Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gannett Co Inc (GCI, Financial) reported a strong second quarter with adjusted EBITDA growth reaching approximately $75 million, up nearly 5% over the prior year.
- Digital revenues increased by 6.2% and now account for 44% of total revenues, driven by growth across all key digital revenue categories.
- The company achieved new highs in digital-only subscription revenue and ARPU, with growth rates of at least 20% over the prior-year period.
- Gannett Co Inc (GCI) improved its balance sheet, moving first-lien net leverage below two times to 1.9 times, while maintaining strong liquidity.
- The company saw increased engagement with its digital audience, resulting in the third consecutive quarter of year-over-year growth in digital advertising.
Negative Points
- Total operating revenues decreased by 4.8% or 4.6% on a same-store basis, indicating a decline in overall revenue.
- Digital Marketing Solutions (DMS) revenue growth slowed slightly compared to the strong first quarter, with lower budget retention early in the quarter.
- Higher-than-expected churn in digital advertising and DMS results impacted revenue, primarily in lower margin accounts.
- The company is still facing challenges in stabilizing print revenue, which remains a declining category.
- Despite improvements, Gannett Co Inc (GCI) continues to face competitive pressures in the traditional media industry, which is generally experiencing declines.
Q & A Highlights
Q: How does Gannett plan to sustain its audience growth and leverage its large internet platform audience?
A: Kristin Roberts, Chief Content Officer, explained that Gannett's large audience allows the company to focus on engagement, which leads to diversified digital revenue. The strategy involves creating a multi-point monetization journey, increasing revenue captured per digital user through programmatic revenue, direct ad sales, affiliate revenue, partnerships, e-commerce, and subscriptions. The company is also leveraging AI to personalize consumer journeys and increase engagement.
Q: What are Gannett's plans for debt repayment and asset sales in the second half of the year?
A: Doug Horne, Chief Financial Officer, stated that debt repayment is a top priority, with a target of $45 million to $50 million in asset sales and at least $110 million in debt repayment for the year. The company has repaid $41 million so far and expects more activity in Q3 and Q4 through real estate and non-strategic asset sales, alongside continued free cash flow generation.
Q: What gives Gannett confidence in further digital subscriber and revenue growth?
A: Michael Reed, CEO, highlighted two primary areas: ARPU and volume. Despite a 20% increase in ARPU over the past year, it remains below market levels, presenting an opportunity to double digital subscription revenues over the next three years. Additionally, low penetration rates and leveraging data and AI for personalized experiences are expected to accelerate digital subscriber growth.
Q: How does Gannett view the impact of AI search engines on its content and potential partnerships?
A: Chris Cho, President of Digital Marketing Solutions, emphasized the importance of proper compensation for Gannett's content, which is necessary for AI search engines to maintain relevance. The company is open to partnerships but seeks fair value for its content, aiming to avoid short-term gains that could undermine long-term value.
Q: What are Gannett's expectations for revenue and EBITDA projections for the rest of 2024?
A: Michael Reed expressed confidence in meeting full-year objectives, noting six consecutive quarters of revenue trend improvement and substantial EBITDA growth. The company is on track with its revenue and EBITDA projections, supported by strong digital advertising and DMS pipelines, audience engagement initiatives, and print stabilization efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
