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Share Name | Share Symbol | Market | Type |
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New Gannett Co Inc | NYSE:GCI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.01 | 0.41% | 2.42 | 4,365 | 13:30:00 |
Gannett Co., Inc. (NYSE: GCI) ("Gannett" or "company" or "we") today reported third quarter 2017 financial results for the period ended September 24, 2017.
“Throughout the quarter, we enhanced audience growth and engagement, expanded our marketing services capabilities and added new offerings to our portfolio,” said Robert J. Dickey, president and chief executive officer. “Specifically, we reached record audiences via our USA TODAY NETWORK, completed the migration of remaining properties to the ReachLocal digital marketing platform, and announced a majority investment in Grateful Ventures which provides us with an increased presence in attractive lifestyle categories.”
Mr. Dickey continued, “We delivered strong year-over-year earnings growth in the third quarter, despite challenging print advertising trends. Profitability gains were driven by improved digital performance, most notably at ReachLocal, as well as the continued realization of synergies from our 2016 local market acquisitions and other cost saving initiatives.”
Third Quarter 2017 Consolidated Results
Third quarter operating revenues were $744.3 million, including a $1.4 million negative impact from hurricanes Harvey and Irma, compared to $772.3 million in the prior year quarter. There was no material impact on revenues related to currency changes in the quarter. The year-over-year performance reflected lower print advertising and circulation revenues offset partially by higher digital advertising revenues and the contribution from acquired operations (1). On a same store basis, operating revenues in the third quarter declined 9.4% (or 10.2% when excluding $6.7 million related to the 2016 third quarter revaluation of acquired deferred revenue), an improvement compared to a decline in the 2017 second quarter of 10.6%, as a result of digital revenue growth. Total digital revenues in the third quarter increased to $245.0 million, or approximately 33% of total revenue, including the contribution from ReachLocal which was acquired in August 2016.
GAAP net income for the third quarter was $23.0 million, including a $20.1 million tax benefit offset partially by $15.4 million of after-tax severance, acquisition, asset impairment, facility consolidation and other costs; approximately $10.3 million of these charges were non-cash. Adjusted EBITDA (2) for the third quarter increased 27.3% to $73.9 million compared to $58.0 million in the prior year quarter with a 240 basis point margin improvement year-over-year, which includes the favorable comparison related to the aforementioned deferred revenue revaluation.
Publishing Segment
Publishing segment operating revenues in the third quarter were $660.3 million compared to $736.6 million in the prior year quarter. On a same store basis, publishing segment operating revenues in the third quarter declined 11.0% year-over-year. Same store print advertising revenues in the third quarter declined 18.7% year-over-year versus a 16.8% decline in the 2017 second quarter. Same store circulation revenues fell 7.6% from the prior year quarter compared to a 7.4% decline in the 2017 second quarter. Digital-only subscriber volumes grew 60% year-over-year and now total approximately 312,000 subscribers.
Digital advertising revenues in the third quarter increased 4.1% to $102.9 million compared to the prior year quarter. On a same store basis, digital revenues increased 3.7% with growth in areas such as mobile, audience extension, digital marketing services and branded content.
Publishing segment adjusted EBITDA for the quarter was $87.5 million compared to $86.4 million in the prior year third quarter reflecting continued operational efficiencies.
ReachLocal Segment
Operating revenues for the third quarter were $93.8 million, a 9% increase on a sequential basis versus the 2017 second quarter. The increase was attributable to continued strong growth in North America and the continued migration of Gannett clients onto the ReachLocal platform.
Adjusted EBITDA was $5.2 million in the 2017 third quarter, representing a 5.6% margin, a significant improvement from the 1.4% margin in the 2017 second quarter. Improved profitability in the quarter was driven by the further scaling of Gannett related revenue on the ReachLocal platform and an increase in the number of products per client in North America that is driving budget growth.
“We reached the one-year mark since being acquired by Gannett in August 2016, and we’re excited by the momentum in the business,” said Sharon Rowlands, chief executive officer of ReachLocal. “We recently completed the roll out of our digital marketing capabilities to the former Journal Media Group properties, and we are now focused on leveraging Gannett's broad local footprint to drive market share growth of our strong digital solutions."
Cash Flow
Net cash flow from operating activities for the third quarter was approximately $34.1 million compared to $24.6 million in the prior year quarter. Capital expenditures in the third quarter were approximately $17.1 million, primarily for technology investments and maintenance projects. During the third quarter, the company paid dividends of $18.1 million and repurchased two million shares of its outstanding common stock for $17.4 million.
