Paradium.AI Q3 2026 Earnings Call - PARADIUMAI INC

Good afternoon, ladies and gentlemen, and thank you for joining us today. Welcome to Pradia MAI's third quarter 2026 earnings conference call. I would now like to turn the conference over to Morgan Fitzgerald, Investor Relations and Social Media. Ms. FitzgerALD, you may begin the conference. Thank you and good afternoon. Hosting the call today are Paul Edmondson, Chief Executive Officer, and Jeffrey Raitt, Principal Financial Officer. Before we begin, I'd like to note that some of the comments made during this call may include forward-looking statements. statements other than statements of historical fact or statements that could be deemed forward-looking statements forward- looking statements relate to the future events or future performance and include without limitation statements concerning the company's business strategy including our artificial intelligence strategy and the anticipated benefits of our rebranding as Peradium AI future revenues and income from continuing operations anticipated audience reach yield growth and monetization improvements cost reductions market growth liquidity capital requirements product introductions and technological capabilities search engine optimization and expansion plans as disclosed in our annual report on form 10k for the year ended december 31st 2025 filed with the sec on march 16th 2026 the 2025 form 10-k and in our other sec filings and publicly available documents the company cautions investors that any forward-looking statements made in this call or that the company may make orally or in writing from time to time are based on the beliefs of assumptions made by and information currently available to the company. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond the company's control or ability to predict. Accordingly, investors should use caution in relying on forward-looking statements, which are based only on known results and trends at the time they are made, to anticipate future results or trends. Certain risks are discussed in the company's filings with the SEC. The company disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. In addition, reference will be made to the non-GAAP financial measure, adjusted EBITDA. Information regarding reconciliation of this non-GAP measure to the closest GAAP measure can be found in the press release that was issued this afternoon and can also be found on the Investor Relations page of our website at investors.paradium.ai. With that, I'll turn to CEO Paul Edmondson. Paul, the call is yours. Thank you for joining us today to discuss our Q3 2026 results. This quarter call marks our first as Paradigm AI and signifies a new era for our business. While the publishing industry as a whole continues to endure one of the most volatile and rapidly changing traffic environments that I've seen through my 20-plus years in the industry, we've been focused on executing and creating across the company and applying AI across our teams, products, and workflows. Last quarter, we announced the acquisition of InfoSentience, along with the launch of Tudor Studios. These AI technologies, as well as Encore, are proprietary data and monetization engine have been catalysts for continued innovation, including a new AI task management product we'll be launching in Q4. More on that in a moment. Cutter Studios has gone from a concept to producing hundreds of pieces of content in roughly four months. This capability continues to show steady progress. Our team is working hard to fine-tune the technology's capabilities, and we anticipate it, along with InfoSentience, will grow significantly throughout Q4, Our brand licensing team also continues to make strides. We recently announced the launch of collaboration between Pet Helpful and Trust, Respect, Love by Cesar Millan. This co-brand combines the credibility of celebrity expert Cesar Millan and the backing of Accel Brands with the audience engine of Pet Helpful, Parade, and Millan's personal platforms. We're thrilled by this opportunity to extend Pet Helpfull off the page and into tangible experiences for audiences to connect with. Cutter Studios will also be used to drive reach by turning long-form content into engaging, shoppable videos and articles. This co-brand is targeted for 2027 retail launch, and we're excited to update you along the way. The through line of this is all our continuing commitment to reducing our dependency on referral traffic and capitalizing on the opportunity that AI creates for improving efficiencies and developing products. We're innovating across the organization. We're improving monetization, increasing content output, and expanding avenues for revenue as we move through the remainder of the year. Now, I'll pass it to Jeff to share the financial results for the quarter. Thanks, Paul, and good afternoon, everyone. Revenue for Q3 2026 was $20.5 million, down 31% compared to $29.8 million in Q3 2025. We reported a gap net loss of $3.8 million in Q3 2026 compared to net income of $6.9 million in the same period a year ago. These results were impacted by the reversal of an employee retention tax credit asset in the amount of $1.3 million that was disallowed, a decision we plan to appeal. These results were also impacted by timing of recognition of annual incentive compensation expenses of $1 million. Adjusted EBITDA was $2.4 million in Q3 2026 versus $11.9 million in Q3 2025. As a reminder, adjusted EBIT is a non-GAAP measure. A reconciliation of this non-GAP measure to the closest GAAP measure can be found in the press release that was issued this afternoon and can also be found on our investor website at investors.paradium.ai. Our cash position remains steady at over $10 million at quarter end, consistent with year-end 2025 levels. We believe