When Gannett reported unexpectedly deep revenue declines for its second quarter, that raised a question that has lingered: How much improvement could the company achieve in the third quarter?
The answer came Thursday. At the nation’s largest newspaper company, with 200-plus dailies, the bottom line was the same – an identical third quarter loss of $54 million and a 10% year-to-year revenue decline. CEO Mike Reed told analysts, as he had in August, that he does not expect revenue to head back up until sometime in 2024.
At the same time, Reed said, “we do see some wins”:
- Paid digital subscriptions hit 1.98 million by the end of the quarter, September 30, an increase of 28.5% compared to the same period a year ago. They have passed 2 million since.
- Cost controls have taken root. Headcount in the U.S fell 6.5% during the quarter with 468 employees leaving the company and another 400 open positions left unfilled. At the end of the quarter, headcount stood at 12,331. Gannett has also imposed mandatory unpaid leaves and suspended 401(k) contributions. Reed said the full impact on costs will be greater this quarter and through 2023.
- The company’s digital marketing services subsidiary continues to grow, and it is gradually paying down the debt it took on when Gannett and the GateHouse chain merged in November 2019.
- The company is on track to sell $60 to $70 million in real estate and other assets this year.
(A fuller account of financial details appears in USA Today’s story on the third quarter results).
Besides battling inflation and economic uncertainty that has been spooking advertisers, Gannett’s move to become more of a digital company still faces a fundamental problem. Revenues from the print side of the operation are falling by a lot more than those on the digital side are growing.
In a filing Thursday with the Securities and Exchange Commission, the company said that digital paid circulation revenues increased year-to-year by $9 million. But print circulation revenues were off by $51 million.
Print advertising also declined – by $31 million year-to-year – and digital advertising revenue was slightly off as well.
In his discussion with analysts, Reed said that the company has had trouble hiring enough drivers to home deliver papers. About 10% of routes are not regularly staffed. In the interest of customer service, the company is selectively raising driver pay and has shifted some delivery to mail.
The company also has eased off print subscription price increases in hopes of stabilizing those numbers, Reed said.
In an aside to the analysts, Reed said, “we welcome conversations with shareholders who would like to increase their positions.” Spokesperson Lark-Marie Anton explained that this was not any sort of an invitation to a takeover bid but a chance for holders of the cheap Gannett stock to buy more as a legal restriction lifts on the third anniversary of the merger in November.
Gannett shares, which had lost roughly half their value since the disappointing second quarter results were revealed, rallied some Thursday: up 11.5% to $1.65 in midday trading.