At the end of the third quarter, the company had a cash balance of $110.0 million and a balance on its revolving line of credit of $375.0 million, or net debt of $265.0 million.
Outlook
The company reiterates its prior revenue guidance for 2017 of $3.15 to $3.22 billion and its Adjusted EBITDA guidance for 2017 for $360 to $365 million.
Additionally, for the full year 2017, the company expects the following:
* * * *
Conference Call Information
The company will hold a conference call at 10:00 a.m. ET today to discuss its third quarter results. The call can be accessed via a live webcast through the company's investor site, http://investors.gannett.com/, or listen-only conference lines. U.S. callers should dial 855-462-1958 and international callers should dial 503-343-6635 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 1909911.
Forward Looking Statements
This press release contains certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. Forward-looking statements include all statements that are not historical facts. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether or not any such forward-looking statements are in fact achieved will depend on future events, some of which are beyond our control.
The matters discussed in these forward-looking statements are subject to a number of risks, trends, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, among other things:
A further description of these and other important risks, trends, uncertainties and other factors is provided in the company’s filings with the U.S. Securities and Exchange Commission, including the company’s annual report on Form 10-K for fiscal year 2016. Any forward-looking statements should be evaluated in light of these important risk factors. The company is not responsible for updating or revising any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
This press release also contains a discussion of certain non-GAAP financial measures that the company presents to allow investors and analysts to measure, analyze and compare its financial condition and results of operations in a meaningful and consistent manner. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying this press release.
About Gannett
Gannett Co., Inc. (NYSE: GCI) is a next-generation media company committed to strengthening communities across our network. Through trusted, compelling content and unmatched local-to-national reach, Gannett touches the lives of more than 110 million people monthly. With more than 120 markets internationally, it is known for Pulitzer Prize-winning newsrooms, powerhouse brands such as USA TODAY and specialized media properties. To connect with us, visit www.gannett.com.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1 Three months ended Nine months endedSeptember 24,2017
September 25,2016
September 24,2017
September 25,2016
Operating revenues:
Advertising $ 420,793 $ 429,053 $ 1,301,522 $ 1,190,108 Circulation 264,413 285,583 821,375 835,872 Other 59,068 57,685 169,341 154,500 Total operating revenues 744,274 772,321 2,292,238 2,180,480 Operating expenses: Cost of sales and operating expenses 476,526 516,236 1,470,558 1,419,016 Selling, general and administrative expenses 203,995 217,609 627,113 586,100 Depreciation 41,128 30,638 124,260 83,889 Amortization 8,658 5,003 24,193 7,961 Facility consolidation and asset impairment charges 2,189 28,673 22,799 33,160 Total operating expenses 732,496 798,159 2,268,923 2,130,126 Operating income (loss) 11,778 (25,838 ) 23,315 50,354 Non-operating expenses: Interest expense (4,613 ) (3,652 ) (12,322 ) (8,509 ) Other non-operating items, net (922 ) (3,694 ) (10,110 ) (9,572 ) Total non-operating expenses (5,535 ) (7,346 ) (22,432 ) (18,081 ) Income (loss) before income taxes 6,243 (33,184 ) 883 32,273 Provision (benefit) for income taxes ** (16,801 ) (9,223 ) (19,595 ) 4,157 Net income (loss) $ 23,044 $ (23,961 ) $ 20,478 $ 28,116 Earnings (loss) per share - basic $ 0.20 $ (0.21 ) $ 0.18 $ 0.24 Earnings (loss) per share - diluted $ 0.20 $ (0.21 ) $ 0.18 $ 0.24 Weighted average number of common shares outstanding: Basic 113,253 116,556 113,467 