the August extension of the maturity for our debt facility provides adequate runway to execute our strategic transition. Baseline operations continue to cover our debt service requirements, and we greatly value the continued partnership with our lender as we scale our new products. Our AI initiatives are generating early positive momentum. As we shared in our Q1 and Q2 earnings calls, we deliberately implemented monetization experiments earlier this year, and the findings from those experiments yielded results in September, with blended RPM rising 15% month over month to $28.99. Further, content production expanded sequentially each month during the third quarter, up 15% over Q2 2026. This growth was fueled by the rollout of InfoSentience and Cutter Studios. Our priority is to aggressively scale these new AI-driven products. Now, I'll turn the call back over to Paul for a strategic update. Thanks, Jeff. Moving into Q4, we're continuing to accelerate our AI vision, specifically outlined in our transition to Paradium AI and away from a publishing-only company. The Paradium vision, focused on empowering creators and media entrepreneurs and creating efficiencies within traditional publishing workflows, has already begun to take root with actionable products developed. As we roll out Cutter Studios and InfoSentience with more products in the pipeline, we're evolving beyond our roots as a traditional media company and engineering something fundamentally bigger. We're building a diversified platform with the ability to create value across a much broader range of markets, including SaaS, subscriptions, e-commerce, and B2B services that will change how we build and grow our business. By developing our own products and commercial relationships, we can reduce our reliance on third-party referral traffic while creating new, more sustainable revenue opportunities. In October, we upgraded our CMS with purpose-built AI tools for content creation, editing, and management. In the months following launch, the volume of words reviewed and edited per update more than doubled, reflecting deeper, more substantial refreshes to evergreen content. These updated articles are generating roughly 50% more page views within three weeks of being revised. Our newest product, Tablation, is an AI task management system built for development and content management. Tablation's initial use case was to streamline content management for our editorial teams, but we recognize that it is much more broadly applicable than that and can be used across sales, development, and much more. This is our first application that is geared toward enterprise, and we expect to launch the alpha version in Q4. We continue our efforts to optimize traffic levels, and we're expanding for the future. The ecosystem as a whole continues to evolve at a rapid pace with AI, and we intend to get ahead of what's next for creators and publishers. This quarter didn't come without challenges, but the energy and determination of our team and the groundwork that we've been building are coming together, with improvements in our monetization, InfoSentience, and Cutter Studios beginning to take off, and tabulations launch on the horizon, we're excited to report back with continued updates on our initiatives and progress in our evolution as Pradium AI. Thank you all for your continued interest in Pradium and for your time today. I'll turn it back to the operator now to begin the Q&A session. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. 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 poll for questions. Our first question is from Ryan Mayers with Lake Street Capital. Please proceed with your question. Hey, guys. Thanks for taking my question. First one for me, you know, if we think about the sequential growth margin decline. Can you just remind us what the factors of that were? How much of that was just fixed as it relates to lower traffic? That's where the lower margin came in versus how much of that Was just other items. Hey, Ryan, thanks for the question. So a couple things that I do want to make mention of, as I said on the call, we did have two one-off items that impacted the quarter. One was the write-off of a tax credit asset that was disallowed, which we plan to appeal. And the other was some out-of-period compensation expenses that we recognized. The total impact of those was $2.3 million. Aside from that, we did see some margin compression with our declining ad revenue as well. So, it's a combination of both of those two factors that kind of leads us to the margin profile of the third quarter. okay and then using that you know if we think about what you guys have seen so far early on in the fourth quarter you know have you seen margins rebound a little bit and then maybe just also just an update on traffic if you've seen that sort of stabilize and you know coincidentally what that margin impact will look like here in the third quarter i would expect the margin profile in the sixth quarter to show a small bit of improvement as we will have improved monetization in the fourth quarter compared to the third, but we have not seen any material recovery of traffic, and it continues to be a volatile and challenging referral traffic environment that we're facing here. So we have continued headwinds, but we are aggressively scaling our new products, Cutter and InfoSentience, and our goal is to have both of those products contributing materially by the end of the year. Okay. Got it. Good to know. Thanks for taking my question. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. We have reached the end of the question and answer session. I would like the turn the floor back over to Paul Edmondson for closing comments. Thank you for joining our call today, and that concludes our call. Thank you.