and the entire Wirecutter affiliate referral revenues. Adjusted operating costs grew 10%, largely as a result of higher compensation and benefits expenses, which included investments in our video journalism. Cost growth exceeded our guidance range primarily due to incremental variable compensation tied to financial outperformance. Increases in sales and marketing costs in the quarter included both higher marketing and promotion expenses and higher costs associated with our advertising revenues. As I mentioned at the top, AOP grew 16% in the quarter to approximately $155 million. Adjusted diluted EPS increased 11 cents to 69 cents, reflecting 19% growth. We generated approximately $266 million of free cash flow in the first half of the year. Over that same period, we returned approximately $160 million to shareholders, consisting of approximately $92 million in share repurchases and approximately $68 million in dividends. This is consistent with our capital allocation strategy, which includes returning at least 50% of free cash flow to our shareholders over the midterm. I'll note that while our strong free cash flow in the first half primarily reflected our growing AOP and capital efficient model, It also benefited from timing of seasonal working capital, some of which we expect to reverse in the second half. In addition, as we discussed last quarter, 2026 free cash flow will include a tax-related benefit of approximately $60 million, the majority of which we do not expect to recur beyond fiscal 2026. I'll now look ahead to Q3. Digital-only subscription revenues are expected to increase 12% to 15% and total subscription revenues are expected to increase 9 to 11%. Digital advertising revenues are expected to increase mid to high teens and total advertising revenues are expected to increase high single to low double digits. Affiliate licensing and other revenues are expected to increase low to mid single digits. This takes into account the timing shift of a marketing promotion by one of our affiliate partners which occurred in Q2 of this year as compared to last year. where that promotion occurred in Q3. Adjusted operating costs are expected to increase 8% to 9%. We intend to continue operating efficiently while making disciplined investments in our high-quality journalism and digital product experiences that add value for our audiences and help reinforce and expand our competitive advantages. As we've discussed, video in particular remains an important area of strategic investment being reflected in our results and in our guidance. We believe video allows us to have an even greater impact with the journalistic investment we are making by penetrating a large and new addressable market for us. We are confident in our ability to generate strong returns over the long term as we grow the amount and impact of video journalism in news and across the portfolio. In summary, our strategy continues to work as designed. Our strategic priorities are all aimed at building a larger and more engaged audience over time, growing our subscriber base, We will now begin the question and answer session.

To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jason Bazinet with Citi. Please go ahead.

Thanks so much. I wonder if I could just ask a question on expenses. You talked about the two drivers of the elevated sales and marketing. I think you said higher promo and then some costs related to video. Can you just unpack that a bit? Because I feel like your shares have reacted pretty sharply to elevated sales and marketing in the past. I think it was the fourth quarter of 24. And it ends up being nothing. You know, it's not like a big structural change in your costs. But I wonder if you can just provide any color about how much of this is sort of temporary versus structural. Thanks.

Yeah, Jason, I'm happy to take that. We were pleased with our sales and marketing performance in Q2, and our approach there remains consistent, so no changes to the approach. I mentioned in my remarks it's a little different than you characterized it in your question. There are really two different components to highlight there. The first is marketing. The second is actually advertising-related costs. In marketing, we continue to drive the majority of our subscription starts as our model is designed to do organically behind the strength of our ongoing investment in journalism and product development. And we continue to treat marketing as a useful additional growth lever. It can fluctuate, as you know, quarter to quarter as we continue to approach it with a lot of discipline. We're focused on efficiency and returns, leaning in when the moments call for it, for example, around the World Cup in Q2. Now, beyond marketing in Q2, there was a separate portion of the growth associated with advertising as well, and that's for a couple of reasons. First, we outperformed our ad revenue expectations in the quarter, which meant a bit higher ad cogs, incentive compensation. And then second, this year we staffed a new middle market ad sales team to access a part of the market that we weren't serving previously, which we see as another promising way to aim to strengthen that, you know, sort of those long-term growth drivers in advertising. Overall, I characterize the Q2 results as reflecting our strategy working as designed to help drive healthy revenue growth and AOP growth.

Great. Thanks so much, Jason, for the question. Operator, we'll take our next question, please.

The next question comes from David Karnofsky with J.P. Morgan. Please go ahead.

