Q3 2024 Summary
Published Feb 18, 2025, 5:23 PM UTC- Gannett surpassed 200 million monthly unique visitors in Q3, exceeding expectations and indicating a larger total addressable market for the company's digital offerings. This milestone is seen as a leading indicator for improved revenue trends in the digital category in 2025.
- Optimism for future growth in Digital Marketing Solutions (DMS) due to expected improvements in the macroeconomic environment, including recent interest rate cuts that are anticipated to stimulate spending in the home services sector. Additionally, Gannett is implementing internal strategies to enhance customer success and retention, positioning the DMS business for better performance in Q4 and beyond.
- Strategic divestment of non-core businesses, allowing Gannett to focus on core growth areas. The company has completed $20 million in asset sales year-to-date and aims for $45 million to $50 million in proceeds, which can be used to pay down debt and potentially improve profitability.
- Headwinds in the Digital Marketing Solutions (DMS) Business: Gannett's DMS segment faced a decline in revenue due to reduced advertising spend from larger advertisers in the Home Services vertical, influenced by economic uncertainty and higher interest rates. This contraction led to a decrease of "a couple of points of degradation" in revenue, and while there are signs of improvement, continued economic challenges could negatively impact future growth.
- Delay in Achieving Revenue Inflection Point: The company acknowledged that the revenue inflection point is anticipated to come later than expected, indicating that their growth strategies may not be yielding results as quickly as planned. This delay could lead to prolonged revenue challenges and uncertainty in achieving sustainable growth.
- Uncertainty in Asset Sales Timing and Impact on Revenue: Gannett has sold or closed non-strategic businesses contributing approximately $65 million in annualized revenue, with 40% digital and 60% non-digital revenue. While these actions are intended to focus on core operations, the reduction in revenue may impact top-line performance. Additionally, the timing of future asset sales is uncertain, with some transactions possibly shifting into 2025 due to fluid timing, potentially affecting cash flow and debt repayment plans.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Digital revenue growth | FY 2024 | anticipating continued growth across all digital revenue categories | 6% to 7% | no change |
Free cash flow | FY 2024 | anticipating solid free cash flow generation in the second half | updated to reflect the impact of the Q4 debt refinancing | no change |
Debt repayment | FY 2024 | planning to repay at least $110 million in FY 2024 | continued focus on reducing first lien net leverage, targeting below 1x | no change |
Revenue growth | FY 2025 | no prior guidance | reaffirmed mid-term guidance, projecting full-year 2025 revenue growth | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent Digital Revenue Growth | Emphasized in Q1, Q2, and Q4 with strong digital advertising performance, record subscription numbers, and increases in unit metrics (e.g., digital-only ARPU, YoY growth of 21–25%). | Q3 highlighted record digital revenues at $277.4 million with robust YoY gains, reinforcing the recurring focus on digital expansion. | Consistently positive with improving metrics |
Digital Marketing Solutions (DMS) Performance | Discussed in Q1, Q2, and Q4 with solid revenue and ARPU growth, introduction of AI-powered toolsets like DASH, and noted headwinds from churn and sector-specific challenges. | Q3 acknowledged slight revenue declines from churn in lower-spending accounts but also noted improvements in ARPU and momentum from new AI-powered initiatives (DASH) and an anticipated rebound in key verticals. | Mixed sentiment: ongoing headwinds counterbalanced by strategic AI initiatives |
Deleveraging and Asset Sales | Across Q1, Q2, and Q4, the company detailed significant debt repayments, asset sales targets (ranging from $45–$50 million), and marked reductions in first lien net leverage with proactive refinancing measures. | In Q3, Gannett reported repaying $28.5 million of debt and completed a comprehensive refinancing that extended maturities and reduced the dilutive impact of convertible notes. | Consistent focus with continued progress in reducing leverage |
AI and Data Integration | In Q1, Q2, and Q4, initiatives included launching AI-powered CRM toolsets, integrating AI into product innovation, and exploring licensing and partnership opportunities to protect and monetize content. | Q3 emphasized a strategic AI evolution, including a notable partnership with Microsoft for Copilot Daily Briefing and continued commitment to leveraging historical content with AI enhancements. | Sustained commitment with heightened emphasis on partnerships and product innovation |
Audience and Visitor Growth | Previous periods (Q1, Q2, Q4) reported steady audience sizes (around 185–187 million average monthly unique visitors) and strong engagement through diversified content strategies and event-driven pageview surges. | Q3 celebrated surpassing 200 million average monthly unique visitors and double-digit pageview growth driven by major events, underscoring robust audience engagement. | Positive upward trend with growing scale and engagement |