116,461 Diluted 115,774 116,556 115,655 119,149 * The company early adopted Financial Accounting Standards Board ("FASB") guidance requiring changes to the presentation of net periodic pension and other postretirement benefit costs. Specifically, this guidance requires entities to classify the service cost component of the net benefit cost in the same income statement line item as other employee compensation costs while all other components of net benefit cost must be presented as non-operating items. The guidance further requires such classification changes to be retrospectively applied beginning in the interim period in which the guidance is adopted. As a result of adopting this guidance, in the third quarter of 2016 and the first nine months of 2016, operating income and other non-operating expenses increased $2.8 million and $7.5 million, respectively. Net income, retained earnings, and earnings per share remained unchanged. ** The benefit for income taxes for the third quarter and first nine months of 2017 includes a net benefit of $20.1 million related to a worthless stock and debt deduction for one of our ReachLocal international subsidiaries. SEGMENT INFORMATIONGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 2 Three months ended Nine months endedSeptember 24,2017
September 25,2016
September 24,2017
September 25,2016
Operating revenues: Publishing $ 660,338 $ 736,570 $ 2,047,442 $ 2,142,621 ReachLocal 93,817 34,977 257,308 34,977 Corporate and Other 1,338 774 3,347 2,882 Intersegment eliminations (11,219 ) — (15,859 ) — Total $ 744,274 $ 772,321 $ 2,292,238 $ 2,180,480 Adjusted EBITDA: Publishing $ 87,451 $ 86,371 $ 283,235 $ 298,161 ReachLocal 5,229 (6,744 ) 9,592 (6,744 ) Corporate and Other (18,827 ) (21,598 ) (65,639 ) (61,367 ) Total $ 73,853 $ 58,029 $ 227,188 $ 230,050 Depreciation and amortization: Publishing $ 35,053 $ 27,766 $ 106,116 $ 76,519 ReachLocal 8,846 3,924 25,504 3,924 Corporate and Other 5,887 3,951 16,833 11,407 Total $ 49,786 $ 35,641 $ 148,453 $ 91,850 Capital expenditures: Publishing $ 6,359 $ 13,424 $ 23,586 $ 25,089 ReachLocal 5,004 1,196 12,904 1,196 Corporate and Other 5,690 4,245 10,394 18,716 Total $ 17,053 $ 18,865 $ 46,884 $ 45,001 REVENUE DETAILGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 3 Three months endedSeptember 24,2017
September 25,2016
% Change Reported revenue $ 744,274 $ 772,321 (3.6 %) Acquired revenue (44,942 ) —***
Currency impact 491 —
***
Exited operations — (93 ) (100 %) Same store revenue $ 699,823 $ 772,228 (9.4 %) Reported advertising revenue $ 420,793 $ 429,053 (1.9 %) Acquired revenue (37,761 ) — *** Currency impact 313 — *** Same store advertising revenue $ 383,345 $ 429,053 (10.7 %) Reported circulation revenue $ 264,413 $ 285,583 (7.4 %) Acquired revenue (809 ) — *** Currency impact 138 — *** Same store circulation revenue $ 263,742 $ 285,583 (7.6 %) Table No. 4 Three months endedSeptember 24,2017
September 25,2016
% Change Publishing revenue detail Print advertising $ 244,843 $ 298,434 (18.0 %) Digital advertising: External sales 92,959 98,780 (5.9 %) Intersegment sales 9,904 — *** Total digital advertising 102,863 98,780 4.1 % Total advertising 347,706 397,214 (12.5 %) Circulation 264,413 285,583 (7.4 %) Other: External sales 46,904 53,773 (12.8 %) Intersegment sales 1,315 — *** Total other 48,219 53,773 (10.3 %) Total Publishing revenue $ 660,338 $ 736,570 (10.3 %)USE OF NON-GAAP INFORMATION
The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read together with financial information presented on a GAAP basis.
The company defines its non-GAAP measures as follows:
The company uses non-GAAP financial measures for purposes of evaluating its performance and liquidity. Therefore, the company believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view our businesses through the eyes of our management and Board of Directors, facilitating comparison of results across historical periods, and providing a focus on the underlying ongoing operating performance of our business. Many of our peer group companies present similar non-GAAP measures to better facilitate industry comparisons.
