Q1 2024 Summary
Published Feb 18, 2025, 5:23 PM UTC- Strong and accelerating digital revenue growth across multiple streams: Gannett's digital revenues grew by 8% in Q1, outperforming expectations [3]. This growth was driven by robust performance in digital advertising, digital-only subscriptions, Digital Marketing Solutions (DMS) revenue, and partnership revenue [3]. The company expects digital revenues to surpass 10% growth this year, contributing significantly to total revenue improvement [3] [12].
- Return to growth in Digital Marketing Solutions (DMS) with new AI-powered product: DMS revenue returned to growth in Q1, outperforming expectations, with confidence to accelerate growth further [3] [6]. Gannett is launching an AI-powered CRM solution that addresses customer pain points in managing and responding to leads, with positive early reception and plans for broader monetization [6] [15].
- Improving financial performance with positive free cash flow and EBITDA growth: Gannett reported an increase in free cash flow in Q1, a seasonally weaker quarter, exceeding estimates [5]. The company expects to grow free cash flow and EBITDA for the full year, reaffirming its guidance and expressing confidence in achieving its full-year objectives [5] [7].
- Digital subscriber growth has stagnated, with the company relying more on increasing digital-only subscription ARPU to drive revenue rather than growing the subscriber base significantly. This could hinder future revenue expansion.
- The company's dependence on uncertain legal actions and legislation, such as the lawsuit against Google and the Journalism Competition and Preservation Act (JCPA), introduces risks. Progress on these fronts is expected to be slow, especially during an election year, which may not yield timely or favorable results for Gannett.
- Sustaining revenue growth through ARPU increases may not be viable long-term without significant subscriber growth. The company's acknowledgment that they are "relatively underpriced" and see opportunities to raise prices suggests potential limitations, as price hikes could lead to customer attrition if not accompanied by added value.
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Revenue Growth Outlook
Q: What's driving revenue improvement, and will it continue?
A: Management is pleased with the strong Q1 performance, where total revenue deceleration improved from -8% to -5%, a 300 basis point improvement. They expect this trend to continue, anticipating 1 to 1.5 points of further trend improvement each quarter, leading to revenue growth as they exit the year. Importantly, they expect digital revenue to be the main contributor, with digital revenues surpassing 10% growth this year. -
Digital Revenue Drivers
Q: What's fueling the digital revenue growth?
A: Digital revenue growth in Q1 was 8%, stronger than anticipated. Management attributes this to strong performance across various digital revenue categories : digital advertising growth from increased page views and better monetization , continued upside in digital-only subscription revenue through volume growth and pricing opportunities , DMS revenue outperforming expectations and expanding into new verticals , and partnership revenue expected to double to $20 million with 90%+ EBITDA margins. -
Free Cash Flow and EBITDA Guidance
Q: How is the company tracking on free cash flow and EBITDA guidance?
A: Management feels confident about their full-year outlook, reaffirmed based on Q1 results. They had an increase in free cash flow in Q1, typically a seasonally weaker period, which is positive. They expect to grow free cash flow on a full-year basis and anticipate EBITDA growth as guided. -
Digital Subscription Growth and ARPU
Q: What's the outlook for digital subscription growth and ARPU?
A: Management is optimistic about growing both volume and ARPU of digital-only subscribers. Actions taken in the prior year to focus on long-term subscribers are showing results now. They believe there's opportunity to further penetrate local markets and feel they are underpriced relative to competitors. Improvements in content and a local focus have positively impacted results. Going forward, they see opportunities to increase pricing and grow volume, which are key to overall revenue growth. -
AI-Powered CRM Product Launch
Q: Can you provide details on the new AI product in DMS?
A: The company has developed an AI-powered CRM solution to address customer pain points in managing and responding to leads and understanding lead value. Currently in beta testing with positive reception, they plan to monetize this software solution and make it commercially available more broadly. -
Litigation and Legislative Progress
Q: What's the status of the litigation with Google and legislative developments?
A: The DOJ case involving Google, outlining many of the same allegations as their case, is scheduled for trial in September this year. Management remains very confident in their case. On the legislative front, they are lobbying for the JCPA (Journalism Competition and Preservation Act). While passing legislation in 2024 may be challenging due to the election year, they expect more active discussions in 2025 and are seeing progress at the state level, such as bipartisan legislation passed in California similar to the JCPA. -
Audience and Page Views Growth
Q: What's driving growth in audience and page views?
A: The company is engineering audience growth, with local markets focusing on local content and service journalism. Growth in video is expected to be a major driver. USA Today's growth is outperforming competitors, particularly in sports. During March Madness, they more than doubled their sports audience compared to a year ago , leading to a nearly 80% lift in sponsorship revenue from events like the Super Bowl and March Madness. Expanding audience drives programmatic growth and revenue from partnerships like Gambling.com.