Macroeconomic and Interest Rate Impacts | Little to no explicit discussion in Q1, Q2, and Q4; these concerns were generally muted or not detailed in prior earnings narratives. | Q3 introduced commentary on the dampening effects in the home improvement and renovation sectors due to a heightened interest rate environment, while also expressing optimism following recent rate cuts. | Newly emphasized topic emerging in the current period |
Print Revenue Decline | Q1, Q2, and Q4 addressed print revenue declines, with discussions on measures to stabilize the segment, improve efficiency (e.g., cost-effective mail delivery), and offset losses with digital growth. | Q3 did not provide specific details on print revenue trends, indicating a shift away from emphasizing the legacy print issues in the current narrative. | No longer mentioned, suggesting a reduced focus on legacy challenges |
Execution and Revenue Growth Risks | Q4 (and to a lesser extent Q1/Q2) mentioned uncertainties about reaching revenue inflection points, converting the pipeline, and sustaining growth strategies despite overall digital momentum. | Q3 revisited persistent uncertainties regarding achieving revenue inflection points and pipeline conversions, although management maintained optimism with record digital results and positive monthly performance signals. | Continued concern with cautious optimism despite robust digital performance |
Share Dilution Risks | Q4 explicitly raised concerns about the dilutive impact of convertible notes (adding up to 95 million shares), while Q1 and Q2 did not focus on this aspect. | Q3 addressed share dilution by highlighting refinancing that reduced the potential dilutive impact of 2027 convertible notes by about 46%, mitigating previous concerns. | Mitigated risk due to proactive refinancing efforts and reduced dilution potential |
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2025 Revenue Growth Outlook
Q: Thoughts on 2025 revenue growth and inflection points?
A: Management is confident about achieving full-year revenue growth in 2025 over 2024. They are close to the inflection point, driven by increased audience engagement and digital monetization. Digital advertising, subscriptions, and partnerships are experiencing steady growth, with ARPU up 20% year-over-year. New monetization opportunities are being added each quarter, reinforcing their digital strategy. -
Asset Sales and Pipeline
Q: Update on asset sales and future plans?
A: The company sold or closed non-strategic businesses with $65 million in annualized revenue, mostly with minimal EBITDA contribution. Year-to-date, they have completed $20 million in asset sales and aim to achieve or exceed $45 million to $50 million in total asset sale proceeds, though timing may shift into 2025. These sales generate cash, reduce debt, and allow focus on growth areas. -
Legal Case Against Google
Q: Any updates on the lawsuit against Google?
A: Management closely follows the DOJ's ad tech case against Google and believes the DOJ presented a strong argument on Google's monopolistic behavior. One of their employees testified as the DOJ's first witness. A decision on liability is expected by year-end, with the remedies phase to follow. They are optimistic about the progress to date. -
Digital Audience Growth Impact
Q: How will surpassing 200 million monthly uniques impact business?
A: Reaching 200 million average monthly unique visitors in Q3 exceeded expectations and reflects the scale of their audience. While audience size expands the total addressable market, increased engagement is key to enhanced monetization. Higher engagement allows for tailored monetization opportunities across ads, subscriptions, and partnerships. This growth is a leading indicator for improved revenue trends in the digital category in 2025. -
DMS Trends and Outlook
Q: Can you elaborate on DMS sector trends and evolution?
A: The home renovation and improvement category was muted in Q3 due to high interest rates and lagging home sales, causing a couple of points of revenue degradation. This is viewed as temporary, with recent Fed rate cuts expected to boost spending. Internally, they are enhancing client campaigns, improving retention, and aligning sales compensation with client success. They expect better Q4 trends and future growth. -
Microsoft Deal and AI Partnerships
Q: What's unique about the Microsoft deal and its implications?
A: The Microsoft deal involves licensing a narrow slice of content, allowing the company to understand its use and value. It deepens their relationship with Microsoft and maintains the value of their content. Although modest in revenue, it's an example of the partnerships they aim to pursue. They are working with various AI partners and expect to announce more deals going forward. -
Audience Growth Beyond Politics
Q: How dependent is audience growth on the election cycle?
A: The vast majority of audience growth is not related to politics. While political events provide a boost, the company focuses on understanding user behavior to drive steady, predictable growth. Strategies are based on data to meet user needs, ensuring that large news events are additive rather than foundational.