Newsmax Third Quarter 2026 Earnings Conference Call - NEWSMAX INC

Financial Performance:

• Total revenue reached $69 million (including a $14 million non-recurring termination fee), representing a 52.5% YoY increase; underlying revenue was $55 million, up 21.6% YoY.
• Adjusted EBITDA was $19 million, an improvement of $20 million from the prior year quarter; underlying adjusted EBITDA was $5 million, marking the second consecutive profitable quarter.
• Reported net income was $15.2 million ($0.12 per share) compared to a net loss of $4.1 million ($0.03 per share) in the prior year quarter.
• Affiliate fees surged 77.4% to $14.3 million, driven by rate increases on renewals and six new independent cable operator agreements.
• Licensing revenue exploded 343% YoY to $5.4 million, fueled by international expansion and new AI content partnerships.
• Advertising revenue grew 1.9% to $28.1 million; Cable ad revenue rose 3% despite a soft market.
• Gross margin improved to 55.3% in Q3 2026 (44.0% excluding the one-time item) versus 35.3% in the prior year period.
• Subscription revenue declined 12% to $6.1 million, while legacy product sales (books/supplements) fell 21.2% to $1.2 million.
• Balance sheet remains robust with $137.6 million in total cash and investments ($26.7M cash, $110.8M short-term investments) and zero debt.

Guidance and Future Outlook:

• Maintained full-year 2026 underlying revenue guidance of $212 million to $216 million (midpoint up 13% YoY); guidance including the one-time item is $226 million to $230 million.
• Management projects international licensing fees to reach approximately $25 million on an annualized basis in 2027, following the current year's target of $16 million.
• Anticipates structural, non-cyclical growth driven by affiliate fee expansion and international licensing, with the 2028 presidential election cycle expected to amplify advertising spending and viewership.
• Expects continued margin improvement as high-margin affiliate and licensing revenues scale and legacy spending is reduced.
• Planning to enhance monetization of Newsmax 2 (free streaming) by taking more control of advertising inventory in coming quarters.

Business Segments and Product Lines:

• Broadcasting segment revenue grew 65.9% YoY to $60.7 million (or 27.6% underlying); growth driven by affiliate fees and international licensing.
• Digital segment revenue decreased 4.1% YoY to $8.3 million, offset by the inclusion of a new licensing line item ($0.6M).
• Launched Newsmax Ukraine on November 1st and expanded Newsmax en Español to three U.S. streaming distributors; secured availability on all major paid TV platforms in Israel.
• Acquired two radio stations in Miami (Radio Mambi and a sister station) to enter the Spanish-speaking market and expand radio/podcast presence.
• Newsmax Plus (paid streaming) catalog expanded to over 700 titles, including original documentaries, scripted classics, and new genres like military history and true crime; engagement time per account rose 19% YoY.
• Newsmax 2 (free streaming) is now available in 131 markets, reaching approximately 87% of U.S. TV households.
• Signed a multi-year AI content partnership with Meta to distribute Newsmax content across Meta's apps and devices.

Market and Competitive Landscape:

• Ranked the fourth highest-rated cable news channel and number two in engagement for adults 35-64; fastest-growing basic cable network since 2020.
• Total viewership reached 49 million in the first nine months of 2026 (in line with the 2024 election period), up 42% from 2023; average tune-in time is 25 minutes, up from 14 minutes in 2020.
• 3.3 million viewers watch Newsmax exclusively without tuning into Fox, CNN, or MSNBC.
• Social media followers grew 13% YoY to 26.8 million; ranked first among news publishers for interactions per follower on Facebook.
• Management emphasizes that news consumption is diversifying across cable, OTT, social, and AI, with Newsmax positioning itself as the trusted outlet for the underserved center-right market.

Risks and Challenges:

• Decline in legacy revenue streams, specifically print magazine subscriptions and paid financial/health newsletters, as the company strategically shifts resources to online and streaming channels.
• Digital advertising revenue faces headwinds from the general market, requiring a focus on high-margin affiliate and licensing fees for growth.
• Reliance on election cycles: While the company views election-driven viewership as a retention driver, midterms and off-years typically see lower advertising spend compared to presidential cycles.
• Execution risk in converting high engagement on Newsmax Plus into profitable subscriber growth through continued content investment.

Management Commentary and Tone:

• Tone was highly confident and optimistic, characterizing Q3 2026 as the "strongest in our history as a public company."
• Management emphasized "structural" rather than "cyclical" growth, highlighting the unique position of being a digital-native company with a successful linear channel.
• Leadership expressed strong conviction in the 2028 election cycle as a precursor for sustained growth in engagement and advertising revenue.
• CEO Chris Ruddy highlighted the "quality of growth" in affiliate and licensing fees, noting that these are multi-year contracts setting higher bases for future revenue.

Analyst Questions and Answers:

• Engagement vs. Elections: Management confirmed that the two years leading into a presidential election historically drive higher engagement and revenue, with the 2028 cycle expected to be a "Super Bowl" of engagement.
• M&A Strategy: Regarding the Miami radio station acquisition, management clarified this was a strategic "toehold" in the Spanish-speaking market and radio ecosystem rather than a signal of a broad M&A strategy; the focus remains on organic platform growth.
• Newsmax Plus Strategy: Management explained the content library expansion (adding scripted shows, military history, true crime) is designed to increase retention and justify the $50/year subscription price point to a niche family-friendly audience.
• AI Usage: AI is deployed across all departments for marketing, legal verification, and content production efficiency (reducing article creation time from hours to under an hour), though it is used to augment rather than replace human creators.
• Digital Segment Viability: Management rejected the idea of divesting the digital segment, asserting it is the foundational growth engine for cross-promoting TV and app audiences and is essential for the 2028 election growth.

Other Key Points:

• Received a Special Recognition Award from the Royal Television Society (UK) for support in building Newsmax Ukrainian studios during wartime.
• The company has a "two-year window" into the 2028 cycle and believes it is entering that period from a position of strength with record revenue and a loyal, multi-platform audience.
• Capital allocation priorities continue to focus on programming, talent, technology, and distribution investments to support long-term structural growth.