Gannett Co., Inc. (GCI) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: positive elements include a favorable ruling in the Google antitrust case, debt reduction, and strong digital advertising growth. However, digital revenue declined, and there's uncertainty around AI partnerships and OpenAI negotiations. The shift of revenue drivers to Q4 and incremental expenses from the cost reduction program further complicate the outlook. With no clear market cap, the impact remains uncertain, but the balance of positives and negatives suggests a neutral stock price movement.
Key Financial Performance
Total Revenues $560.8 million, a decrease of 8.4% year-over-year or 6.8% on a same-store basis. The decline was influenced by large customers shifting their spend from Q3 into Q4 and static revenue trends.
Operating Costs and SG&A Expenses Decreased approximately 8% year-over-year due to disciplined cost management. However, Q3 expenses included incremental costs from the $100 million cost reduction program, such as medical and benefit-related costs tied to employee exits.
Total Adjusted EBITDA $57.2 million, representing a 10.2% margin. This was impacted by the timing of revenue and adjusted EBITDA drivers shifting into Q4 and incremental expenses from the cost reduction program.
Total Digital Revenues $262.7 million, a decrease of 5.3% year-over-year or 4.1% on a same-store basis. Digital advertising revenues increased 2.9% due to improved client retention and a large audience base.
Digital-Only Subscription Revenues $43.7 million, a sequential growth of 2.4%. Digital-only ARPU reached a record high of $8.80, up approximately 8% year-over-year, driven by a refined acquisition strategy focusing on long-term monetization.
Domestic Gannett Media Segment Adjusted EBITDA $35.4 million, representing a margin of 8.5%. Revenue trends reflect the sale of the Austin American-Statesman and other divestitures in late 2024.
Newsquest Segment Adjusted EBITDA $14.6 million, up 4.6% year-over-year, with segment adjusted EBITDA margins increasing 50 basis points to 23.9%. Revenue trends posted their second consecutive quarter of growth, increasing 2.5% year-over-year.
Digital Marketing Solutions Core Platform Revenue $114 million. Core platform ARPU remained near record highs at approximately $2,800, reflecting growth of 2% year-over-year. The segment adjusted EBITDA was $9.8 million.
Debt Reduction Outstanding net debt was approximately $921 million, with $18.5 million repaid in Q3 and $116.4 million repaid year-to-date. Total debt fell below $1 billion for the first time since the 2019 merger.
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Operating Highlights
Digital-only ARPU: Achieved a new high of $8.80 in Q3, up approximately 8% year-over-year.
PLAY gaming hub: Launched as a unified digital hub for casual entertainment and gaming, with potential to generate $10 million annually in digital-only subscription and advertising revenue.
AI licensing deals: New AI licensing deal with Microsoft to support the launch of its publisher content marketplace.
DeeperDive AI engine: Fully implemented on USA TODAY, with over 3 million questions asked since mid-September launch.
Digital audience growth: Achieved 187 million average monthly unique visitors, growing more than 3% compared to Q2.
Video content strategy: Focused on video formats, including sports hubs and USA TODAY Pets, to deepen engagement and expand monetization.
Cost reduction program: $100 million cost reduction program fully implemented, expected to drive significant year-over-year growth in adjusted EBITDA in Q4.
Debt reduction: Total debt fell below $1 billion for the first time since 2019 merger, with $116.4 million repaid in the first 9 months of 2025.
AI content monetization: Blocking over 99% of AI bots attempting to scrape content without licensing agreements, with 75 million bots blocked in September alone.
Digital Marketing Solutions (DMS): Core platform revenue stabilized with ARPU near record highs at $2,800, reflecting 2% growth.
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Risk or Challenges
Revenue Timing and Shifts: Several large customers shifted their spending from Q3 to Q4, impacting Q3 revenue and adjusted EBITDA by approximately $7 million. This creates uncertainty in revenue predictability and financial performance.
Cost Reduction Program Expenses: Incremental expenses related to the $100 million cost reduction program, including medical and benefit-related costs tied to employee exits, were pulled forward into Q3, impacting financial results.
Digital Subscription Growth Challenges: While digital-only ARPU reached a new high, digital-only paid subscription volumes reflect deliberate actions to optimize acquisition costs, which may slow volume growth in the short term.
AI Content Scraping: AI bots, particularly from OpenAI, attempted to scrape content without licensing agreements. Although 99% of these bots were blocked, this highlights ongoing risks related to content protection and fair compensation.
Economic and Market Conditions: Revenue trends were static in Q3, and digital revenues decreased by 5.3%, reflecting broader economic and market challenges that could impact future growth.
Debt Levels and Financial Leverage: Although total debt fell below $1 billion, the company remains focused on debt reduction, which could limit financial flexibility for other strategic investments.
Regulatory and Legal Risks: The ongoing lawsuit against Google for monopolistic practices represents both a potential opportunity and a risk, depending on the legal outcomes and associated costs.
Digital Marketing Solutions (DMS) Stabilization: While there are signs of stabilization, DMS core platform revenue and customer count have faced challenges, requiring continued focus to sustain growth.
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Guidance & Outlook
Revenue Expectations: The company expects notable improvement in the fourth quarter, driven by AI licensing revenue, larger digital advertising campaigns, targeted subscription pricing adjustments, and platform enhancements. Digital revenue is anticipated to be down in the low single digits for the full year on a same-store basis, with growth in the low single digits in the fourth quarter.
Adjusted EBITDA: The company expects robust year-over-year growth in adjusted EBITDA in the fourth quarter, marking the third consecutive year of full-year adjusted EBITDA growth.
Free Cash Flow: The company anticipates 30% growth in free cash flow for the full year.
