8-K: Gannett Reports Q3 2024 Results, Digital Growth Surpasses 45% of Total Revenue

Gannett announced its third quarter 2024 financial results, highlighting significant growth in digital revenues and free cash flow, alongside a strategic debt refinancing.

Summary

• Gannett's third quarter 2024 results show a mixed performance with strong digital growth offset by declines in traditional print revenues.
• Total digital revenues reached $277.4 million, representing over 45% of total revenues, an all-time high for the company.
• Digital-only subscription revenues grew by 25% year-over-year, reaching $50.1 million, with a 4.7% increase in total digital-only paid subscriptions to 2.06 million.
• The company's audience reached a record 203 million average monthly unique visitors, a 7.4% increase compared to the prior year.
• Free cash flow increased significantly by 168% year-over-year to $19.8 million, and the company repaid approximately $29 million of debt.
• Total revenues decreased by 6.2% to $612.4 million, impacted by strategic decisions to close or divest certain businesses.
• Adjusted EBITDA increased by 5.6% to $62.9 million, with an improved margin of 10.3%.
• The company completed a debt refinancing on October 15, 2024, extending maturities and reducing potential share dilution by approximately 46%.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong digital growth, increased free cash flow, and successful debt refinancing. However, the decline in total revenue and net loss temper the overall outlook.

Positives

• Digital revenue growth is strong, with digital revenues now making up over 45% of total revenue.
• Digital-only subscriptions are growing rapidly, with a 25% increase in revenue and a 4.7% increase in paid subscriptions.
• The company's audience is expanding, reaching a record 203 million average monthly unique visitors.
• Free cash flow has increased significantly by 168% year-over-year.
• Debt has been reduced by approximately $29 million in the quarter.
• The debt refinancing has extended maturities and reduced potential share dilution.
• Adjusted EBITDA has increased by 5.6% year-over-year.

Negatives

• Total revenues decreased by 6.2% year-over-year, primarily due to strategic decisions to close or divest certain businesses.
• Same store revenues decreased by 5.3%, although this is an improvement of 310 basis points.
• The Digital Marketing Solutions (DMS) segment core platform revenues decreased by 1.4%, primarily due to the home improvement sector performance.
• Net loss attributable to Gannett was $19.7 million, with a loss margin of 3.2%.

Risks

• The decline in total revenues, despite digital growth, indicates ongoing challenges in the traditional print business.
• The decrease in DMS core platform revenues suggests potential weakness in certain digital marketing segments.
• The company is still reporting a net loss, although the adjusted net loss has improved.
• The company's future financial results could differ materially from the company's current estimates.
• The company's estimates do not factor in the impact of any future acquisitions or dispositions.

Future Outlook

Gannett expects total digital revenues to grow approximately 6%-7% on a same store basis for full year 2024, with total revenues down in the low to mid-single digits. They anticipate accelerated digital revenue growth exceeding 10% year-over-year in 2025 and 2026, with digital revenues making up over 50% of total revenues in 2025 and over 55% in 2026. The company also expects total revenue growth in the low single digits in 2025 and 2026, with continued growth in Adjusted EBITDA and free cash flow.

Management Comments

• Michael Reed, Gannett Chairman and Chief Executive Officer, stated that the company continued to make solid progress on key priorities in the third quarter, delivering another quarter of year-over-year Adjusted EBITDA growth.
• He also noted that three out of four digital revenue categories experienced further trend improvement year-over-year, and total digital revenues surpassed 45% of total revenues.
• Reed highlighted the significant increase in free cash flow by 168% year-over-year and the repayment of approximately $29 million of debt.
• He mentioned that some strategic decisions impacted total reported revenue, but these actions were in line with the company's long-term strategy and did not materially impact Adjusted EBITDA.
• Reed also stated that the company is well-positioned to drive sustainable growth across all key financial metrics and reiterated the 2025-2026 business outlook.

Industry Context

Gannett's focus on digital growth reflects a broader trend in the media industry, where traditional print media is declining and digital platforms are becoming increasingly important. The company's efforts to increase digital subscriptions and advertising revenue are in line with industry-wide strategies to adapt to changing consumer habits. The partnership with BetMGM also highlights the growing trend of media companies exploring new revenue streams through strategic partnerships.

Comparison to Industry Standards

• Gannett's digital revenue growth of 5.2% is comparable to other media companies undergoing digital transformation, although some pure-play digital media companies may be experiencing higher growth rates.
• The 25% growth in digital-only subscription revenue is a positive sign, as many traditional media companies are struggling to convert print subscribers to digital.
• The 168% increase in free cash flow is a significant improvement, indicating better financial management and cost control.
• The debt refinancing is a strategic move to improve the company's financial position, similar to actions taken by other media companies to reduce debt burdens.
• Compared to companies like the New York Times, which has seen significant growth in digital subscriptions, Gannett still has room to grow in this area.
• Gannett's focus on local news and digital marketing solutions is a strategy that aligns with the needs of local communities and businesses, similar to other regional media groups.

Stakeholder Impact

• Shareholders will benefit from the increased free cash flow and reduced debt.
• Employees may see opportunities for growth in the digital sector.
• Customers will have access to more digital content and marketing solutions.
• Suppliers may see changes in demand based on the company's strategic shifts.
• Creditors will benefit from the company's improved financial position and debt reduction.

Next Steps

• The company will continue to focus on growing digital revenues and subscriptions.
• Gannett will continue to execute on its strategy and expects to see further improvement to trends in the fourth quarter.
• The company will host a conference call on October 31, 2024, to review the financial and operating results.
• Gannett will continue to monitor and manage its debt obligations.
• The company will continue to invest in technology and products.

Key Dates

Keywords

digital revenue, digital subscriptions, free cash flow, debt refinancing, adjusted EBITDA, digital marketing solutions, Gannett, financial results, media, revenue growth