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Gannett (GCI) Beats on Q2 Earnings, Rises Y/Y, Updates View

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Gannett Co., Inc. (GCI - Free Report) delivered better-than-expected bottom-line results for the fourth straight quarter, when it reported second-quarter 2018 results. This diversified media conglomerate reported adjusted quarterly earnings of 31 cents a share that surpassed the Zacks Consensus Estimate of 20 cents and surged significantly from 18 cents reported in the year-ago quarter.

Gannett’s total revenue of $730.8 million missed the Zacks Consensus Estimate of $741.4 million and declined 5.6% from the prior-year quarter. Favorable foreign currency exchange rates favorably impacted the top line by $4.7 million.

On a same store basis, total operating revenue decreased 7.5% to $716.1 million. Lower print advertising and soft circulation revenues hurt the top line. These were partially offset by increased digital advertising & marketing services revenue and strategic subscriber pricing endeavors.

General Mills, Inc. Price, Consensus and EPS Surprise

Advertising and marketing services revenue fell 7.5% to $420.2 million, while circulation revenue slid 3.6% to $263.8 million. Other operating revenue inched up 0.2% to $46.8 million.

Adjusted EBITDA increased 2.3% to $85.6 million, while adjusted EBITDA margin expanded 90 basis points to 11.7% benefiting from solid earnings increase at ReachLocal and sustained operating efficiencies across publishing and corporate operations.

Segment Details

Publishing segment revenue came in at $644.6 million, down 6.9% from the prior-year quarter. On a same-store basis, publishing segment operating revenue fell 8.9%. Print advertising and circulation revenues declined 19.1% and 5%, respectively, on a same-store basis. Digital advertising & marketing services revenue grew 8.5% to $107.9 million. On a same store basis, the same improved 6.4%. Digital-only subscriber volumes surged 46% from the prior-year quarter to approximately 413,000.

ReachLocal segment revenue came in at $100.4 million during the quarter, reflecting an increase of 16.9% from the prior-year period. This came on the back of transition of the company’s clients onto the ReachLocal platform.

Gannett is realigning its cost structure and streamlining 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. Gannett recently completed the buyout of WordStream, a provider of cloud-based Software-as-a-Service solutions.

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

Other Financial Aspects

In the reported 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 $15.4 million and capital expenditures were $14 million, thereby generating free cash flow of approximately $1.4 million. Management continues to expect to incur capital expenditures of approximately $65-$75 million in 2018. The company ended the second quarter with a cash balance of $209.7 million.



Guidance for 2018

Management now envisions total revenue in the range of $2.95-3.00 billion, compared with the prior projection of $2.93-3.03 billion, and includes a $27 million contribution from WordStream.

Adjusted EBITDA is now expected to be in the band of $337-345 million, up from the previous guidance of $330-340 million, and reflects a contribution of $7 million from WordStream.

Gannett currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We note that shares of this McLean, VA-based company have surged roughly 26% in a year compared with the industry’s growth of about 24%.

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