quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by a zero. After introductory remarks, there will be a question and answer session. To ask a question, you may press star then one on your telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Tim Quinn, People Incorporated's Chief Financial Officer. Please go ahead. Thank you. Good morning, everyone. This is Tim Quinn, CFO of People Incorporated, and I want to welcome you all to our third quarter earnings call.

0:45 Joining me today are Barry Diller, Chairman and Senior Executive of People Incorporated, and Neil Vogel, Chief Executive Officer. People Incorporated has published a presentation on the investor relations section of our website entitled Q3 Earnings Presentation. On this call, Barry, Neil, and I will provide some introductory remarks Referencing that presentation and then open it up to Q&A. Before we get into that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under federal securities laws. These forward-looking statements may include statements related to our outlook, strategy, and future performance and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent annual report on Form 10-K and subsequent reports filed with the SEC.

1:44 This information provided on this call should be considered in light of such risks. We also discussed certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity's sake during the call. I also refer you to our earnings release, investor presentations, and public filings with the SEC and our investor relations section of our website for all comparable GAAP measures and full reconciliations for all non-GAAP measures. And with that, I will hand it over to Barry. Thank you, Tim. Good morning, everyone. I'm going to be, as usual, fairly brief about just some opening remarks. I prefer to get to your questions. On MGM, as you all know, we spent a good many months this summer. First of all, we went into a process where we announced that we were going to attempt to take MGM private for a whole host of reasons, structural reasons.

2:47 We, in the end, decided that now was not the time, if ever was the time, and we ended that process. And then MGM came to us and said, how about if we, excuse me, buy People, Inc. And while I was dubious, I said, well, if you want to make us a proposal, please do so. They did so, and we quickly realized that was not in people's interest that for, again, all sorts of reasons. But I did not think that the time was right, nor do I think probably the time will ever be where someone will, quote, purchase the people entity. As far as MGM is concerned, I have not dimmed at all in my belief in their business. I believe that they are the greatest play – In a world of disintermediation, I think that there are prospects both in their home market of Las Vegas, the regional markets, particularly in both China and the building of this giant resort in Japan.

4:04 I think the prospects are great. And out of the process, when it ended, MGM... is interested, as you can understand, I think, if you follow MGM or you're an investor in MGM, their security is quite undervalued and they wanted to buy stock, but they felt that our position at 26% meant that there were issues, so to speak, of creep and control. and so we entered into an agreement with them that gave gave certain rights, meaning voting rights and some of our insecurities above 20 or 26 percent if in fact it grows by virtue every share they buy increases our ownership thereby. That They wanted to be protected in that and they wanted us to not purchase stock in excess of 29.9%.

5:09 I was fine with that. I don't intend to do so. I think that it's more than likely over time that our 26% will grow way past 29% without our putting up any additional Capital in our company. And our first priority, I think, is we've not been able to purchase our own securities in some time because of the MGM discussions and blackout period. But we are, as they say, open to buy beginning, I think it is, tomorrow. And you will see us doing so. As it relates to the publishing business, which Neil, of course, is going to talk in detail about and will probably be many of your questions, our sessions-based revenue, non-session-based revenue, which is what we're after, is growing quite well. And the drag this year was in the sessions legacy business dragged.

6:24 I have every expectation that we're going to continue on this path of displacing old legacy Google essentially search and concomitant revenue with non-session based revenue from all of the things that we are doing inside all the books but the The key to our publishing business is we've been on this path now two and a half years, almost three years, of changing before actually it became critical loss of sessions. We began to change and diversify our traffic.

7:15 We're continuing to do so. We're confident that we're going to be able to do that, and we're going to be able to get substantial growth, not single-digit growth. That is the goal. That's what I think next year. I would be very disappointed if next year we do not reach that, but I'm sure you'll hear more about that. We've been simplifying the company. As you all know, I think we've taken our overhead down by 90 million to 25 million or so. We continue to simplify the business, sell assets that are non-core. There are only two assets we have, really. One is, I mean, one is obviously MGM and the other is our publishing business.

8:05 I think they balance each other extraordinarily well and I'm very glad that we have them. Think about capital allocation. Capital allocation is going to go towards strengthening that publishing business. We're not going to look outside that. There are many opportunities within that, not big scale, but relatively small scale, but I think could be very additive to the publishing business and returning capital to shareholders. So with that, I'll turn the call back to Tim or to Neil, and we'll get to your questions as soon as they finish. Great. Thanks, BD. That was a great setup. Hopefully, Tim and I can provide some color to what BD just said. Let's jump right in. If you're looking at the slides and you go to slide three, we continue, as Barry said, to execute on our simplification strategy.

