Gannett is confident that "thoughtful" investments in journalism and marketing solutions will enable the company to remain a trusted source of news and information and deliver shareholder value, Gannett CEO and President Robert J. Dickey said Wednesday during a conference call to discuss fourth-quarter results.
Dickey also said Gannett, the owner of USA TODAY and 109 local media properties in the United States, will continue strategic cost-cutting as print revenue declines but will invest in journalism to lure digital subscribers.
"While our industry is undoubtedly facing challenges, we, at Gannett, are committed to remaining a trusted source of news and information across our communities," Dickey said on the call with analysts and investors. "And we are confident that continued thoughtful investments in journalism and marketing solutions will enable us to do so, while also creating value for our shareholders."
Media analysts view paid online subscriptions as increasingly important to the news industry amid stiff competition against Google, Facebook and Amazon for digital ad dollars. The decline of traditional print revenue, including ads and newspaper subscriptions, has undermined media industry finances as consumers look online for news and information.
Gannett's digital-only subscriptions rose 46.3 percent year-over-year to to 504,000. To continue that growth, Dickey said USA TODAY Network publications will raise the number of free stories readers can access without subscribing in 2019. He said Gannett's experience indicates that move will help convince readers to pay for more. Also of note: At flagship media property USA TODAY, 75 percent of ad revenue is now digital, marking a key milestone for the brand, Dickey said.
Print revenue declines, an industry-wide challenge, continued to leave a mark on Gannett, which took several steps recently to reduce expenses, including an early-retirement offer for long-time employees and layoffs.
Dickey said Gannett would continue "our focus on efficiency" in 2019, including "the restructuring of some newsrooms into a more holistically managed state coverage and additional printing and distribution efforts."
The company's recent cost cuts will save it about $60 million in 2019, Chief Financial Officer Alison Engel said.
"While these cost efforts are difficult, they are critical to the long-term success of the company," Dickey said.
Earlier Wednesday, Gannett reported a drop in fourth-quarter revenue and earnings despite increases in digital revenue and paid online subscriptions.
The media company reported adjusted earnings per share of 44 cents, compared with Wall Street expectations of 45 cents per share, according to S&P Global Market Intelligence. Gannett's stock fell 5.6 percent to $10.63 Wednesday.
Gannett executives said their efforts to boost online revenue are paying off, including growth in digital subscriptions through the USA TODAY Network of publications and digital marketing assets such as ReachLocal and SweetIQ
Digital revenue totaled $272.3 million, representing about 36 percent of the company's sales. Of Gannett's advertising and marketing services revenue, about 48 percent was digital.
Gannett's operating revenue totaled $751.4 million in the fourth quarter of 2018. That was down 12 percent, compared with a year earlier, or 7.4 percent when adjusting for continued operations and the fact that the 2017 fourth-quarter had more days. Analysts polled by S&P Global had projected revenue of $786.5 million for the period. Print ad revenue fell 19.6 percent on a comparable basis.
The company posted a net loss of $14.2 million in the fourth quarter, due largely to restructuring, asset impairment charges and other costs of $56.3 million. A year earlier, the company's net loss was $13.6 million. Analysts polled by S&P Global had predicted a profit of $61 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $111 million for the period, down 16.4 percent. ReachLocal's "strong earnings growth" helped offset declining publishing revenues, Gannett said.
The fourth-quarter earnings report comes as Gannett faces an unsolicited bid by hedge fund-owned MNG Enterprises, also known as Digital First Media, to acquire the company or take control of its board of directors.
Gannett has rejected Alden Global Capital-owned MNG's $12-per-share offer, saying it's not "credible." Gannett's board said after a meeting with MNG representatives, that MNG's $1.8 billion acquisition effort would be funded exclusively with debt and that MNG had not lined up financing, which Gannett said underscored its reasons for rejecting the offer.
MNG, known for aggressive cost-cutting and asset sales at its roster of newspapers, on Wednesday criticized Gannett leaders for not delivering enough value for shareholders. MNG released a statement Wednesday saying "MNG believes the owners of Gannett deserve better and calls on its fellow shareholders to demand answers to the following questions on today’s earnings call."
Gannett valued too low: Digital First $1.4B Gannett value too low, analysts say
MNG, a minority shareholder in Gannett, recently nominated a slate of six directors to Gannett's board. Gannett cast doubts on whether the nominees qualify for seats, citing conflicts of interest because of their close ties to the Alden board, and under applicable antitrust laws, because MNG is a competitor to Gannett.
MNG said Wednesday that Gannett should be forced to answer why its digital acquisitions aren't "a substantial waste of shareholder capital," why CEO compensation has increased and why the company believes MNG can't finance the proposed deal, among other questions.
Gannett said in a statement that MNG's latest remarks are "just another attempt by MNG to distract attention from the fact that its unsolicited proposal to acquire Gannett is not credible." It did not address the MNG offer or issues related to it during the Wednesday conference call.
Independent media analysts have said MNG's offer for Gannett is too low and that the company's cost-cutting objectives are not realistic.
Dickey recently announced his plans to retire on May 7. On Wednesday, Dickey said Gannett's search for a new CEO "is very active" and includes internal and external candidates.