Q1 2025 Gannett Co Inc Earnings Call
Greetings and welcome to the Gannett Company Q1, 2025 earnings call at.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Matt Esposito head of Investor Relations you may begin.
Speaker Change: Thank you good morning, everyone and thank you for joining our call today to discuss <unk> first quarter 2025 financial results something on today's call will be Mike Reed, Chairman and Chief Executive Officer, Tricia, Arthur Chief Financial Officer, and Kristin Roberts Chief content Officer, if you navigate to that website you will find that we have posted an earnings call.
Speaker Change: And then some additional earlier press release, we will be referencing it today on the call as it provide you with additional detail on this quarter's performance and our full year 2025 business outlook before we begin. Please on your reminded this call is being reported in addition, certain statements made during this call are or maybe deemed to be forward looking statements as defined under.
Speaker Change: The U S federal securities laws, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today.
Speaker Change: Cause you to read the cautionary statement regarding forward looking statements in the earnings supplement as well as the risk factors described in Gannett's filings made with the Securities and Exchange Commission, except as required by law, we undertake no obligation to publicly update or correct any of the forward looking statements made during this call. Please keep in mind all comparisons are on a year over year basis, unless otherwise noted.
Speaker Change: In addition, we will be discussing non-GAAP financial information during the call, including same store revenues free cash flow adjusted EBITDA adjusted EBITDA margin and adjusted net income attributable to getting that you can find reconciliations of our non-GAAP measures to the most comparable U S. GAAP measures in the earnings supplement lastly, I would like to remind you that nothing on this call.
Speaker Change: Constitutes an offer to sell or solicitation of offers to purchase anything that securities. The webcast and audio cast are copyrighted material.
Speaker Change: It may not be duplicated reproduced or rebroadcast without our prior written consent with that I would like to turn the call over to Mike Reed Gannett's, Chairman and CEO.
Speaker Change: Thank you, Matt good morning, and thanks for joining our first quarter earnings calls.
Speaker Change: In February we outlined our full year outlook with the expectation that 2025 would unfold as the year of two halves.
Speaker Change: As Youll recall, we anticipated a progressive build in our performance.
Speaker Change: The first quarter results, we are presenting today reflect our ability to deliver improvements in earnings and free cash flow well navigating both a highly dynamic environment and the outsized impact of several items unique to the first quarter.
Speaker Change: With these items are now behind US we expect to drive a marked improvement in our topline trends for the balance of the year.
Speaker Change: Led by a reacceleration in our digital businesses.
Speaker Change: Additionally, we believe this perspective is supported by the fact that March marked our best performing month of the quarter for digital revenue.
Speaker Change: And we are seeing improving revenue trends continue into Q2.
Speaker Change: We believe our financial objectives remain within reach in this such we are reaffirming our full year 2025 business outlook.
Speaker Change: The path to growth is rarely linear and while digital revenue in the first quarter was more challenged we continue to have the largest digital media audience among content creators and I am confident we have the right strategy with the right leaders driving our business forward.
Speaker Change: Despite an uncertain economic backdrop, our Q1 performance delivered clear proof points that validate our strategy and its potential to drive meaningful growth.
Speaker Change: This includes significant bottom line improvement despite certain one time items.
Speaker Change: Solid free cash flow generation and aggressive debt reduction of approximately $75 million.
Speaker Change: Which lowered our leverage and further strengthen our capital structure.
Speaker Change: The opportunities ahead are substantial and we are taking swift targeted actions to accelerate the execution of the opportunities that will drive long term value creation.
Speaker Change: To that end, we recently announced a key leadership transition with the appointment of Tricia Gasser is our chief financial Officer.
Tricia has more than 20 years of financial experience, including more than 15 years in the media industry.
Speaker Change: We are fortunate to have a leader with deep institutional knowledge and operational experience to enable the organization to deliver excellence in value to our stakeholders.
Speaker Change: We also want to acknowledge the departure of Chris Cho from the digital marketing solutions Division.
Speaker Change: We remain more committed than ever to our strategy and our leadership changes better position us to strengthen our financial and operational performance.
Speaker Change: Before we dive into first quarter results I want to share three important takeaways that reinforces our optimism for 2025 and beyond.
Speaker Change: First.
Speaker Change: We believe we have a substantial opportunity for long term growth.
Speaker Change: Our industry, leading scale at a national and local level diverse digital businesses and our vast collection of content that audiences see serve as powerful engines for the growth we expect to capture over time.
Speaker Change: We are also continuously unlocking new monetization opportunities, which combined with ongoing investments in our digital initiatives are expected to accelerate the speed of our transformation.