8:53 There again, there are three main drivers for us, and we've discussed this prior. First, we're focusing on the core assets, as Barry said, People, Inc., and our stake in MGM. For People, Q3 marks 12 straight quarters of digital revenue growth, and we're executing a strategy to accelerate that growth going forward. And as BD said, for MGM, We're focused on using our ownership position to help MG unlock its many opportunities. Second, we're continuing to optimistically monetize our non-core assets. We're making good progress here. We'll be smart, seeking the right opportunities. And third, we're being thoughtful stewards of our capital. As Barry said, we're in a strong position to opportunistically buy our own shares and fuel growth through M&A, specifically at the PeopleLink operating business.

9:39 Page four will be familiar to many of you. People Incorporated continues to trade at a discount to the value of its MGM holdings plus cash. That means investors are getting our people media business and all of our other stakes, including Toro, Vivian, and Daily Beast, as well as our real estate, effectively for free. The game plan we outlined is clear. The goal is to unlock the value shown. Now on to people's media results for the quarter. Q3 represents our 12th straight quarter of digital revenue growth, although not with the strength we would have hoped. Digital revenue grew 2% down from 6% last quarter. The trend for the quarter was clear. Our newer non-sessions-based revenues continued to grow at pace, while legacy sessions-based revenues were more of a drag than we expected. Our future is the strength of our brands and the durability and diversity of our non-session-based businesses, as Barry introduced. Non-sessions-based revenues grew at a solid 15%, in line with Q2, with continued strength in licensing, content syndication, events, and social video. In the last quarter alone, we launched My Recipes Plus and PeopleVIP paid online subscription models, along with multiple new and expanded events across our food and home brands, and we're up to 50-plus social video series across brands from InStyle to Travel and Leisure. Legacy sessions-based revenues declined by 6% in Q3 versus 1% in Q2. That was driven by web session declines of 26% up from 22% last quarter.

11:07 primarily due to declines in Google referrals. However, we continue to drive premium ad rates rooted in the quality of our brands, audiences, and execution, offsetting much of those declines on the web. We expect our digital revenue growth rate to increase in Q4 and to deliver on our EBITDA targets for the year. We plan for digital growth to return to mid to high single digits in 2027 and our aspirations are in line with what BD outlined. We are aligning are resources to our biggest opportunities with disciplined cost efficiency. Last week, we executed staffing reductions impacting 195 employees, about 6% of our workforce. We are optimizing headcount around our most important projects. We continue to integrate AI across all work streams. We are reorienting essentially everything we do to embrace AI.

11:54 And most importantly, we're now playing offense, not defense. We are aggressively looking for acquisitions to accelerate our non-sessions-based businesses. The next slide illustrates the macro changes in media and how we've evolved. Going to slide six, our opportunity to reach audiences and serve marketers has never been larger, more diversified, or offered greater potential. Since the Meredith acquisition five years ago, we have grown from website-based media with print routes, limited in scale and narrow in revenue streams, to brand-focused media reaching scaled audiences across digital and in real life. The growth of our non-sessions-based revenue is a direct result of the growth in these businesses. World-class brands are our anchor. We have the gravitas of 50 or even 100 years of history, and our generational relationships with consumers transcend media tactics.

12:46 Our key objectives are twofold, to build direct relationships with consumers and to capitalize on our significantly larger addressable market, whether it's social video hits like People's Next Red Corporate Reporter, Rapidly expanding events like BHG's Red Plaid Cafe or our content partnership with Apple News, we're successfully delivering new ways to connect with and delight consumers. The next slide shows how we develop and grow properties specifically in today's brand-based era, focusing on People's 2026 Sexiest Man Alive, one of our most important franchises. Going on to the next slide. Last week, People announced its pick for SMA, Noah Wiley from the hit show The Pit, I'm sure Noah is thrilled to be part of our earnings call. SMA is a 41-year-old franchise that has been re-energized by our new media mix, and we've increased its reach, cultural resonance, and economic potential.

13:37 What started as a magazine cover, then a web feature, has become a robust franchise that lives across Instagram, TikTok, YouTube, Apple News, our People app and VIP subscription, podcasts, and our distribution partners. The outcome is clear. We grew revenue associated with SMA this year 50% with significantly expanded audience reach and drove the cultural conversation. We have opportunities like this across all of our key brands. So whether it's launching our own products like Sweet Tea at Southern Living, which is coming very soon, expanding our event franchises, launching subscription services, or creating new video-based IP, we have a blueprint for future growth. Now I'll turn it over to Tim to go over the financials. Great. Turning to page eight, I want to frame in financial terms where we sit on our journey from a primarily web-centric business to a diversified, branded media company. Our formula is to grow our non-sessions revenue about 15 to 20% over time. We have some room to go from the 15% we delivered this quarter, but as Neil said, we have plans to get there.

