Gannett beats estimates for its 4Q results amid growing digital subscriptions and lower costs

Gannett reported a year-over-year decline in fourth-quarter revenue and a wider net loss, but the company beat its earlier estimates for the period as cost-cutting and an increased emphasis on digital subscriptions paid off.

The media company, which owns USA TODAY and about 260 other daily publications as well as several hundred weeklies, reported a net loss of $122.2 million for the quarter, compared with a loss of $95.1 million in the same period a year earlier. The results included a $74.3 million non-cash loss in connection with a derivative due on the company's convertible notes and a $42.1 million loss from an early debt paydown.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 5% to $148.8 million. 

Overall, revenue fell 17% to $875.4 million. On a comparable basis, circulation revenue declined 13.6%, print advertising revenue decreased 26.9% and digital ad and marketing services revenue eased by 2%.

Investors already had a general idea of what to expect for the fourth quarter because Gannett released preliminary estimates of its earnings on Jan. 19. 

Those estimates included fourth-quarter revenue of $865 million to $875 million, a net loss before taxes of $130 million to $135 million and EBITDA of $142 million to $147 million. The company ended up beating all three of those estimates.

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"During a challenging 2020, we achieved strong operational execution, significant cost and debt reductions, improved operating trends and financial position, and we enter 2021 with good momentum, prepared to implement our subscription-led growth plan," Gannett Chairman and CEO Michael Reed said in a statement. "We are making significant progress on our transition from a traditional media business to a digitally focused content platform."

Digital subscription increases

Gannett has been grappling with a decline in print newspaper revenue for years but has recently enjoyed success with an increased focus on paid digital subscriptions, which are viewed as crucial to the success of media companies as newspaper dollars decline.

Investors have grown increasingly optimistic about the company in recent months, quadrupling the company's stock price since early November to a close of $5.61 on Wednesday.

One reason may be Gannett's momentum in online subscriptions, which rose 29% in the fourth quarter, compared with a year earlier, to about 1.1 million by the end of the quarter.

Reed said at an investment conference in January that the company has set a goal of securing 10 million digital subscriptions within five years.

Lowering debt costs

Gannett has also taken several steps in recent months to improve its cash flow. Those moves included refinancing a significant portion of the $1.8 billion loan from private equity firm Apollo Global Management that enabled the 2019 merger of New Media Investment Group and the company previously known as Gannett. The new entity took on the Gannett name.

The company said Thursday it expects to save $90 million in interest payments in 2021 due to those debt refinancing moves, which included paying down loans and exchanging a portion for lower interest rate debt. As of Thursday, Gannett owes $1.545 billion.

Gannett also said it saved $177 million in 2020 by integrating its operations following the merger, including $61 million in the fourth quarter. That translates into savings of $245 million on an annualized basis through moves like closing overlapping printing facilities and a reduction in redundant executive positions.

The company expects that it will meet its goal of more than $300 million in annualized "synergies" by the end of 2021.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.