Gannett's Q1 Misses on Earnings, But Digital Gains and Debt Reduction Offer Hope

Gannett Co., Inc. (NYSE: GCI) reported its first-quarter 2025 results, revealing a GAAP EPS of -$0.05, which missed consensus estimates by $0.02. Revenue of $571.6 million fell short by $21.5 million, driven by strategic asset sales and macroeconomic headwinds. However, beneath the surface, the company demonstrated progress in digital growth, debt reduction, and operational efficiency—key drivers of its long-term strategy.

The Top-Line Struggle

Total revenue declined 10.1% year-over-year, with same-store sales dropping 7.7% after excluding the sale of the Austin-American Statesman and non-strategic divestitures. The miss reflects ongoing challenges in its traditional print operations and a weak advertising environment. Digital revenues, however, remained a bright spot, totaling $250.4 million (44% of total revenue), with 195 million average monthly unique visitors—a 4.7% increase—highlighting its dominance in U.S. news consumption.

The stock price has underperformed, down ~15% year-to-date as investors focus on near-term revenue pressures. Yet, the company’s strategic progress may offer a foundation for recovery.

Operational Improvements and Debt Reduction

Despite the revenue miss, Gannett narrowed its net loss to $7.3 million from $84.8 million a year ago, reflecting cost discipline. Adjusted EBITDA rose to $50.5 million, while free cash flow increased 7.6% to $10.2 million. Crucially, the company reduced total debt by $74.5 million during the quarter, lowering its first-lien net leverage ratio to 2.6x—a 4.8% sequential improvement. Management’s proactive debt-reduction efforts, including repurchasing $14 million of its 2027 convertible notes, signal financial resilience.

Digital Momentum and 2025 Outlook

Gannett reaffirmed its full-year 2025 targets, emphasizing its digital transformation:
- Digital Revenue Growth: 7–10% on a same-store basis, with digital revenue expected to hit 50% of total revenue by year-end.
- Subscriptions: Digital-only subscriptions totaled $43.3 million, with 1.93 million subscribers generating $7.22 average revenue per user (ARPU).
- Cash Flow: Free cash flow is projected to grow over 40% year-over-year, driven by operational efficiencies and reduced capital expenditures.

CEO Michael Reed highlighted March as the strongest month for digital revenue in the quarter, with trends continuing into Q2. The company is also expanding AI licensing deals and subscription products, aiming to capitalize on its 195 million monthly visitors—a scale few competitors can match.

Risks and Challenges

While the outlook is encouraging, risks remain. The company’s traditional print operations continue to decline, and macroeconomic uncertainty could further pressure advertising spend. Additionally, the same-store revenue decline of 7.7% underscores the need for sustained top-line growth in digital segments.

Conclusion: A Mixed Quarter with Strategic Silver Linings

Gannett’s Q1 results reflect a challenging environment for traditional media, but the company is making progress in its transformation. The narrowing net loss, improving free cash flow, and debt reduction demonstrate operational discipline. Digital revenue growth, subscription momentum, and the March revenue uptick suggest that Gannett’s focus on content monetization and AI partnerships could drive recovery.

With digital revenue poised to hit 50% of total revenue in 2025 and free cash flow growth of over 40%, the company is positioning itself for stronger performance in the second half of the year. While near-term headwinds persist, investors should weigh the risks against Gannett’s scale, audience reach, and disciplined execution. For those with a long-term horizon, the stock’s current valuation—trading at ~6x 2025E EBITDA—offers an intriguing entry point, provided the company delivers on its strategic goals.

The narrowing leverage ratio and improving margins underscore financial stabilization, a critical step toward sustained growth. Gannett’s story remains one of transition—but with digital as its engine, the future may hold brighter quarters ahead.