Speaker Change: Second we are reaffirming our full year 2025 business outlook the fundamentals reflected in our Q1 results give us confidence in our ability to deliver on our 2025 outlook.
Speaker Change: We believe we are well positioned to improve revenue trends achieved a third consecutive year of adjusted EBITDA and free cash flow growth and.
Speaker Change: And drive improvements in net income compared to the prior year.
Speaker Change: Last but certainly not least we believe we are entering a moment of real structural change in the digital advertising ecosystem, one that directly benefits given that and publishers like us.
Speaker Change: The federal Court's recent ruling that Google illegally monopolized key segments of the digital advertising market place validates, what we and others have argued for years Google.
Speaker Change: <unk> built a closed system that suppress competition channel demand towards its own exchange and diverted revenue away from content creators.
Speaker Change: This wasn't just a regulatory concern it's systematically eroded publisher revenue for years.
Speaker Change: Now that the liability phase of the trial has concluded and the proceedings are moving to the damages phase, which may include potential divestiture of Google's AD exchange and AD server.
Speaker Change: We can now enter a more open transparent and competitive marketplace.
Speaker Change: This shift is expected to unlock higher C. P M.
Speaker Change: Stronger fill rates and.
Speaker Change: More equitable and profitable participation and the add value chain.
Speaker Change: Was the largest digital audience among content creators and over 300 million in annual digital advertising revenue.
Speaker Change: Getting that is well positioned to capture that upside.
Speaker Change: It is broader structural improvements unfold, we are accelerating our efforts to expand first party data.
Speaker Change: Deep in direct advertising relationships and develop the technology infrastructure needed to control, how we manage and monetize our inventory.
Speaker Change: Furthermore, we view the recent Doj ruling as a positive signal for the strength of our own case against Google as we continue to move forward.
Speaker Change: Now with that I would like to discuss the key operational highlights from the first quarter.
Speaker Change: Our commitment to a diversified digital strategy is expected to provide a foundation for sustainable growth.
Speaker Change: We see our highly engaged digital audience is a powerful leading indicator of the revenue opportunities, we are well positioned to unlocked in.
Speaker Change: In Q1, we continued to attract a significant digital audience with 195 million average monthly unique visitors coming to our platform growing over 4% compared to the prior year period.
Speaker Change: With our audience at scale the next phase of our transformation prioritizes deeper engagement.
Speaker Change: There is significant potential to expand total digital revenues by delivering more personalized experiences across the consumer journey and increasing monetization of the audience is already engaging with our platform.
Speaker Change: Diversifying our monetization opportunities also remains a top priority and the collaboration between our content consumer and product teams has already played a key role in advancing our progress.
Speaker Change: With that I'll now turn it over to Christian to cover the monetization efforts around our growing audience Kristen.
Speaker Change: Thank you Mike.
Speaker Change: They're really looking for.
Speaker Change: Arm.
Speaker Change: And our readers in the communities. We serve is what makes the Sunshine and I am proud to say our network bookings rose this type of year for the second consecutive quarter, we were the leading information provider among content creators on America as measured by Comscore, our success demonstrates that.
Speaker Change: I don't personally have unified content strategy on listening to our consumers by featuring a healthy Max service journalism training is an exceptional commentary on storytelling can deliver solid results. It also reinforces our ability to create content that is trusted and relevant in clean.
Speaker Change: Being a leader in sports content arent Nicholson.
Speaker Change: As I shared in February our goal is clear to become the leading sports media business in America, and we believe we're on the verge of making that happen through one team sports the journey of one team sports.
Speaker Change: A year ago when the network.
Speaker Change: March Madness comprehensive sparkling extraordinary 12 months I've pulled from the class one of the driving forces behind that growth has been exponential rise in interest in women's sport Women's sports coverage is nothing ever across our network, especially with all the time.
Speaker Change: Our company set itself apart of a pioneer in this space bottles of Dallas, and we are still setting ourselves apart.
Speaker Change: Official launch of USA, today's news sports vertical studio in mind.
Speaker Change: This centralized platform highlights our extensive comprehensive women's sports, which reaches more than 40 million bonds through in depth and unique storytelling dynamic advance and expanded multimedia content.
Speaker Change: Since last month's launch with the reigning WNBA champions, The New York Liberty studio nine has already gained meaningful traction evidenced by strong fan engagement and growing advertiser interest early results include audience gross affiliate revenue from ticket and merchandise sales.
Speaker Change: And the addition of new sponsorships, we are optimistic about the long term potential of studio nine and importantly, it is a perfect example of our flywheel in us.
