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Gannett Hangs Its Hat on Digital Revenue

Digital-only paid subscriptions increased 29% year-over-year, surpassing 2.03 million digital-only paid subscriptions for the period.

Last week, Gannett Co., Inc. reported its fourth-quarter 2022 financial highlights. While the company had success in digital-only subscriptions and digital revenue, total revenue was $730.7 million, an 11.6% decrease year-over-year. Total digital revenue for the quarter was $269.2 million, a decrease of 0.4% year-over-year. Digital revenue now represents 36.8% of total revenue.

Despite the decline in total revenue, Gannett chairman and CEO Michael Reed focused on the positive.

“During the fourth quarter the Company continued to make significant progress against its strategic priorities, and we ended 2022 with our highest quarterly Adjusted EBITDA for the year, resulting in significant sequential growth over the prior quarter,” Reed said in a February 23, 2023 news release.

“This illustrates the effectiveness of our ongoing cost management program which has enabled us to navigate the near-term volatility and we believe will allow Gannett to realize its long-term growth goals. As a result, we believe we have laid the foundation for strong full-year 2023 guidance which includes significant cash flow growth,” added Reed.

Financial highlights

Gannett shared the following financial highlights:

  • For the fourth quarter, Gannett had net income of $32.8 million. However, for the full year, the company reported a net loss of $78.0 million.
  • The company finished the year with 2.03 million digital-only paid subscriptions, a 24.2% increase year-over-year.
  • Digital-only circulation revenue was $35.5 million, a 28.6% increase year-over-year.
  • Gannett reports they had 179 million average monthly unique visitors to the USA TODAY NETWORK during the fourth quarter and 46 million average monthly unique visitors to their U.K. digital sites.
  • Digital Marketing Solutions revenue was $121.1 million, a 7.0% increase year-over-year with average revenue per user of $2,607, a 7.7% increase year-over-year.
  • Net income attributable to Gannett was $32.8 million, an income margin of 4.5%.
  • Cash provided by operating activities was $7.8 million, and free cash flow was $1.6 million.
  • At year end, the company had cash and cash equivalents of $94.3 million.

Outlook for 2023

Gannett shared the following guidance for 2023.

  • Revenue between $2.75 billion and $2.80 billion
  • Net income (loss) attributable to Gannett between ($20M) and $10M
  • Cash from operating activities between $120 million to $140 million
  • Free cash flow between $80 million to $100 million

Operational highlights

In a November 2022 interview with Editor & Publisher, Reed shared his thoughts on USA TODAY’s 40th anniversary when the company was considered an innovator, using color in their weekday newspapers and adding infographics and reporting on pop culture.

“We were ahead of our time and remain so today as we explore innovative ways to immerse our readers in our content. Our expert-driven journalism has served as the nation’s source of clarity, and our to-the-point succinct style continues to inform the next generation of USA TODAY readers and subscribers,” Reed said.

Though not specifically addressed in the company’s earnings release, the company held several rounds of layoffs last year. In August, Gannett cut 400 jobs and eliminated another 400 open positions, representing about 3% of the company’s U.S. work force. In October, Gannett announced additional changes that would impact employees, including the temporary suspension of 401(k) matching, mandatory leave in December, voluntary severance offers, a hiring free, and other cost-cutting measures.

Insider Take

The media industry has been in trouble for decades. Consolidation, the pandemic and the economy have piled on the woes of media companies large and small. Gannett, though now under the New Media Investment umbrella, is suffering along with other companies. They continue to cut staff, sell off less profitable assets and restructure the company to try to turn things around. They are making small strides in the right direction, but not without a lot of suffering in the process. They have gutted their most valuable asset – their employees – and are hoping that digital subscriptions and solutions will save them while paying off debt. It is going to take a long time to steer this ship in a new direction. How many more employees and news organizations will suffer in the process?

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