14:44 This part of our business will represent about half of our digital revenue by this time next year, and is where we are putting all of our time, energy and resources. This is the future. The other half of the business resides on the web and is the place where our consumers interact directly with our brands and often choose to transact. Because of this, we can combat the declines in web audiences better than most by focusing on the performance we deliver for advertisers and our commerce partners. You saw this play out in the numbers very clearly this quarter. Digital revenue growth at People slowed to 2%, and that was primarily felt in our sessions-based ads business. Total digital ads declined 8% in the quarter, and this was directly attributable to core session declines of 26%, the steepest we've seen yet. AI overviews penetration on Google search queries are now found on over 90% of the searches we track, an increase even since Q3.

15:46 At the same time, the use of AI agents and other products continue to change consumer behavior in real time. Despite all of this, we delivered digital revenue growth for the 12th straight quarter. Today, we make more content of all kinds than anyone in publishing, and that is accruing to our benefit with our licensing revenue growing 49% in the quarter. This growth represents revenue from people consuming our content across all distributed platforms, including Apple News and AI. Outside of publishing, the emerging and other segment also performed extremely well, with both Vivian and the Daily Beast posting strong revenue growth and improving margins and profitability. Overall, PPLI EBITDA, the holding company, was flat year over year, and digital EBITDA at People was down about a million dollars.

16:38 Turning to slide nine, this slide highlights the very strong cash position the business has built over the last year as we execute our corporate simplification strategy. This is an important part of the story, so I want to take a moment to connect the dots. We have two pieces to the strategy. First is growing operating cash flow. At a time when many businesses making headlines are now cash flow negative, People the Publisher generated $186 million of free cash flow after tax and debt service last year. At the same time, we've taken the necessary steps to reduce corporate expenses at the former IAC holdco level and expect to be at about 45 million corporate expense run rate by the end of Q1 next year, cutting our former overhead burden by half. Going forward, this will allow us to be even more efficient turning operating profit into cash.

17:36 The second part of the equation is the simplification strategy. This year, the sale of CARE, the limited partner stake that was previously announced, and close in Q3 and smaller asset sales have together generated nearly a half a billion dollars of after-tax cash. Going forward, our remaining collection of assets also have real value and include Toro, Vivian, the Daily Beast, each of which are growing nicely, and our IC headquarters building. For context, conservatively, the value of this collection of assets is at least similar to the cash proceeds generated this past year. So it is material. Notably, this framing excludes any potential proceeds from the ongoing Google ad tech litigation, which we believe offers further meaningful upside.

18:25 Most importantly, our plan is to put that cash to good use. We've proven we are more than capable of defending our business against all these well-documented threats Now is the time to go back on the offensive with our strengthening balance sheet and cash reserves. We have ample resources to continue to get back to buying our own stock and will be actively looking to accelerate people growth through opportunistic M&A. Finally, on slide 10, we are refining our guidance for the year given the current outlook for Q4. For People, Inc., we expect EBITDA to be in the 330 to 345 range and mid-single digits revenue growth for the year. For total PPLI EBITDA at the Holdco, we are expecting EBITDA in the 263 to 283 range.

19:13 To wrap it up, we remain focused on delivering our financial results for the year, while importantly positioning the business to execute on our ambitious growth plans for 2027. And with that, operator, we are ready for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then two. And our first question for today will come from Justin Patterson with KeyBank. Please go ahead. Great. Thank you very much. Good morning. Two, if I can. First, can you talk about how AI impacted people traffic over the course of the quarter and the efforts you have to mitigate some of those headwinds?

20:01 and then secondly, as you look toward 2027 and in the ad market where there's a lot of change going on, where do you see opportunities around product innovation to help advertisers navigate this environment? Thank you. Thanks Justin, it's Neil. I'll take these two, let Tim chime in with some color. The first question was, how did AI affect traffic? I have two facts for you. It's not the last quarter, it's really the last few years as Barry said. We've lost nearly 70% of our Google search traffic over the last two years. And as Tim said, AIO is now over 90% of the queries that used to send us traffic from search. This has been ongoing. Despite all this, we've still grown for 12 straight quarters.

20:48 Mitigating this is not new to us, nor is this decline surprising. I think in this quarter, decline may have been a little steeper than we anticipated, but none of it's surprising. I mean, we were using the term, and I want to take credit for this, we kind of made up the term Google Zero internally. But what we've been doing is we've focused on our brands, their gravitas, our audiences, to develop more durable and diversified ways to reach audiences and reach advertisers. We're not new to this, and it's why we've been able to grow through this to date, and it's why we're super optimistic. The things we're doing all show up essentially in our non-session-based revenue, and you can see that we had a strong quarter there that's growing healthily, and the Google stuff showed up in the sessions-based revenue.