Thank you. Will, on the digital subscription outlook, the 12% to 15% range, that's a bit below where you've operated or guided over the past several quarters. So just in that context, can you speak to any volume mix or pricing factors to be aware of? And then Meredith, maybe relatedly, you noted Times isn't immune to broader trends in publishing. You've seen reports of some platforms kind of reconsidering deals. with LLMs due to traffic impact. I know you haven't engaged on these, but just maybe you can give us the lay of the land as you see it right now.

Great. I'll start with that digital subscription revenue guide. You know, first to say we're pleased with our overall, you know, over 16% growth of digital subscription Q2. Underlying that growth, as I mentioned in my prepared remarks, was the over 13% year-over-year increase in subscribers over the last 12 months. as well as pricing performance, which continued to go well. Now, to your question sort of looking at Q3, it's, I think, helpful to recall that digital subscription revenue growth can be driven by a variety of factors. I'd roll them up for these purposes into sort of three basic categories. The first is, as I mentioned, sort of that sub growth over the prior 12 months. Even if subs can vary quarter to quarter, of course. The second is mix, the mix of those subs between Higher Price Bundle Subs, Lower Price Single Product Subs. And then the third, as you mentioned, is pricing, step-up performance. And by step-up, I mean a couple of different things. How well are subs transitioning off promotion to higher prices, as well as the timing and performance of any price increases. So as it relates to Q3, I'd note in part the cohort impact of the paywalling of the mini in last year's Q3. That contribution from Lower price single product subs a year ago plays a bit of a role in the submix in the quarter. Overall, I'd step back and say our strategy continues to work as designed. We're focused on sustaining healthy underlying drivers of digital subscription revenue as reflected in that guide, meaning continuing to add significant value to our products, generating strong engagement around them, and then we consider asking users to pay a bit more over time as our products become even more differentiated and valuable in their last.

Let me take the second part of your question, David. Let me start by saying we've been saying for a while now that the overall direction of travel is less traffic to publishers from the big platforms and as you heard me say in my prepared remarks, we delivered our Q2 results against The backdrop of a rapidly changing information ecosystem that's shaped by a small number of big tech companies whose moves are continuing to result in that less traffic. We're not immune to that impact, but we are building resilience to the trend and we're doing that by investing in coverage and products and brands. that are so good they're worthy of being sought out and worthy of direct relationships. We're doing that by making our destination product experiences, I'd say now especially our apps, even more effective at engaging prospects. And we're doing that, as you've heard both Will and I talk about, by making video a bigger part of the experience. And I'll just say that our aim in all this over time is to become less reliant on the intermediaries. And you should imagine we are always calibrating between making our work available widely so that people can sample it and to, you know, make sure we're doing that in a way that isn't substitutional. And I think that gets at, you know, the specifics in your questions.

Great. Thank you, David. Operator, next question.

The next question comes from Cameron Manson Perrone with Morgan Stanley. Please go ahead.

Thanks and morning. I wanted to ask about video. Competition seems to be higher than ever here. You know, engagement issues at Netflix, YouTube investing more outside of creator video, social media platforms investing more behind short form video. Are those trends supportive of consumer demand and therefore your strategy? Or how do you think about the attractiveness of video investment kind of within that backdrop? Thanks.

Yeah, I'm happy to take that one. My short answer is yes, those trends are consistent with our direction of travel and our strategy. And I'll say, you know, it's early days in video for The Times, but we have dramatically scaled We are growing video engagement on our platform and off our platform. Let me just reiterate what we're doing here from a strategy perspective. I think Will and I both alluded to this in our prepared remarks. We see video as a big long-term opportunity to establish the Times, to be as preferred a brand for watching the news as it is for reading and listening. Our efforts here are really meant to grow engagement with the audience we already have and also to reach net new audiences and build share with a new audience. And I would say we believe video allows us to have even greater impact with our journalistic investment because we're penetrating a large market and a new market for us. And I'll just say on production, were really scaling now, still early, but now producing thousands of original videos across the portfolio. You know, four real areas of growth in production, reporter video, news clips, our trademark visual investigations, and then shows, which we've talked about extensively. It's early days on engagement, but we like what we see so far, and you've now seen us make a couple of deliberate moves to build engagement on our own platform with the Watch tab and now Shows tab for long-form watching. And we have a lot of confidence that as we build engagement at scale, we'll have a lot of ways over the long term to monetize it.