NON-GAAP FINANCIAL INFORMATION ADJUSTED EBITDAGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 Three months ended September 24, 2017 Publishing ReachLocalCorporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 23,044 Benefit for income taxes (16,801 ) Interest expense 4,613 Other non-operating items, net 922 Operating income (loss) (GAAP basis) $ 43,638 $ (4,207 ) $ (27,653 ) $ 11,778 Severance-related charges 5,421 191 (495 ) 5,117 Acquisition-related items 420 — 1,639 2,059 Facility consolidation and asset impairment charges 2,189 — — 2,189 Other items 730 399 1,795 2,924 Depreciation 33,730 1,511 5,887 41,128 Amortization 1,323 7,335 — 8,658 Adjusted EBITDA (non-GAAP basis) $ 87,451 $ 5,229 $ (18,827 ) $ 73,853 Three months ended September 25, 2016 Publishing ReachLocalCorporate andOther
ConsolidatedTotal
Net (loss) (GAAP basis) $ (23,961 ) Benefit for income taxes (9,223 ) Interest expense 3,652 Other non-operating items, net 3,694 Operating income (loss) (GAAP basis) $ 25,221 $ (11,230 ) $ (39,829 ) $ (25,838 ) Severance-related charges 4,575 562 — 5,137 Acquisition-related items 136 — 14,280 14,416 Facility consolidation and asset impairment charges 28,673 — — 28,673 Depreciation 25,926 761 3,951 30,638 Amortization 1,840 3,163 — 5,003 Adjusted EBITDA (non-GAAP basis) $ 86,371 $ (6,744 ) $ (21,598 ) $ 58,029 NON-GAAP FINANCIAL INFORMATION ADJUSTED EBITDAGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 (continued) Nine months ended September 24, 2017 Publishing ReachLocalCorporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 20,478 Benefit for income taxes (19,595 ) Interest expense 12,322 Other non-operating items, net 10,110 Operating income (loss) (GAAP basis) $ 139,363 $ (16,868 ) $ (99,180 ) $ 23,315 Severance-related charges 21,181 514 3,687 25,382 Acquisition-related items 331 43 4,278 4,652 Facility consolidation and asset impairment charges 22,799 — — 22,799 Other items (6,555 ) 399 8,743 2,587 Depreciation 102,217 5,210 16,833 124,260 Amortization 3,899 20,294 — 24,193 Adjusted EBITDA (non-GAAP basis) $ 283,235 $ 9,592 $ (65,639 ) $ 227,188 Nine months ended September 25, 2016 Publishing ReachLocalCorporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 28,116 Provision for income taxes 4,157 Interest expense 8,509 Other non-operating items, net 9,572 Operating income (loss) (GAAP basis) $ 163,277 $ (11,230 ) $ (101,693 ) $ 50,354 Severance-related charges 26,269 562 — 26,831 Acquisition-related items 136 — 28,919 29,055 Facility consolidation and asset impairment charges 33,160 — — 33,160 Other items (1,200 ) — — (1,200 ) Depreciation 71,721 761 11,407 83,889 Amortization 4,798 3,163 — 7,961 Adjusted EBITDA (non-GAAP basis) $ 298,161 $ (6,744 ) $ (61,367 ) $ 230,050 NON-GAAP FINANCIAL INFORMATION ADJUSTED DILUTED EPSGannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 6 Three months ended Nine months endedSeptember 24,2017
September 25,2016
September 24,2017
September 25,2016
Severance-related charges $ 5,117 $ 5,137 $ 25,382 $ 26,831 Acquisition-related items 2,059 14,416 4,652 29,055 Facility consolidation and asset impairment charges (including accelerated depreciation) 17,098 29,761 61,445 34,311 Other items 19 — (3,179 ) (1,200 ) Pretax impact 24,293 49,314 88,300 88,997 Income tax impact of above items (8,863 ) (17,757 ) (33,295 ) (30,414 ) Tax benefit (20,086 ) — (20,086 ) — Impact of items affecting comparability on net income (loss) $ (4,656 ) $ 31,557 $ 34,919 $ 58,583 Net income (loss) (GAAP basis) $ 23,044 $ (23,961 ) $ 20,478 $ 28,116 Impact of items affecting comparability on net income (loss) (4,656 ) 31,557 34,919 58,583 Adjusted net income (non-GAAP basis) $ 18,388 $ 7,596 $ 55,397 $ 86,699 Earnings (loss) per share - diluted (GAAP basis) $ 0.20 $ (0.21 ) $ 0.18 $ 0.24 Impact of items affecting comparability on net income (loss) (0.04 ) 0.27 0.30 0.49 Adjusted earnings per share - diluted (non-GAAP basis) $ 0.16 $ 0.06 $ 0.48 $ 0.73 Diluted weighted average number of common shares outstanding (GAAP basis) 115,774 116,556 115,655 119,149 Diluted weighted average number of common shares outstanding (non-GAAP basis) 115,774 119,010 115,655 119,149 NON-GAAP FINANCIAL INFORMATION FREE CASH FLOWGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 7Three months endedSeptember 24, 2017
Nine months endedSeptember 24, 2017
Net cash flow from operating activities (GAAP basis) $ 34,147 $ 163,691 Capital expenditures (17,053 ) (46,884 ) Free cash flow (non-GAAP basis) $ 17,094 $ 116,807
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005450/en/
Gannett Co., Inc.For investor inquiries, contact:Stacy CunninghamVP, Financial Planning & Analysis703-854-3168investors@gannett.comorJonathan SchafferThe Blueshirt Groupinvestors@gannett.comorFor media inquiries, contact:Amber AllmanVice President, Corporate Events & Communications703-854-5358aallman@gannett.com
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