Release Date: May 02, 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 significant improvement in digital revenue, which grew by 8% year-over-year and now represents over 42% of total revenues.
- Digital-only subscription revenue and digital-only RPU reached new highs, with growth rates exceeding 20% compared to the first quarter of the previous year.
- The company's Digital Marketing Solutions (DMS) business returned to growth, with revenues up 3.7% over the same period last year, ahead of expectations.
- Partnership revenue nearly doubled over the prior year, contributing significantly to earnings and free cash flow with high margins.
- Gannett Co Inc (GCI) achieved a marked improvement in free cash flow compared to the prior year period and improved sequential year-over-year trends in adjusted EBITDA.
Negative Points
- Total operating revenues for Q1 were down by 5%, indicating a decrease despite improvements in digital revenue streams.
- The company reported a net loss of $84.8 million for the quarter, influenced by a $46 million asset impairment related to the exit from its leased McLean, Virginia facility.
- Despite growth in digital areas, the print and commercial revenues segment continues to face challenges, necessitating ongoing efforts to improve trends in legacy revenue streams.
- While digital revenues are growing, the overall revenue deceleration and the need for continued significant improvements highlight ongoing pressures in transitioning to a digital-first business model.
- The company's adjusted net loss of $36.4 million reflects ongoing financial challenges despite positive developments in digital and partnership revenues.
Q & A Highlights
Q: What caused the total revenue deceleration improvement from -8% to -5% sequentially, and how do you see this trend continuing throughout the year?
A: Michael Reed, CEO, noted the first quarter's strong performance gives confidence in achieving revenue growth by year-end. He expects a 1 to 1.5 points improvement in revenue trend each quarter, driven mainly by digital revenue growth, which is anticipated to surpass 10% this year.
Q: What drove the significant increase in digital revenue growth from less than 2% to 8% in the last quarters, and how will this trend continue?
A: Michael Reed explained that Q1's digital revenue growth exceeded expectations, driven by advertising growth, digital-only subscription revenue, and DMS revenue. He expects these factors to fuel continued growth throughout the year, with partnership revenue expected to double, reaching about $20 million with high EBITDA margins.
Q: Can you provide more details about the new AI-powered CRM toolset in the DMS business?
A: Chris Cho, President of Digital Marketing Solutions, described the AI-powered CRM toolset designed to address customer pain points in managing and prioritizing leads. The product is currently in beta testing with positive feedback and is expected to be monetized and made broadly available soon.
Q: How do you feel about the free cash flow trends and full-year guidance based on Q1 results?
A: Doug Horne, CFO, expressed confidence in meeting full-year expectations for free cash flow and EBITDA growth, highlighting that Q1 typically has weaker cash flow, making the positive results particularly encouraging.
Q: What are your expectations for digital subscription growth and RPU trends going forward?
A: Doug Horne discussed the strategic shift to focus on acquiring long-term digital subscribers, which has begun to show positive results. He sees potential for both volume growth and RPU increases, driven by underpricing relative to the market and enhanced content strategies.
Q: Could you elaborate on the audience growth strategies and their impact on revenue?
A: Kristin Roberts, Chief Content Officer, highlighted efforts in local markets and sports verticals that have significantly increased audience engagement and page views. These efforts are expected to drive both direct and partnership revenue growth, particularly in areas like sports betting.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