21:36 The non-sessions-based things that we're doing to grow the business include events, social series, which has been a big success for us, programs across TikTok, Instagram, big audiences on YouTube, our Decipher product, which is not only open web, but has pivoted a lot into CTV, our success on Apple News, our AI licensing, our launch of apps and subscriptions, doing things like our consumer products like sweet tea. Each of our brands has a plan for the future, and we've been executing against it. And I think it's why Barry's so optimistic about our next year. It's why we feel so good about our return to Good Growth Upcoming, and why we feel really good about this business. Our success is anchored in our iconic brands and reaching audiences in new ways, and I think we've proven we're pretty good at it.

22:27 Second question, which is a good question, is as the internet changes, right, and it's not just like selling ads on a web, what ad innovation do we need to sell going forward? And I think the one interesting thing is We have been building these audiences we talk about for longer than there have been businesses to support these audiences. So what we've had to do for the last three years is work very hard to create models that actually work. We have no interest in audience that we can't effectively deliver value to both users and to advertisers. So a very good example is what we've done in episodic series. So The Intern is a big hit series we have at InStyle. It took off and we had to find a model for it.

23:14 The model for it now is essentially season-long branded content. A season is, you know, seven three-minute episodes and what we do is we get a sponsor and we weave that sponsor into the plot line with a wink in a way that users enjoy. And somebody buys an entire season. Now, not only are they buying an entire season of The Intern, but they then have the opportunity to layer on that events at InStyle, events at People, media across YouTube and across Instagram and across all these other places So we're selling these really interesting packages. On their own, the social series are very lucrative and very high margin. And these things allow us to make packages that are very modern and very exciting for advertisers. And I think that is a lot why we've seen, despite 26% sessions-based decline this quarter, even on the web, the sessions-based revenue didn't go down, went down 6%. People really like what we're selling, our audiences really like what we're doing, and we're integrating things really, really well.

24:15 So between adapting to Cypher to make it work for CTV, the things we're doing with our episodic shows, the clever things we're doing to advertise on social, the expansion of our events, we have a whole host of things we can sell people that we frankly didn't even have 12 or 18 months ago that's resonating in the market. Yeah, that's well said, Neil. And the only point I would underscore is we're a very capable direct sales team that have relationships across, you know, basically all key advertising sectors. And we wouldn't be able to make this transition without that asset. And it's, you know, it's core to what we're doing. And it's, as I said, it's really an asset for us to leverage. Operator, next question. The next question will come from John Blackledge with TD Cowan.

25:03 Please go ahead. Great. Two questions. First, now that the MGM situation is clarified, how should we think about the go-forward strategy to unlock shareholder value? And then second, can you further kind of unpack the 3Q digital revenue drivers and how should they trend in 4Q? Thank you. Barry, do you want to tackle the MGM question? Yeah, I don't know about tackling. How do we unlock value? MGM, I believe in the next years, is going to increase its value substantially.

25:48 There are several catalysts for this. The furtherance of all the exciting things we're doing in Las Vegas, etc. Las Vegas had a tough summer, but seems to be coming out of that now. I don't think there's no Great, thank you. I'll tackle the Q3 question. Yeah, I mean, the deceleration of revenue, as we said, John, was directly attributable to the decline in sessions.

26:44 You know, we are very clear-eyed. We are in the midst of a very real and fundamental transition in the business. We have been on this path for several years now. And as we said repeatedly, we continue to grow through it. Advertising, as I said, declined 8%. The traffic pressure intensified. Yet our direct sold revenue and our programmatic rates are both growing really nicely. So that strength reflects really the unique value we bring in the market, which is branded environments, real people, premium performance. We are not counting on sessions to improve, but yet we do expect advertising to improve in Q4. Again, that's off the backs of our premium sales capabilities and performance.

27:33 Performance marketing growth slowed from 13% to 2% in Q3. This was largely expected, something we previewed, and was in part due to the timing of Prime Day, which was a drag of about 4 percentage points of growth that was shifted into Q2 from Q3. We actually expect Q4 to improve back to sort of the mid to high single digits levels that we would have seen in each of Q2 and Q3 when you adjust for the Prime Day impacts. Finally, the licensing revenue, as I said and as we saw, was really impressive. We continue to have real success across Apple News, AI, and other content partnerships. In Q4, those growth rates will slow some as we lap the Meta AI deal that we announced last Q4.

