Gannett, owner of USA TODAY and news organizations in 43 states, on Thursday posted a profit in the fourth quarter of 2022 after a series of cost-cutting measures.
The company reported a net income of $32.77 million in the quarter compared with a loss of $22.45 million a year earlier. The results benefited from a nearly 30% rise in digital-only circulation revenues and lower operating expenses. It was the company’s first quarterly profit since the third quarter of 2021.
Gannett had 2.03 million digital-only paid subscriptions at the end of the quarter, up 24% year over year.
“We’re happy to turn the page on 2022. It was a tough year,” Chairman and CEO Michael Reed said in a call following the release of Gannett’s results. But “we are entering 2023 with a lot of optimism.”
Gannett also owns Newsquest, a regional news publisher in the United Kingdom, and LocaliQ, which provides digital marketing services.
Gannett earnings:Gannett posts third-quarter loss amid cost-cutting, layoffs
Challenges for the media industry
Like other companies in the media industry, Gannett has been hit by a decline in advertising revenue and other challenges in the broader economy.
The company last year announced cost-cutting measures, including job cuts, five days of unpaid leave for most staff and a pause in the company’s 401(k) match. Layoffs have continued into the new year as the company closes printing presses in New York, Georgia and Indiana.
But “we have seen the largest cost pressures, namely newsprint and distribution costs, peak and stabilize,” Doug Horne, Gannett’s chief financial officer, said Thursday. “We expect labor and newsprint costs in 2023 to remain relatively stable to the pricing at year-end 2022.”
Other media outlets like NPR, The Washington Post, Vox Media and CNN have also cut jobs. The news sector at large announced more than 1,800 job cuts in 2022, up 20% from the year prior, according to outplacement firm Challenger, Gray & Christmas.
Gannett, which had $1.272 billion of debt outstanding as of Dec. 31, has also been divesting real estate and other assets. It expects to sell another $50 million to $60 million in real estate and other assets this year to pay down debt.
Reed said the company is also open to selling off trophy properties.
“We would entertain bids on any of our markets, any of our products, that are at or above fair market value,” he said. “We’re hopeful that we’ll have an opportunity this year to do that. But it’s not anything that’s in our plans.”
The company repaid $47 million of debt in the fourth quarter, ending the year with $94 million in cash.
Gannett:Owner of USA TODAY continues cost-cutting measures
Strategy changes
When Gannett first launched USA TODAY’s subscription product in 2021, the company prioritized subscription growth, Reed said, adding that the company has since adjusted its strategy to a “more balanced” approach that is expected to lower subscription acquisition but improve revenue and profitability.
“We will continue to pursue subscriptions growth but we will be more targeted in our acquisition strategy,” Reed said. “Having said that, we still expect to see significant growth in digital-only subscriptions and revenue during 2023.”
Gannett has also recently invested in artificial intelligence tools to simplify certain tasks like cropping photos and gathering datasets.
Revenue breakdown
Total operating revenue was $730.66 million in the fourth quarter, down from $826.54 million in the same quarter a year earlier. Digital revenue, which accounted for 37% of total revenue, was down 0.4% year-over-year to $269.2 million on a comparable basis.
Circulation revenues fell 17% to $255.3 million on a comparable basis, while digital-only circulation revenues were up 30% to $35.6 million in the fourth quarter as the company surpassed two million digital-only paid subscriptions.
“Inflation seems to have peaked. It’s good to see some moderation there. And 2023 revenue trends are improving during the first two months of 2023,” Reed said. “We’re encouraged by what we’re seeing and hearing from our customers.”
Gannett shares traded at $3.13 Thursday morning, up 21.3% from the day before.
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