Business context and reporting period
The supplied filing is Gannett Co., Inc.’s Form 10-K for the fiscal year ended December 31, 2023, filed February 22, 2024. Gannett owns USA TODAY and operates U.S. local media, U.K. publisher Newsquest, and digital marketing business LocaliQ. The request metadata names “USA TODAY Co., Inc.”; the filing identifies the registrant as Gannett Co., Inc. (NYSE: GCI). Financial results are annual, not a standalone 2023 fourth-quarter report.
Beginning in Q4 2023, Newsquest was reported as a separate segment; historical segment data was recast for comparison.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $2.664 billion | $2.945 billion |
| Operating income (loss) | $86.3 million | $(33.6) million |
| Net loss attributable to Gannett | $(27.8) million | $(78.0) million |
| Loss per diluted share | $(0.20) | $(0.57) |
| Adjusted EBITDA (non-GAAP) | $267.7 million; 10.0% margin | $257.3 million; 8.7% margin |
| Cash from operating activities | $94.6 million | $40.8 million |
| Cash and cash equivalents at year-end | $100.2 million | $94.3 million |
Revenue declined 10%, primarily reflecting lower print advertising and circulation. Advertising and marketing services fell 7% to $1.387 billion; circulation declined 14% to $927.8 million. Digital-only subscription revenue rose 17% to $155.6 million, while print circulation revenue fell 19%. Digital revenues across the company were approximately $1.1 billion, or 39% of total revenue.
Operating income improved substantially as expenses fell 13%, including lower operating costs, selling and administrative costs, restructuring charges, and a larger gain on asset sales. The company nevertheless reported a net loss: interest expense was $111.8 million, and income tax expense was $21.7 million despite a pretax loss. Adjusted EBITDA is a company-defined non-GAAP measure and should not be viewed as a substitute for GAAP results.
By segment, Domestic Gannett Media revenue decreased 12% to $2.096 billion and Adjusted EBITDA decreased 6% to $194.6 million. Newsquest revenue was approximately flat at $234.0 million, while Adjusted EBITDA increased 25% to $50.1 million. DMS revenue increased 2% to $477.9 million, but Adjusted EBITDA declined 8% to $53.2 million.
Cash from investing activities was $47.0 million, including $85.3 million of proceeds from real estate and other asset sales; cash used in financing was $135.5 million, principally reflecting debt repayments. Capital expenditures were $38.1 million in 2023. Current assets were $444.2 million versus current liabilities of $533.5 million.
Year-end debt carrying value was approximately $1.045 billion; principal outstanding was $1.131 billion. Debt included a $350.4 million variable-rate term loan, $291.6 million principal of 2026 notes, $485.3 million principal of convertible 2027 notes, and $3.3 million of 2024 notes. The company reported compliance with debt covenants, including a $30 million minimum liquidity requirement. Interest expense increased to $111.8 million from $108.4 million.
Material changes, outlook and risks
- Print advertising and print circulation continued to contract; digital-only subscriptions and DMS revenue grew, but growth in digital did not offset declines in legacy revenue.
- Domestic Gannett Media digital-only paid subscriptions were 1.912 million, down 2.9%; Newsquest subscriptions were 83,000, up 40.7%. Total paid digital-only subscriptions were 1.995 million, down 1.7%.
- Management expects operating cash flow to fund operations and debt service and says it expects adequate liquidity for at least the next 12 months. It cautions that further economic deterioration or faster revenue declines could weaken cash generation and liquidity. No specific revenue or earnings guidance is provided.
- Management expects 2024 capital expenditures of approximately $50 million to $60 million and anticipates $79.6 million of debt interest payments in 2024. It continues cost reduction and digital-revenue initiatives, including audience monetization, partnerships and DMS product development.
- In 2023, Gannett repurchased $53.6 million principal of 2026 notes at a discount and made $88.0 million of term-loan prepayments, including scheduled amortization. Asset-sale gains were $40.1 million, mainly from production facilities. Integration and reorganization costs were $24.5 million.
- After year-end, Gannett decided to relocate its headquarters from McLean, Virginia, to New York. It expects approximately $45 million in impairment charges in Q1 2024 related to the vacated McLean facility.
- In February 2024, a jury awarded $5 million compensatory and $20 million punitive damages in an Oklahoma case. Gannett intends to appeal and says it believes any damages would be covered by insurance; the ultimate outcome remains uncertain. Separately, its 2023 antitrust lawsuit against Google is treated as a gain contingency; no recovery is assured or recorded.
- Key risks include secular print declines, advertising sensitivity to economic conditions, debt service and refinancing requirements, variable interest rates, digital-platform and third-party media dependence, privacy and cookie changes, foreign exchange exposure, newsprint supply and pricing, cybersecurity and AI risks, and possible dilution from conversion of the 2027 notes. Conversion could result in substantial share issuance; the filing estimates 97.1 million shares at the initial conversion rate, with a potentially higher amount under specified adjustments.
Important facts for investors to verify
- Review the audited financial statements and debt note for cash availability, covenant headroom, scheduled amortization, and the 2026–2027 maturities; the filing reports $521.0 million of principal payments due in 2026 and $485.3 million in 2027.
- Track whether digital subscription, digital advertising and DMS growth can offset continued print revenue declines, including trends in subscription volumes and average revenue per user.
- Assess the sustainability of operating cash flow and Adjusted EBITDA, noting the contribution of asset-sale gains and the limits of the non-GAAP measure.
- Monitor the Oklahoma verdict and appeal, the expected Q1 2024 headquarters impairment, and any material developments in the Google litigation.
- Review the potential dilution and cash-settlement implications of the convertible 2027 notes, along with the company’s ability to meet its debt obligations without relying on asset sales.