Speaker Change: In just two years, we have built the largest digital audiences.
Speaker Change: Innovation in the country with 195 million average monthly unique visitors as measured by Comscore and Adobe analytics.
Speaker Change: Our audience continues to grow with accelerated total consumer monetization through a diverse and expanding portfolio of new and enhanced content destinations, we're giving our consumers more reasons to come to life more reasons to stall more reasons to engage with our partners.
Speaker Change: More reasons to subscribers as a result, the doors now open for real innovation to fully unlock the value of our audience and new audiences, who seek our value content.
Speaker Change: For the first time data automation and <unk> are not only accessible and cost effective.
Speaker Change: Playable scam. These capabilities are powering new tools and strategies that optimize pricing and snacks personalization streamlined workflows and strengthen analysis.
Speaker Change: Every part of the business smarter and more efficient.
Speaker Change: Data serves as the fuel for the flywheel with every improvement generating richer insights and greater profitability over time.
Speaker Change: Momentum builds the flywheel accelerates through product diversification and the creation of new revenue streams.
Speaker Change: On that note in Q1, we made some organizational changes to more closely align our consumer content and product teams to better position the company to maximize the value of our growing digital audience on core products.
Speaker Change: As part of this shift we're prioritizing acquisition of highly engaged long term and more profitable local subscribers.
Speaker Change: Our product development and marketing efforts are focused on the local consumer, including creating more personalized and relevant experiences.
Speaker Change: We grow our local subscriber base and build new subscription products. We continue to expect solid full year growth in digital only paid subscriptions and digital only subscription revenue driven by our now unified content consumer and product teams. This strategic alignment is expected to access.
Speaker Change: <unk> the growth in our core local businesses and presents a powerful opportunity to build new subscriptions and products that leverage the content. We already produce our focus will be on brands with strong recognition and name awareness from there we will tap into our extensive content collection.
Speaker Change: And develop a range of products that deliver meaningful value to subscribers.
Speaker Change: This strategy will be key to driving the expected success of studio nine along with our highly engaging vertical such as pets and entertainment.
Speaker Change: Before closing I want to extend my gratitude to the content consumer and product teams for being relentless and network intelligence and prioritization to deliver experiences. Our readers mean the path ahead is full of opportunities and I'm excited for what the future holds as we work together.
Mike Reed: Back to you Mike.
Mike Reed: Thank you Christian I am excited by the recent launch of studio nine which will unlock new revenue opportunities in the year ahead.
Mike Reed: It is also encouraging to see how our scale reach and commitment to innovation continue to attract larger and more diverse audiences.
Mike Reed: Studio nine is a great example of how we create new revenue streams around the great content, we already produce.
Mike Reed: Type of content, our strategic partners are seeking.
Mike Reed: In the first quarter, we continued to innovate in response to the impact of Google's manual actions.
Mike Reed: While googles actions have delayed the pace of growth. We originally anticipated with the launch of our various partnerships. We continue to create solutions that benefit our audiences and our partners, which is expected to reaccelerate that pace of growth moving forward.
Mike Reed: In addition, our focus has been on unlocking immediate monetization from our existing content through syndication strategic partnerships.
Mike Reed: Driven platforms and the expansion of our ecommerce business.
Mike Reed: We believe the value of real time authentic and trusted content at scale has never been higher.
Mike Reed: Our recent collaborations with Dow Jones Microsoft.
Mike Reed: And our Q1 announcement of Amazon's, Alexa plus underscore that growing demand.
Mike Reed: We expect to continue staffing more of these high margin deals given the rich and diverse nature of our content as well as our proactive in this over the past year to build out capabilities in house.
Mike Reed: We expect to expand these revenue streams as we continue to engage with foundational partners to position as a premier content partner.
Mike Reed: Now turning to our Dms business. Despite recent challenges we view this year as an opportunity to strengthen our foundation and solidify our role as an indispensable digital partner.
Mike Reed: We are executing on a well defined action plan that is supported by strategic investments and substantial upgrades to our product suite.
Mike Reed: Some of these include.
Mike Reed: Rolling out new CRM integrations, which are expected to deliver more targeted personalized campaigns and generate stronger insights for our customers.
Mike Reed: As a result, we expect to drive higher customer retention over time.
Mike Reed: Separately, we are strengthening our search optimization capabilities to align with evolving customer search behavior.
Mike Reed: This will enable us to generate more qualified leads while minimizing cost per lead for our customers.
Mike Reed: Next we are building on the strong momentum of our AI powered solution dash with new features and functionality is designed to further optimize campaigns and drive stronger commercial outcomes.
