Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gannett Co Inc (GCI, Financial) achieved a milestone of surpassing 200 million average monthly unique visitors, reflecting a 7% growth compared to the prior year.
- The company reported a significant increase in free cash flow, generating approximately $20 million, which is a 168% increase compared to the previous year.
- Digital revenue accounted for over 45% of total revenues, marking an all-time high for Gannett Co Inc (GCI).
- The digital-only subscription business saw robust growth, with revenue surpassing $50 million and ARPU climbing above $8.
- Gannett Co Inc (GCI) successfully completed debt refinancing transactions, extending maturity and reducing potential future share dilution.
Negative Points
- Total revenue was lower than expected due to the sale and unwind of non-strategic businesses and softer trends in the Newsquest and DMS segments.
- The DMS business experienced a contraction in advertising spend rates, particularly in the home services vertical, due to economic uncertainty.
- Year-over-year total operating revenues decreased by 6.2%, impacted by strategic decisions to close or divest certain businesses.
- The anticipated revenue inflection point is expected to come later than initially projected, affecting short-term growth expectations.
- The company faced challenges in the print segment at Newsquest, reflecting a temporary slowdown in local economic conditions.
Q & A Highlights
Q: With Gannett surpassing 200 million monthly unique visitors, how do you see this impacting your business and future opportunities?
A: Mike Reed, CEO, highlighted that reaching 200 million monthly unique visitors is a significant milestone, reflecting the scale of their audience and the total addressable market. He emphasized that while scale is important, engagement is crucial for enhanced monetization. Each page view offers an opportunity for tailored monetization through ads, subscriptions, and partnerships. The audience and engagement are leading indicators for improved revenue trends, particularly in digital categories, expected to continue into 2025.
Q: Can you provide more details on the businesses sold and their impact on revenue and EBITDA?
A: Doug Horne, CFO, explained that Gannett sold or shuttered businesses that did not align with their long-term strategy, impacting approximately $65 million in annualized revenue, with minimal EBITDA impact. These businesses were not core to their strategy, such as a commercial printing business and one dependent on Google algorithms. The sales generated cash proceeds used to pay down debt, allowing Gannett to focus on growth areas.
Q: What trends are affecting the Digital Marketing Solutions (DMS) segment, and how are they evolving?
A: Mike Reed noted that the home renovation and improvement category was muted due to high interest rates and a lagging home sales environment, impacting DMS revenue. However, recent rate cuts are seen as positive catalysts. Gannett is implementing internal actions to accelerate the business, such as aligning sales team compensation with client success, which, along with an improving macro environment, is expected to improve trends in Q4 and beyond.
Q: What are the expectations for revenue growth in 2025, and what are the key milestones?
A: Mike Reed expressed confidence in reaching a revenue inflection point in the first half of 2025, with full-year revenue growth over 2024. Key metrics include audience engagement driving digital business momentum, digital advertising, subscription, and partnership growth. New monetization opportunities and a growing digital subscriber base reinforce confidence in achieving annual revenue growth, marking a significant inflection point for Gannett.
Q: Can you provide an update on the DOJ's case against Google and its implications for Gannett?
A: Doug Horne stated that Gannett closely follows the DOJ's ad tech case against Google, which they believe presented a strong argument against Google's monopolistic behavior. The case's closing arguments are scheduled for November, with a decision expected by year-end. The case highlights Google's control over ad sales, impacting publisher revenue. Gannett seeks to restore competition to allow journalism to flourish and feels positive about the progress.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