Great. Thanks, Cameron. Betsy, we'll take our next question, please.

The next question comes from Kat Gunn-Morrell with Evercore ISI. Please go ahead.

Great, good morning and thanks for taking the question. Digital advertising had another strong quarter growing 21% and again coming in ahead of expectations and your third quarter guidance calls for mid to high teens growth. I was hoping you could unpack the Q2 upside across impressions, pricing, ad formats, and maybe advertiser categories and as we look ahead, how much of the momentum reflects structural drivers like additional ad supply and share of wallet gains versus You know, maybe timing or other factors that we should be mindful of. And finally, you know, are your investments in video beginning to contribute meaningfully to ad revenue at this point? And could increasing video monetization help offset the more difficult ad comps you'll face over the next several quarters? Thank you.

Thanks, Keck, and I'll take that. Both good questions. Let me just start by saying Q2 was a very strong quarter for digital advertising. You know what the rate of growth was. And I would say as to the drivers, the strategy is kind of working as it was designed to. We are in now a number of big spaces that have a lot of appeal to marketers. We have differentiated coverage and products in those spaces. And I will just say that growth in the quarter came from across the portfolio. So everything is sort of working. at the same time. And across the portfolio, we now have real scale of engagement, especially in news and games and sports, but really everywhere. And then lastly, as to the drivers, we have that very strong engagement. And then we also have ad products that really work for marketers. So campaigns renew because the ads You've heard our outlook for Q3, and I think that continues to reflect healthy demand across the portfolio. We have said previously, and I'll reiterate, that we are lapping, to your question about structural drivers, we're lapping strong growth and supply in the back half of the year from last year. I would say overall we continue to be optimistic about our ad business. You know, it can be a little variable quarter to quarter, but we're confident in its role as a long-term growth driver. And then remind me the second part of your question. I think you asked if video, what role video played. I'll just say you heard me talk about how ambitious we feel about video and excited we are. It's playing a relatively minor role in the growth in advertising so far, and you're going to see us really focus on scaling production, scaling engagement, and then, you know, scaling monetization, but minor role so far.

Great. Thanks, Kaka. Operator, next question.

The next question comes from David Plouse with Bank of America. Please go ahead.

Hey, thanks for taking the question. Just two quick ones, if I may. You had an acceleration in digital ARPU in the quarter. I mean, does this reflect the way to think about this, like the full quarter impact from pricing actions that you took in one queue or is it sort of higher conversion to higher price tiers or maybe it's a little of both? What's the best way to think about that? And then the second question is, you know, obviously the affiliate licensing and other line has, you know, multiple different components. Presumably, you've comped the Amazon AI deal from last year at this point. Can you sort of talk about some of the puts and takes for growth for this line for the rest of the year? Thanks.

Sure, I can take both of those. On the question about ARPU, yeah, I mean, as I sort of said in my previous answer and in my remarks, You know, notable strength in digital subscription revenue in Q2, that's 16.4%, and we're pleased with that ARPU growth of 3.1%. What you're seeing there, you know, a lot of different factors at play, but we are seeing the benefits of, for example, the digital bundle price increase that we mentioned in Q1. It started sort of seeing the benefits of in Q1. That was a price increase from 25 to 30 for a cohort of tenured subscribers. And I also said in my prepared remarks, we continue to be pleased with the performance as subscribers roll off their promotions. So both the retention and yield there, we continue to be pleased with. So those are some of the dynamics at play and what is supporting that Q2 ARPA growth. and then on affiliate licensing. Oh, affiliate licensing and the other question. Yes, as you said and you know from previous calls, it's a mix of stuff in there, licensing deals, affiliate books, TV, film, commercial printing that can create some lumpiness. That ALO revenue growth of 7% in Q2 and being ahead of our guidance range and sort of the dynamic in Q3, it's worth noting that That higher wire color affiliate revenue referral number takes into account the timing of a shift in a marketing promotion by one of our affiliate partners. It occurred in Q2 of this year instead of Q3, which is the quarter it happened last year. I would say, you know, given the sort of multiple parts in that, it's, you know, you've seen our guide. and it takes into that into account. Licensing is obviously an important part of the business as well. And we're pleased with what's going on with the line, but nothing more to unpack there.