28:20 We still expect full year growth to be about what we delivered in licensing in the first half, which translates to something roughly about 20% Q4 growth. Again, our focus is to get back to the growth we want and expect, as Neil said, mid to high single digits, and that gets us on a path to the double digits that Barry and we all aspire to. Operator, next question. The next question will come from Jason Halfstein with Oppenheimer. Please go ahead. Thanks, Stu. Can you just elaborate, I guess, more of a focus on next year? So in the face of worsening search traffic, how are you thinking about growing non-session revenue next year? More specifically, maybe talk about what's a reasonable expectation for licensing for next year? And then secondly, can we get an update on the Google lawsuit? When do you expect it to be resolved?

29:14 Are there legal costs still contemplated in the corporate run rates? Do you have a way to tie this into a long-term licensing deal with Google versus just like a one-time settlement or payment from them banks? I'll let Tim do the Google question. I'll take the non-sessions revenue question for next year. I think the non-sessions revenue answer is an extension of what I said prior. I think as we get into next year, not only will we continue to launch new things, potentially Girded a bit by some smaller acquisitions that give us some capabilities. But we should see the maturation of a lot of the things we've launched this year and at the end of last year. And I think we're pretty excited to see where these things go.

30:00 And I think they give us confidence in our numbers. In terms of Google, the math would say that we're probably on the other side of a lot of these declines. We've already lost 70% of our referrals. AI is on 90% of searches. So hopefully, at least in real numbers, that thing's going to stabilize even if it doesn't in percentage decline terms. But we feel very good about next year. Again, we talk about planting seeds. We've planted a lot of seeds that are starting to grow. We have a lot more seeds to plant. And we feel very good about it. Yeah, I think that's right. 2027, Jason, is a little bit of the payoff for the last two years' worth of work. I think we feel confident that we will continue to see success on Decipher.

30:50 Excited about the subscription products that we've launched. We have about 6 million downloads or registrations on our My Recipes and People app product. Now we're going to turn to monetizing those subscribers. And so that's the path to get back to the growth. Talking about Google, switching gears to the Google ad tech litigation for a second. You know, again, to remind people who haven't heard the story, we are relying on the government's findings that Google engaged in anti-competitive practices as it relates to the ad market. The government's already found that that to be the case. We believe that we have substantial claims amongst the largest claims out there given our lineage with Dot Dash, Meredith, and Time Inc.

31:36 The new information in this last few months is that a court date has been set For the USA Today litigation, which is the court set a date of April. This is not our case, but as a precedent for us, you know, we're kind of next in the queue after it. It gives us a lot more confidence that a resolution to our case could occur in 2020. The litigation, it's related only to damages, not to whether or not something was wrong. So we're hopeful that it's a 2027 event and we remain confident our claims could be at least nine figures when it's all said and done. But a lot of uncertainty and a lot remains to be seen there. Operator, next question. The next question will come from Dan Kornos with StoneX.

32:22 Please go ahead. Yeah, thanks. Good morning. Neil, I guess I know you've talked an awful lot about it already. But I think the concept, we all saw what Google reported this quarter, and now they're starting to aggressively monetize advertising within AI overviews. And we're seeing that that advertising is yielding less. So they're kind of being forced to kill their own golden goose, which they clearly cheated to grow back in the day. But When you look at all of the initiatives that you have forthcoming, you kind of mentioned briefly Decipher, CTV, etc. Just help us understand sort of where the best shots on goal are to help you kind of reaccelerate the core business or the non-sessions business, I should say, into 27.

33:11 And I guess adjacent to that, You guys have made it pretty clear that M&A is firmly back on the table. You've got a great balance sheet. You generate a ton of free cash. Can you, like, size that for us? Would you do larger deals? And what kind of stuff are you guys looking at? Thanks. Sure. I'll take a shot at this. Tim can add color. Let's go to the shots on goal question, which is actually a very good framing. So I think we have real traction in a number of things we're doing that we think are going to be – fairly high probability shots on goal. One is social series, and the episodic work we're doing, we have more than 50 social series across our brands. It is almost like the new TV for a new generation, and it has been a material part of our growth. We're very excited about that.

34:02 We're very excited about Decipher. Now, the open web has slowed a bit, which you would think would water down our excitement about Decipher, but what Decipher's data has been has proven Very good for CTV. Tim gave the time period, but recently more than half of Decipher's business has been CTV targeting, which is a really interesting thing. Events are a little bit more linear growth, but we've had a lot of success in events, expanding our events and launching our events. And as Tim said, we're making our first foray into web-based subscriptions. Now, we have 9 or 10 million subscribers to our print magazine, so we know how to do this. We have launched two really interesting app products, one around My Recipes, which is a recipe aggregator, and it's going to be a whole bunch of other things, and what we call our People VIP app.

