Gannett (GCI) Q1 Earnings Beat But Fall Y/Y, View Intact

Gannett Co., Inc. (NYSE:GCI) delivered better-than-expected bottom-line results for the third straight quarter, when it reported first-quarter 2018 results. This diversified media conglomerate posted adjusted quarterly earnings of 13 cents a share that surpassed the Zacks Consensus Estimate of 2 cents but declined 7.1% from 14 cents reported in the year-ago quarter.

Gannett’s total revenue of $723 million fell marginally short of the Zacks Consensus Estimate of $723.9 million and declined 6.5% from the prior-year quarter. On a same store basis, total operating revenue decreased 7.2% to $704.3 million. Lower print advertising and soft circulation revenues hurt the top line. These were partially offset by increased digital advertising revenue and strategic subscriber pricing endeavors.

Advertising revenue fell 8.3% to $399.5 million, whereas circulation revenue slid 5.9% to $266.6 million. Other operating revenue increased 4% to $56.8 million.

We note that shares of this McLean, Virginia based company have decreased 11% in the past three months wider than the industry’s decline of 5.2%.

Adjusted EBITDA plunged 21% to $55.1 million, whereas adjusted EBITDA margin contracted 140 basis points to 7.6%.

Segment Details

Publishing segment revenue came in at $638.7 million, down 8.1% from the prior year quarter. On a same-store basis, publishing segment operating revenue fell 8.6%. Print advertising and circulation revenues declined 17.2% and 5.1%, respectively, on a same-store basis. Digital advertising revenue grew 7.3% to $101.5 million. On a same store basis, the same improved 5.5%. Digital-only subscriber volumes surged 51% from the prior-year quarter and now total approximately 382,000.

ReachLocal segment revenue came in at $96.5 million during the quarter, reflecting an increase of 24.4% from the prior-year period. This came on the back of organic growth in North America and Latin America, the addition of SweetIQ and transition of the company’s clients onto the ReachLocal platform.

Gannett is realigning its cost structure and streamlining its operations to increase efficiencies and safeguard its earnings and cash flows from dwindling print advertising revenue. It also remains focused on improving its digital business with an aim to lower dependency on soft print media business and traditional advertising. The company also intends to undertake strategic acquisitions in order to strengthen its position in the industry.

Other publishing companies such as New Media Investment Group Inc. (NYSE:NEWM) , The New York Times Company (NYSE:NYT) and The McClatchy Company (NYSE:MNI) are also trying to adapt to different revenue generating ways.

Other Financial Aspects

In the quarter, Gannett paid dividends of $18.1 million but did not buy back any shares. During the quarter, net cash flow from operating activities was about $65.2 million and capital expenditures were $13.5 million, thereby generating free cash flow of approximately $51.6 million. Management expects to incur capital expenditures of approximately $65-$75 million in 2018. The company ended the quarter with a cash balance of $145.9 million.

Guidance for 2018

Gannett continues to project full year revenue in the band of $2.93-3.03 billion and adjusted EBITDA projection of $330-$340 million.

Gannett currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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