Mike Reed: Importantly, early data indicates that dash positively impacts new client retention reinforcing its value and strengthening long term customer relationships.
Mike Reed: As another example, we remain keenly focused on pursuing the right customer profile.
Mike Reed: These customers tend to be lower our pool and higher margin with search representing a smaller percentage of total revenue.
Mike Reed: We saw success with this in Q1 and while these actions will take time to build toward overall revenue growth. They have higher retention and are expected to strategically reduce our reliance on search.
Mike Reed: Overall, we remain fully committed to enhancing the customer experience across our product suite.
Mike Reed: The early success of these initiatives reinforces our confidence in returning our Dms revenue performance to near flat in the second quarter.
Mike Reed: With that I would like to turn the call over to Tricia to provide additional detail and color around our first quarter financial results Tricia.
Tricia: Thank you, Mike and good morning, everyone I'm pleased to be here with you today.
Tricia: Please keep in mind all comparisons are on a year over year basis, unless otherwise noted as expected Q1 presented some unique challenges. However, we are confident in our strategic plans, we have in place to achieve our financial objectives for the full year with continued focus on our strategy efficiency initiatives and disciplined operational execution.
Tricia: <unk>, we are well positioned to drive a stronger performance as we enter the second quarter.
Tricia: For Q1 total operating revenues were $571 6 million a decrease of 10, 1% or seven 7% on a same store basis.
Tricia: The spread between our reported and same store revenues grew in the quarter due to the sale of the Austin American statesman.
Tricia: Revenue from exited operations totaled $16 million in Q1, and we expect that figure to increase in the second quarter.
Tricia: In addition, our total digital revenues also reflect a larger than normal customer revenue reversals and this level of activity is not expected to continue.
Tricia: Q1 performance was also comparatively challenged by leap day.
Tricia: All of these items had an impact to overall revenue and adjusted EBITDA as compared to the prior year as they move past. These headwinds we expect same store revenue to improve with stronger performance compared to the trends we saw in 2024.
Tricia: We remain confident in our ability to drive meaningful improvement in our topline trends and overall same store revenue growth.
Tricia: Adjusted EBITDA totaled $50 5 million in the first quarter, representing a margin of eight 8%.
Tricia: Year over year decline was in line with our expectations largely driven by the items I just referenced.
Tricia: We expect higher adjusted EBITDA in the second quarter, although similar year over year performance with a return to growth in the second half of the year driven by improving revenue trends and disciplined cost management.
Tricia: Expense management remains a critical priority and in Q1, the operating expenses decreased to 18, 1% in part due to the impact of exited operation.
Tricia: Our expenses have remained largely unaffected by the current tariff policy that we continue to closely monitor the situation.
Tricia: Over the past three months, we have made several changes to streamline our executive leadership team, resulting in a more cohesive and agile structure.
Tricia: We have benefited from Aetna transaction across the organization along with significant cost savings.
Tricia: We also continue to demonstrate our ability to modulate our expense base in response to economic conditions, while also enabling investment in our growth drivers.
Tricia: We remain intensely focused on executing transformative cost reduction to create a more flexible cost structure and position us to achieve our financial objectives for the year.
Tricia: On the bottom line, we reported a net loss of $7 million in the first quarter, representing an improvement of approximately 77 million.
Tricia: This includes the impact of cycling of 46 million impairment charge related to the exit of our leased facility in Mclean, Virginia in the first quarter of last year.
Tricia: Our results also improved on an adjusted basis, but adjusted net loss of $13 million, improving approximately 23 million.
Tricia: Total digital revenues in Q1 were $258 4 million down six 4% or three 8% on a same store basis and represented approximately 44% of total revenues.
Tricia: The first quarter as an anomaly with the decline driven by softer trends in our news quest and Dms segment.
Tricia: Along with increased revenue reversals that more acutely affected our digital are there and digital only subscription businesses.
Tricia: With these impacts now behind us along with improving fundamentals across our digital businesses. We anticipate total digital revenue performance to stabilize with potential for flat to modest growth in Q2 and more substantial growth in the latter part of the year.
Tricia: Yes.
Tricia: In Q1 digital only subscription revenues exceeded $43 million, reflecting minor same store growth volumes.
Tricia: Volumes in the quarter were impacted by the sale of Austin as well as elevated customer churn.
Tricia: Deeper focus on maximizing the value of our local subscription products along with shorter introductory offer period will likely take time to scale, but are essential to building a sustainable and highly profitable digital only paid subscription base.
Tricia: Shifting to trends our efforts didn't have the subscriber experience continued to deliver positive results March by a second consecutive quarter of sequential improvement in print and commercial revenue trends.