34:52 Between the two of them, we've got over 6 million people that have already signed up for these things. We just need to convert them to paying, which is a very, very good opportunity. And we continue to do really well syndicating our content to places like Apple News. and some other places. We really have a really nice, healthy portfolio of things going forward that we're excited about. I think some of them are going to work really well. Not all of them are going to work really well, but they don't all need to work really well to get back to double-digit growth. So we feel very good about that. The next question was M&A, and I think that is true and something Barry is very much encouraging us to do. I think to frame it, I think the expectation would be in the last five, six months we've made two small acquisitions.

35:39 We bought FeedFeed, which was an influencer network around food, and we built something called HotLock, which was an event series, a food event series for Gen Z audiences. They're both very add-on. They're both things we think we can really grow and expand given our sales team and our infrastructure and expertise. I would expect More things of that profile. Add-on things. If you're a private equity person, think of them as add-on acquisitions for things you're already doing to really bolster our non-session-based revenue businesses. That would be the primary focus. Yeah, more direct connections to our users, places where we can leverage our advertiser relationships. But these are not bet-the-company type of bets. So we don't want to allay any fears there. Go ahead, Barry.

36:24 I'd only add one thing, which I don't know. The acquisitions that we are looking at are bolt-ons to our current publishing business. We're not looking outside of that. I can't say that something won't come along opportunistically, but it's really unlikely. And also, the size of these acquisitions will not, I also believe, be large. Thank you. Great. Operator, next question, please. The next question will come from Steven Ju with UBS. Please go ahead. All right. Thanks, guys, for taking the question. So just kind of looking back over the last year, I think the licensing and other revenue has now risen to be about 20% of the digital revenue mix.

37:11 So I was wondering if you could talk about the different components that live in that line, and in particular, I guess, the Apple News distribution and how that functions and then It seems like there's probably other well traffic outlets like Apple News that you guys could probably lean into. Thanks. Yeah, I'll take that one. Neil can color in. So yeah, our licensing revenue has three components to it. So think about it as content licensing, AI licensing, and kind of traditional product licensing. The majority of the growth that we have seen is coming from the content licensing line. Again, to reiterate what I said earlier, we are making more High quality content than anybody out there, publishing or otherwise.

37:56 You know, tech, written word, video, everything. We made a shift two, three years ago to publish that content to as many places as we could. One of the places where we've had great success is in Apple News. It is a traditional sort of browsing-like experience. It relies heavily on our historical magazine presence and capability. You can consume the magazine in the Apple News experience as well as our digital content. And so, you know, that's been a great partnership. Yes, how does it work? It is, think about it as a revenue share based on time spent, based on how much content the user consumes. And so, you know, we like that model. We are able to sell advertising on that as well, kind of to the extent that we can extend and our own capabilities.

38:49 So Apple News has been a great success. They're not the only one, as you said. We continue to publish to places like Yahoo and MSN and looking for YouTube and all sorts of other Netflix, you know, places where we can get our content in front of our consumers. So, you know, I think one advantage that we have, Stephen, that in this realm is we are not a single brand company. There are about 15 brands where we have success in these distributed environments. And that gives us multiple bites at the apple and has allowed us to really scale. The second part of the licensing line, of course, is AI, AI licenses. We remain optimistic in that market that they will continue to evolve and that there's a big place for our content. There's increasingly a place for recency, meaning new content in that marketplace.

39:43 And the third leg of the stool, so to speak, is traditional product licensing where we continue to have one of, if not the biggest, licensing deal at Walmart with our BHG line. And so, you know, licensing is a very high margin, as you can see, fast-growing area of the business, and I think it is A function of sort of the quality of our brands and the level of investments that we're making in our content. With that, I'll turn it back over to the operator for the next question. The next question will come from Eric Sheridan with Goldman Sachs. Please go ahead. Thanks so much for taking the question. With the revenue results you saw in some of the non-core markets, Operations. I want to know if we go a little bit deeper in some of the drivers of those results and how you increasingly think about the long-term future for those assets within the broader portfolio approach you guys have talked about so far. Thanks so much.

40:41 Thanks, Eric. I can grab that. You know, the sort of Turo is the biggest and continues to perform extremely well. They had record first half results. They continue to deliver double digits revenue growth quarter in, quarter out. and recently announced they are pacing towards about a billion two of revenue for the year. So, you know, Toro's in really good shape. Again, we are a minority holder. We're, you know, we're anxious for an opportunity to monetize the good work that they're doing there and, you know, we look to partner with them to find that path. You can't really put a timing on it, but that's something that we're excited about and the performance underwrites, you know, a really big opportunity there. Vivian and Bill Kong and his team are doing a great job.

