Q4 2023 Summary
Published Feb 18, 2025, 5:23 PM UTC- Strong growth in digital revenues, expected to surpass 50% of total revenues in 2024 and reaching 55% in 2026, providing greater visibility and confidence in future revenue streams.
- Significant debt reduction, with over $140 million of debt repaid in 2023, exceeding the initial projection of $110 million, demonstrating strong cash generation and commitment to improving the balance sheet. Management expresses confidence in meeting or exceeding the projected $110 million debt repayment in 2024.
- Implementation of a new content strategy leveraging data and AI, which is driving audience growth and engagement, leading to improved monetization opportunities across the platform, including through affiliate revenue partnerships.
- The company's fully diluted share count could significantly increase by up to 95 million shares due to the potential conversion of convertible notes, leading to shareholder dilution.
- The deleveraging plan depends heavily on continued asset sales, with expectations of $45 million to $50 million in asset sales for 2024, which may not be sustainable in the long term.
- Cost reduction strategies rely on external factors, such as deflation in raw material prices (e.g., paper), which may not persist and could impact future cost savings.
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EBITDA Guidance and Net Debt
Q: What is your EBITDA outlook and net debt projection?
A: We expect EBITDA growth in 2024 over 2023, continuing the growth from 2022 to 2023. Our net debt is currently about $1 billion, with half being second lien convertible debt. We plan to pay down another $110 million this year, aiming for first lien net debt of around $300 million by next year-end. -
Digital Revenue Growth Drivers
Q: What's accelerating digital revenue growth besides ARPU?
A: In addition to ARPU growth carrying into 2024, we're seeing volume growth and benefits from our content strategy, which increases audience and engagement. Our affiliate partnerships bring more audience, fueling advertising, subscription, and affiliate revenue opportunities. Our DMS business is expanding into new verticals, leveraging AI and data to acquire customers and grow our product set. These factors give us confidence to grow digital revenues by 10% in 2024 and accelerate growth in 2025 and 2026. -
Cost Reduction Initiatives
Q: What are the drivers of cost reduction in 2024 and beyond?
A: We're reducing costs through several initiatives. Paper prices have returned to normalized levels, creating favorable impacts. Moving to mail delivery in certain markets saves roughly 50% on home delivery costs. We're consolidating our printing and distribution infrastructure, reducing the number of sites. Investing in technology and consolidating systems unlock duplicate license costs and efficiency gains. We're also aggressively reducing excess office space investments outside our biggest markets. -
Affiliate Deals and Margins
Q: Can you discuss existing and future affiliate deals and their margins?
A: In 2023, we signed 5 affiliate deals, with 2 live during the year generating just below $10 million in revenue. We expect this to more than double to $20 million in 2024 as all 5 deals are now live. We anticipate significant growth from current deals and plan to sign more. These deals have margins of 95% to 100% since we incur minimal incremental costs. -
AI Strategy and Content Licensing
Q: What's happening with AI at Gannett, and are there content licensing opportunities?
A: We're leveraging AI tools to reduce costs, increase efficiencies, and drive revenue without replacing journalists or publishing content. AI helps our journalists become more efficient, leading to increased productivity and new product opportunities. On the licensing side, we believe we will be fairly compensated for our valuable, constantly refreshed content used by AI technologies. While no deals are in place yet, any future licensing revenue is not included in our current projections and represents upside potential. -
Confidence in Debt Repayment Targets
Q: How confident are you in meeting the $110 million debt repayment target for 2024?
A: We feel very confident in our ability to meet the $110 million debt repayment target for 2024. We've successfully exceeded asset sale expectations over the past few years, repaying over $140 million in 2023, which was above our projection. -
McLean Office Impairment and Savings
Q: What is the annual savings expected from vacating the Virginia facilities?
A: The impairment charge for the McLean office space is approximately $45 million. We expect operating expenses to decrease by about $7 million to $8 million annually while the lease is still in place, as a result of vacating this office space. -
Fully Diluted Share Count Including Converts
Q: What is the fully diluted share count including the convertible notes?
A: Including the converts, the fully diluted share count would add about 95 million shares, for a maximum total. This number could decrease over time if we buy back some of those convertible notes. -
Bullishness on Growth Opportunities
Q: Why are you so bullish about future opportunities?
A: Our new content strategy is driving audience growth, and through data and AI, we're engaging better with that audience, leading to monetization opportunities. Affiliate revenue partnerships bring in a broader audience, enhancing growth on the digital platform. We're seeing digital revenue surpass 50% next year and reaching 55% in 2026, with more visibility into revenue sources. With less than 20% of total revenue now coming from print advertising, we have confidence in our growth trajectory. Finally, our new management team, in place since this summer, is beginning to execute strategies that will bear fruit in 2024 and beyond.