USA Today parent Gannett's stock tumbles 10% after revenue falls short of estimates

By Ciara Linnane

Digital revenue rose 6.2% to account for 44% of all revenue

Gannett Co. Inc.'s stock shed early losses to trade down 10% Thursday, after the USA Today publisher's second-quarter revenue fell short of expectations, offsetting profit that beat by a wide margin.

The company (GCI) had net income of $13.7 million, or 9 cents a share, for the quarter, after a loss of $12.7 million, or 9 cents a share, in the year-earlier period. Revenue fell to $639.8 million from $672.4 million a year ago.

The FactSet consensus was for EPS to be breakeven and revenue of $645.0 million.

"Midway through 2024 we are on track with our operating plans and believe we are well-positioned to continue this positive momentum for the balance of the year," CEO Michael Reed said in prepared remarks.

Digital revenue rose 6.2% to $278.4 million in the period to account for 44% of total revenue. Digital-only subscription revenue rose 22.3% to $46.3 million in the quarter, while digital ad revenue rose 3.6% to $84.5 million. Average revenue per user was also up about 20%.

The company had 185 million average monthly unique visitors to its platforms. "And as a result of improved engagement with that audience, we were able to achieve double digit page view growth over the prior year," Reed told analysts on the company's earnings call, according to a FactSet transcript.

The company backed its guidance for 2024 and still sees revenue down by a low to mid-single digit amount. Total digital revenues are expected to grow about 10%. Net income is expected to improve, excluding an impairment charge of about $46 million related to the exit from the company's McLean, Virginia office during the first quarter.

For 2025 to 2026, it expects revenue to grow in the low single digits and for total digital revenues to exceed 10% growth and account for 50% of total revenue. It expects them to exceed 55% of total revenue in 2026. Net income is expected to improve to a positive number.

The company repaid $24.3 million of debt during the quarter, which led to first lien net leverage below 2x times and brought it below $1 billion for the first time since the 2019 acquisition of legacy Gannett. The company now has about $99 million of cash on its balance sheet.

Gannett is planning to further reduce debt and is targeting asset sales of $45 to $50 million for 202

The stock has gained 113% in the year to date, while the S&P 500 has gained 15.8%.

-Ciara Linnane

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08-01-24 1258ET

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