41:29 Vivian grew Q3 revenue 18% to about $12 million. They've really leaned in on subscription and usage-based revenue streams. They launched an AI assistant subscription product in Q4 2025 that they're having real measurable, tangible success on. And so we continue to be really thrilled with the performance over at Vivian. And they're really gaining some momentum there. and the Daily Beast revenue in Q3 grew 39%, so an amazing quarter for the folks there as well to $8 million. Most importantly, each one of these businesses is performing well. Each one is worth more today than they were worth six months ago or a year ago. What we're looking to do is find the right home for these assets, obviously, and complement that with maximizing value for us and our shareholders.

42:22 We're enthused about it, about the performance there, and it's really giving us confidence in the simplification strategy that we're embarked on. Operator, we can take the next question, please. The next question will come from Brian Smilick with JP Morgan. Please go ahead. Hi, guys. This is Vignesh on for Brian. Thanks for taking the question. I guess just on the ad market, I believe you called it maybe 6 out of 10 last quarter. Just curious where it is now. especially for food and beverage and CPG. And I guess secondly, what do you see for holiday spending and budgets kind of going into the next quarter of 2027? Thanks. Sure. I think this is going to be the third or fourth quarter in a row that we're going to tell you probably six out of ten.

43:11 Again, I think good enough to do our job. The economy is still a little bit weird, right? There's inflation and high gas prices, but So far, the American consumer is undefeated. I think strong categories for us, health and pharma has been really strong. Beauty and style has been really strong. We also have very good assets and very good sellers in those areas, so there's probably some correlation there. Food for us has been challenged for a number of quarters, although it did return to modest growth in Q3. We have some good programs that might be part of it. CPG and food is still, I wouldn't call them growth, I would call them growth. macro exposed so they're a little bit more exposed to things but overall I think six out of ten holiday spend we haven't seen any signs that things are unusual yet. I think we're booking business around how we'd expect so as we get closer we'll know but I guess thematically things are breaking later but that's been a trend going on for years so that's not really new.

44:16 But yeah, so I would say it's a boring answer, but six out of ten. Operator, next question, please. The next question will come from Yusef Squally with Truist. Please go ahead. Awesome. Thank you for taking the question. I have two. So maybe the first is we didn't session-based ad revenues. Is there kind of a natural lower limit to how low? that can go given the search issues. Neil, I think you talked about how you've already lost about 75% of Google traffic. Should we look at 2027 as a year of normalization or at least the start of normalization for that? And then maybe Tim, the adjusted EBITDA guide for 26 implies a big step up in margins in Q3 and Q4, assuming that flat guide. So other than normal seasonality, can you just flesh out some of the drivers of that jump?

45:14 Thank you. Yeah, I mean, I'll start with the margins and then we'll tag team on the sessions because it's a little bit of a crystal ball question. Yeah, we have real seasonality in this business in the back half of the year, so you're going to see a real step up. I would look back to Q4 of 25 for what the margin profile looks like. We would expect margins to be similar in 26 as they were EBITDA margins, digital EBITDA margins as they were in 25. You know, kind of overall, just some commentary on margins. Our non-session based revenue margins are strong. That's a place where people kind of keep looking to find softness or weakness. Really, the margin pressures that we saw here in Q3 were volume related, very candidly. Licensing revenue margins are strong.

46:05 Our non-session based ad margins are strong and comparable. Our decipher margins have been kind of a pleasant surprise and strong. You know, we're continuing to try to manage to those, you know, healthy sort of high 20s target, say, 30% full year EBITDA margins. At the same time, we are investing in the future. So we are investing in each of these products that Neil's described today. You know, we've demonstrated for years that we're disciplined about those investments, that we really try to invest into success, not ahead of it. But, you know, there's a couple, several million dollars sort of drag in Q3. as we stand up the infrastructure, preliminary marketing, even some AI costs associated with those new projects. But again, it's being done thoughtfully.

46:52 It's not going to ever get away from us. And as we referenced in the release and Neil referenced in his remarks, we did a staff reduction in a little bit that we announced last week. It's never easy. They're always hard to do. These are important colleagues that have helped us to get here, but we really felt like we needed to redeploy resources away from some of the legacy businesses like print and even the web towards these new growth initiatives. And so that's another way that we kind of are mindful of our margins. On session-based, do you want to? Yeah. Will you read the session-based question again? Yeah. So just trying to get a sense of when do we trough with session-based ad revenues now that you've lost Most of the traffic that, in theory, you should be losing to Google, right?

47:46 I think you mentioned earlier. So, again, let's definition. What session-based ad revenues actually means is revenues we get from web sessions, people who actually come to our websites. Even without Google, there is a substantial number of people that come to our websites, right? And we've lost 70% of our Google referrals. So there's still a fairly large audience there. 70% of our referrals from search, there's still a fairly large audience on the web that we can market to, and that will always be there. So the piece that we're dealing with is the remaining number of sessions that will be sent to us from Google. They are going to continue to decline over time, but we're on the other side of a lot of it at this point.