Digital Revenue: Digital revenues are expected to grow in the low single digits in the fourth quarter, with digital-only ARPU anticipated to increase in upcoming quarters.
Debt Reduction: The company expects to repay over $135 million in debt during 2025, with total debt already below $1 billion.
Digital Marketing Solutions (DMS): Year-over-year improvement in both core platform revenue and segment adjusted EBITDA is expected in the fourth quarter.
AI Licensing and Content Monetization: The company is optimistic about the upcoming launch of Microsoft's publisher content marketplace and anticipates building on its AI licensing deals. It is also implementing measures to block unauthorized AI bots, which could enhance monetization opportunities.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you share what the development was in the Google antitrust lawsuit and how it impacts the case?
A:Judge Castell issued a summary judgment ruling in Gannett's favor, agreeing with the Department of Justice's findings that Google illegally monopolized the digital advertising market. This establishes liability for Google and shifts the case focus to damages and remedies, potentially expediting the case.
Q:What is driving the timing shift of large revenue drivers from Q3 to Q4?
A:The timing shift was due to a product launch delay for Perplexity's browser and digital advertising deals moving from Q3 to Q4. These shifts are expected to positively impact Q4 revenue.
Q:Can you give more details on the incremental expenses incurred during Q3 and their future impact?
A:The incremental expenses were primarily due to headcount reductions tied to a $100 million cost reduction program. These costs are not expected to continue and may have a favorable impact on Q4.
Q:How do you see the digital revenue mix evolving into 2026, and what gives you confidence in its durability?
A:Digital revenue is expected to surpass 50% of total revenue by 2026. The diverse digital revenue streams, including AI licensing deals, digital advertising, and subscription growth, provide confidence in its durability.
Q:Can you elaborate on how AI partnerships, including Microsoft, translate to monetization and next steps?
A:AI partnerships involve licensing deals with direct fees or revenue sharing. These partnerships aim to monetize high-quality content at fair value and shape the evolving AI content marketplace.
Q:Are you seeing meaningful traffic from AI platforms like Perplexity?
A:No, there is not meaningful traffic from AI platforms. The focus is on monetization through licensing deals rather than traffic, as AI platforms provide answers directly without redirecting users.
Q:What is the status of negotiations with OpenAI and other AI platforms?
A:OpenAI has not agreed to a fair deal yet, despite significant attempts to scrape Gannett's content. Negotiations are ongoing, and Gannett continues to block unauthorized scraping.
Q:Can you elaborate on the strategy for the DMS side of the business?
A:The strategy involves focusing on the ideal customer profile for the DMS platform and using external tools for large, multi-location clients or those requiring predominant media buys. This optimizes ROI and customer experience.
Q:What is the status of real estate and asset sales for further debt paydowns?
A:Gannett has paid down $116 million in debt this year and expects to reach $135 million or more. A few real estate deals remain in the pipeline, but the portfolio is largely monetized.
Q:Do you plan to break out licensing revenue as a separate stream?
A:Yes, Gannett may break out licensing revenue as it becomes a more significant part of digital revenue and as the sustainable revenue model develops.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer regarding OpenAI's willingness to negotiate a fair deal, stating only that negotiations are ongoing and emphasizing the importance of blocking unauthorized scraping.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI bidding
AI bot
ARPU high
DeeperDive
Google content
Media
Microsoft launch
PLAY
Perplexity
SMBs
TODAY platform
Trisha
USA TODAY
access
advertising revenue
agent
approach
audience engagement
content marketplace
content scale
cost reduction
deal Microsoft
entertainment
fan
feature
format
gain
game
high subscription
highlight audience
hub
initiative
interaction
launch publisher
merger
milestone
platform customer
program
publisher content
spend
video
view month
voice
work
GCI Transcript
Gannett Co., Inc. (GCI) Q3 2025 Earnings Call Transcript
Unknown10-30
The earnings call presents a mixed picture: positive elements include a favorable ruling in the Google antitrust case, debt reduction, and strong digital advertising growth. However, digital revenue declined, and there's uncertainty around AI partnerships and OpenAI negotiations. The shift of revenue drivers to Q4 and incremental expenses from the cost reduction program further complicate the outlook. With no clear market cap, the impact remains uncertain, but the balance of positives and negatives suggests a neutral stock price movement.
Gannett Co., Inc. (GCI) Q2 2025 Earnings Call Transcript
Unknown7-31
The earnings call presents a mixed picture: strong net income growth and debt reduction are positive, but declining total revenues and digital revenues raise concerns. The Q&A section reveals optimism about future digital subscriber growth and AI partnerships, but lacks specific data. Given the decline in total revenues and digital challenges, combined with management's optimistic but vague guidance, the stock is likely to see a neutral reaction in the short term.
Gannett Co., Inc. (GCI) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call reveals a decline in total operating revenues and digital revenues, alongside significant debt, leadership changes, and high customer churn. Despite optimistic guidance and a share repurchase program, these negative factors, along with unclear management responses in the Q&A, suggest a negative sentiment. Without a market cap, the impact on stock price is uncertain, but the overall financial and strategic challenges point towards a negative outlook.
Gannett Co., Inc. (GCI) Q3 2024 Earnings Call Transcript
Positive10-31
The earnings call shows strong digital revenue growth, improved EBITDA margins, and strategic asset sales aligning with long-term goals, despite a decline in total operating revenues. The Q&A session highlights management's confidence in future growth and successful partnerships like the Microsoft deal. Although some concerns about asset sales timing exist, the overall sentiment is positive, with management optimistic about 2025. The lack of guidance changes and no major negative announcements suggest a positive stock price movement over the next two weeks.
GCI Slides
GCI Report
Frequently Asked Questions
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