Gannett swings to Q3 loss as revenue grows
Gannett Co., which owns Paste BN and more than 100 local news properties, said Thursday rising operating expenses led to a loss in the third quarter, but digital ad sales and acquisitions pushed revenue higher.
Earnings per share, on an adjusted basis, totaled 6 cents, compared to the 21 cents estimated by analysts polled by S&P Global Market Intelligence.
Gannett reported a third-quarter loss of $24.2 million, compared to a profit of $39.2 million, a year earlier. Total operating expenses were 23% higher, attributable to restructuring, acquisition and severance costs, the McLean, Va.-based company said.
But total operating revenue jumped 10% to $772.3 million due to acquisitions and its investment in digital news. On a "same-store" basis -- excluding the revenues from acquisitions, foreign currency rate changes and some exited businesses -- operating revenues fell 8.6%.
Total advertising revenue increased 12% to $429 million. Digital ad sales for the publishing segment, the company's largest business unit, increased 6.2% to $98.8 million. National digital advertising revenue rose 18.5%. It would have risen 16.6% even without accounting for the recent acquisitions, Gannett said.
Digital-only subscriptions, sold by its local news properties, grew 45%. Total circulation revenue was $285.6 million, a 7.7% increase.
In the fourth quarter, Gannett expects revenue to rise 14% to 16% year-over-year.
Shares of Gannett fell 17% to close Friday at $8.21.
"We have made solid progress integrating our recent acquisitions, which we expect will be strong contributors to our performance as we drive toward a digital future," Gannett CEO Robert Dickey said in a statement. "While we saw signs of improvement late in the third quarter, we were disappointed with our performance, and as we expected, it was our most challenging period in 2016."
Revenue for the publishing segment, which runs its newspapers and their affiliated digital properties, was up 5% to $736.6 million. "This increase was primarily attributable to the continued improvements in national digital advertising revenues as well as the addition of revenues from Journal Media Group and the North Jersey Media Group beginning April 8, 2016 and July 6, 2016, respectively," Gannett said.
The publishing industry has been reeling from declining print advertising sales. But the pace of the decline has accelerated in recent months, leading to a slew of cutbacks in the business.
During the quarter, Gannett began cost-cutting initiatives that will result in $10 million of additional savings in the fourth quarter, Dickey said. Earlier this week, Gannett announced it is reducing its workforce by about 2%, citing a difficult environment for print and digital advertising.
Last week, The Wall Street Journal also said it is offering buyouts to a “substantial number of employees” in an effort to limit the number of involuntary layoffs. In July, The New York Times reported that about 80 employees took voluntary buyout packages.
Gannett's higher national digital advertising revenue during the quarter -- following a 22.4% gain in the second quarter -- stems largely from its investment in digital news initiatives, including video and virtual reality. But like other newspaper publishers, its digital revenue and online traffic haven’t risen fast enough to offset weakness in print.
Gannett reportedly remains in acquisition talks with the executives at Tronc, the owner of the Los Angeles Times, Chicago Tribune and nine other dailies. The pursuit is part of its growth strategy to consolidate the local news business and gain digital marketing prowess that can be pitched to corporate clients and small-business owners. The company last December announced the creation of the Paste BN NETWORK, uniting its national and local news properties and its roster of journalists across the country.
In April, Gannett completed its $280 million acquisition of Journal Media Group, owner of the 178-year-old Milwaukee Journal Sentinel, The Commercial Appeal of Memphis and other daily newspapers. Its acquisition of North Jersey Media Group, which ran The Record of Bergen County, was completed in July.
In August, Gannett also completed the acquisition of ReachLocal, which helps local businesses manage sales leads and increase revenue.