48:31 So the percentage, again, this is a math problem, right? So the percentage declines might go down, but the aggregate numbers of of Sessions are going to go down less because you're dealing with a smaller number up top. The rest of the business, direct traffic, referral deals, that's fairly healthy. It's doing okay. So I do think you will see a leveling off. I do think you'll start to see it next year in session traffic and session-based revenue. And remember, Sessions were down 26% this quarter, but revenue was only down 6%. So if we can mitigate some of this, there is some opportunities in this side of the business to hold the line and have it as a nice underpinning of what we're doing.

49:17 Yeah, I would just underscore, I think the absolute declines will continue. I think the percentage declines will definitely moderate. And that's just sort of the math of it. I do think we're closer to the other side of search. I think what makes the question challenging for us, you and everyone, is what's next? Is it agentic? Where does the world go in terms of new consumer products? But again, most of our traffic today comes directly to our sites or is not coming from Google. And so we'll manage whatever the future is. So I guess the way to think of it is we're not counting on an improvement, that's for sure. We're preparing for the future as it is.

50:03 and sort of optimistic that there'll be some moderation. Operator, next question. The next question will come from Ron Josie with Citi. Please go ahead. Good morning. This is James Michael, Sherman Lewis on for Ron. Thank you for taking my questions. Two here, please. First, on the subject of reallocating investments towards people's biggest opportunities, can you elaborate more here on where you think about leaning in on spend to drive growth? Not just the growth brands, but also how you plan on using AI here. And then secondarily, on the capital allocation strategy, any update on the balance overall, maybe leaning in on share repurchases in the interim ahead of any potential M&A? Any color there would be helpful. Thank you. Where was your first one?

50:51 So in looking at our investments, as Tim said, we will be responsible with our investing. And I think, again, what we're doing here, there's not some new pivot this quarter. We have been doing and operating under the assumption that Google traffic will be very challenged for a number of years. And we have managed to deliver growth and margins in that context while we've launched all these new things. And we don't Think anything in the macro of that look is going to change. As Tim said, we made some hard decisions. We eliminated some jobs last week as part of a reallocation of resources. We will continue to do that. And I think most of our projects are much more people intensive than capital intensive.

51:39 We're not doing data centers. We don't have the challenges that our significantly larger competitors have. and we're able to generate cash, generate margin and invest in new things all at the same time. That's what I would say. In terms of AI, I think the last six months we've seen an incredible improvement in AI coding capabilities. I think our team's done a great job of embracing that. Our software development process is as rapid as it's ever been. That allows us to very efficiently try and launch it to rather to launch these new products that we talked about today. I mean, we've got 34, 3500 employees and 1500 of them are burning tokens at some point during a month working on things.

52:28 So, yeah, we're embracing AI in that sense. I think the other way to think about our business is we really had great success in workflows. I think that's where the best one of the highest and best uses for non-coding AI is today. That's everything from ingesting and interpreting RFPs on the sales side to research to kind of content topic research. So there's a lot of workflow work that we're doing. And again, that's all efficiencies that we're generating in the business that we can redeploy. In terms of your second question, yeah, sorry, go ahead, Barry. No, I was just going to say, let's take one last question. Okay, operator, one last question. The last question for today will come from Matt Condon with Citizens Bank.

53:16 Please go ahead. Great. Thanks for taking my question. I'll keep it short here. Just wanted to ask on $26 billion of off-platform views this quarter, how should we think about the monetization on a per-view basis going forward? Is there a lot of opportunity to grow that and and how do you do that or is really the opportunity just about actually growing those off-platform queues going forward? Thank you so much. Two things. One, I'll let Tim answer the second half of the prior question. The second, I'll take that first. I think when you look at the off-platform audience, that is such a diverse basket of things. There are pieces of that audience that you get paid on a per-view basis. There are other pieces that are sponsorship-driven. There's a whole host of ways that we make money and all the business models and different things we've been talking about here feed into that number. I think it's much more directional.

54:10 I think the way we've changed the business in the last three years, we have more than enough audience right now to do what we need to do for sponsors. We just have to keep it fresh and engaged and fun and interesting, which we're very, very good at. That number is going to go up and I think there's going to be a correlation with revenue going up. But it's not like a direct line like a sell an ad on a web session. And I'll let Tim go back to the prior buy-off question. Yeah, we just wanted to end on a capital allocation question. I think the predominance of the money in the short to midterm will be done spent on share repurchase. I think Barry was very clear and forthright in his opening comments. We'll be opportunistic on the M&A side, but we intend to get back in the share repurchase market kind of right here in short order.

54:58 I think with that, we will wrap it up. Unless, Barry, you have any final comments? No, thank you all. Yeah, thank you all. Okay, bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.