Great. Thanks, David. Betsy, we'll take our next question, please.

The next question comes from Benjamin Soft with Deutsche Bank. Please go ahead.

Good morning. Thanks for the question. You recently announced a local news product in at least one market, and I'm hoping you can talk about how this fits into your broader strategy and how you think about the opportunity with local news. And then, could you remind us where you are in the process of ramping up production for each of the three types of video content in your business plan, whether that's podcasts, reporter-led video, or visual investigations? Thank you.

Thanks for both questions. Let me do the local one first. I would regard it as an experiment and something we're excited about and something we regard as, you know, more than anything kind of supportive of a broader local journalism ecosystem. In the specific product launch we announced, we're collaborating with a local player in the market. So I'd regard it as we're always experimenting with and testing with new ways to meet news needs and ways that we can both support and benefit from others in the ecosystem, and that's what we're doing there. On video, I think your question is kind of where are we in the scaling of different types of video. Is that right?

Yes, that's right. Thanks.

Great. So what I would say is I refer to my prepared remarks to producing, you know, I think in the thousand range of new original videos across the enterprise in the quarter. A lot of that is signature reporter video. That's a format that I think the Times is doing particularly well, and that's where a reporter in the course of, of sort of doing the work to unearth information in addition to the typical publishing of let's call it an 800-word article or a live blog. They also now can have an output which is explaining what they found in their reporting and explaining sort of the process of how they got it, and that has the effect of getting the information out there in a new format that appeals to people and also is kind of inherently humanizing and trust-building. So we're particularly excited about that format. And I'll just say, nowhere near done, rolling that out across the newsroom. Lots and lots of progress, but still a lot more to come. In visual investigations, which is another, you know, I call it signature Times format where we're doing something quite different than what's out there in the market, at some real scale now. That is big enterprise stories where we are able to tell a unique story about something very important happening gathered from all different kinds of available video to piece together what really happened somewhere. I think I talked in the last quarter about the work we did on understanding The bombing of the school in Minab, Iran, happening at the hands of the U.S. in the last quarter. We used a visual investigation to tell that. You should imagine we're going to keep doing that. We're going to expand that as we can. And then I'd say we're early in our show's footprint. You've heard us talk about some of the shows in politics. and culture and business, but you have to imagine early days and we will continue to expand the portfolio and experiment with different kinds of long-form formats. So all relatively early, and I would say we're excited about all of them.

Great. Well, thanks, Ben. Operator, we'll take our next and final question, please.

The last question today comes from Doug Arthur with Schuber Research. Please go ahead.

Yeah, well, I don't want to beat a dead horse here on the costs. I think that when you came into the quarter, you were talking about 8% to 9% guide on the adjusted operating costs. You came in above that. On the sales and marketing, I mean, you mentioned a bunch of variables, including compensation, but how much of it was the success of the World Cup Athletic and kind of leaning into that. And could we see a pullback, therefore, in the fourth quarter?

Yeah, thanks, Doug. So what I want to make, I said in my prepared remarks, the reason for the sort of slightly higher cost growth in the quarter versus our guidance was primarily due to incremental variable compensation tied to financial outperformance. You'll note, among other things, that very strong advertising revenue growth in the quarter versus our expectations. So that's the sort of primary reason we exceed our guidance. Of course, the reason for the cost growth overall, the primary driver there is compensation and benefits associated with our core strategy, which is investing into our journalism in particular and digital product experiences. Meredith and I both talked about video, for example. And so I, you know, just to then follow up on the sales and marketing component, as we've said, we're always we're very disciplined there. We're very focused on making sure that when we see opportunities in the market for efficient returns, we and we I think it makes sense to capture them. We do. You saw that a bit in the quarter. I mentioned one of the things in my previous answer you highlighted on it, but I wouldn't over-rotate on any specific event. It's about making sure we're driving efficient returns with the marketing spend, keeping in mind, of course, that that's a lever and we like it, but overall, our model is still very much an organic growth model driven by our journalism and product.

Great. Thanks, Doug.

Go ahead, Betsy. This concludes our question and answer session. I would like to turn the conference back over to Anthony DiClemente for any closing remarks.

Well, that's it. Thank you all for joining us for our second quarter earnings call. And if you have follow-up questions, feel free to reach out to us. Otherwise, we'll see you next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect