| USA TODAY
Nearly a year after completing a major media merger, USA TODAY owner Gannett is betting on paid digital subscriptions to deliver revenue growth while using cost cuts to offset its declining print business and the effects of the pandemic.
The company, which owns more than 260 daily publications and hundreds of weeklies, reported a net loss of $31.3 million in the third quarter, compared with an $18.5 million loss in the same period a year earlier. Gannett also posted a 19.5% year-over-year decline in revenue to $814.5 million. But that was an improvement over the 28% year-over-year decline in the prior quarter.
“Our third quarter results showed a significant and rapid rebound from the second quarter impact of the COVID pandemic and economic shut down,” CEO and Chairman Michael Reed said in a statement.
COVID-19 takes toll: Gannett posts decline in second-quarter revenue
The media company also recorded adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $88 million, reflecting a profit margin of 10.8%.
Gannett reported that it surpassed 1 million paid online-only subscriptions for the first time, recording a 31.1% increase from a year earlier to 1.03 million. Online subscriptions are viewed as critical to the success of media companies in the digital age as newspaper dollars decline.
“As we continue to focus on transitioning to a subscription-led business model, we expect to leverage this important milestone to accelerate growth in 2021 and beyond,” Reed said.
Gannett’s stock rose 20.7% to $1.37 in morning trading Tuesday.
The third quarter of 2019 was the last full quarter before GateHouse Media parent New Media Investment Group acquired Gannett and changed its name to Gannett, becoming the largest U.S. media company by print circulation and one of the largest by digital audience.
About four months later, the COVID-19 pandemic erupted, dealing a sharp blow to news media companies that rely heavily on advertising revenue. The pandemic has undermined key ad spenders like restaurants, retailers and travel companies. The industry also continues to deal with the advertising shift from print to digital.
To offset the drop in revenue from the coronavirus fallout, Gannett has suspended its dividend, cut capital expenditures and implemented cost cuts in addition to previously planned savings tied to the merger. The company’s third-quarter operating costs declined by 19.3%.
Temporary reductions that began in the second quarter included furloughs, job cuts, temporary pay cuts for senior managers and the suspension of nonessential travel and spending. The company also suspended its 401(k) match. Many other news outlets have taken similar steps.
Gannett has said those cuts are temporary and that it is rolling out permanent cuts, including a round of voluntary buyouts recently offered to most employees in the company regardless of their age or years of experience.
Gannett’s print advertising revenue fell 30.9% to $208 million in the third quarter, compared with the same period a year earlier. Digital advertising and marketing services revenue declined 13.5% to $121.3 million. Circulation revenue slid 13.2% to $336.2 million.
Despite its challenges, Gannett has said it is well-positioned to continue to pay off a five-year, $1.8 billion loan owed to Apollo Global Management, which helped finance the transaction between GateHouse Media parent company New Media and the “old” Gannett.
Reed said the company has applied $100 million from the sale of non-core assets and real estate to pay down its debt in the last year and plans to pay down another $100 million in early 2021. The company remains focused on refinancing the loan in the first half of the year.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.