Tricia: Our refined pricing strategy has driven meaningful progress and retention, resulting in a more stable and loyal subscriber base, which should in turn unlock additional advertising opportunities in the quarters ahead.
Tricia: Our print business continues to have a long tail and remains a strong source of cash flow.
Tricia: This cash flow is expected to strengthen our balance sheet through debt repayment. While also supporting continued investment in our digital growth opportunities.
Tricia: We remain committed to managing the tail in print as effectively as possible as they further intensify our effort to reduce churn among our print subscribers.
Tricia: Pricing and service enhancements.
Tricia: Looking at the domestic media segment revenue trends in Q1 on a reported basis continuing to reflect the sale and shut down our various non strategic businesses in 2024 as well as the divestiture of Austin in the first quarter of 2025.
Tricia: In Q1 adjusted EBITDA in the segment was $33 2 million.
Tricia: Turning to news quest, our topline performance in Q1, it was influenced by a slowdown in digital advertising trends reflective of the local economy and the U K.
Tricia: For Q1 adjusted EBITDA in the segment was $13 9 million.
Tricia: And our digital marketing solutions business. It's total core platform revenue in the quarter was 108.2 million adjust.
Tricia: Adjusted EBITDA for the segment totaled $8 5 million, we had approximately 13400 core platform customers with core platform, our two reaching approximately 2700.
Tricia: As we manage the ongoing impact of last year's churn I am encouraged by the team's direction and our heightened emphasis on acquiring customers that said our ideal profile.
Tricia: As a result, we saw a modest sequential improvement to budget retention in the quarter, which we view as a positive indicator for the second quarter.
Mike Reed: As Mike emphasized our strategic plan prioritizes enhancements to the overall product portfolio as part of a broader commitment to improve retention and optimize account performance.
Mike Reed: Let's now shift to the balance sheet.
Mike Reed: At the end of the first quarter, our cash balance stood at approximately $86 million and our outstanding net debt was approximately $951 million.
Mike Reed: Free cash flow in Q1 totaled $10 2 million growing seven 6%.
Mike Reed: We expect free cash flow generation to be similar in Q2 to Q1 with more substantial free cash flow in the second half of the year.
Mike Reed: We ended Q1 with approximately 1 billion of total debt, reflecting approximately 75 million of total debt pay down for the quarter.
Mike Reed: Subsequent to quarter end, we executed an agreement to repurchase 14 million of our 'twenty 'twenty seven convertible notes at 105% of par value by utilizing 15 million from our delayed draw facility.
Mike Reed: This transaction reduces the impact of future dilution and it was at a discount to the terms offered and the exchanges completed in 2024.
Mike Reed: We are confident in our ability to further improve our capital structure in 2025 and as a result, we expect to repay over a 125 million in debt through amortization asset sales and free cash flow generation.
Mike Reed: A couple of our aggressive debt pay down strategy with our expected full year growth in adjusted EBITDA, We expect to achieve our first lien net leverage approaching two times by the end of the year.
Mike Reed: We remain immensely confident in our operational and financial plans for 2025, the meaningful progress we have already achieved and our long term digital growth strategy underscores the value of the audience says we have curated validates the strength of our monetization plans and marks only the beginning of the value we expect to unlock over.
Mike Reed: Time, I remain optimistic and believe we are on a strong path forward.
Mike Reed: I will now hand, it back to the operator for questions and then we'll go to Mike for some closing thoughts.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Mike Reed: Confirmation tone will indicate your line is in the question queue.
Speaker Change: Press Star two if you would like to remove your question from the queue for.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Your first question for today is from Giuliano Bologna with Compass point.
Giuliano Bologna: Hi, good morning, congratulations on your execution.
Speaker Change: Or on the go.
Speaker Change: Understood.
Speaker Change: Well one thing I'd be curious I would ask you is.
Speaker Change: With the recent law cyclical and the anti case or especially in the Doj case.
Speaker Change: Can you talk about how this might impact your business.
Speaker Change: Great any opportunities.
Speaker Change: Yeah, Hey, Julia I don't think so yeah, a couple of ways. It impacts of some first of all on.
Speaker Change: On the operating side of the business side that we think could absolutely sets the stage for a more fair and favorable bad marketplace for getting out and really for all publishers.
Speaker Change: The doj's when there's a really a meaningful step to rebalancing that whole data digital advertising ecosystem, which is so needed I'm assuming.
Speaker Change: Remedies are put in place, who it'll lead to greater transparency.
Speaker Change: And the ecosystem and higher revenue shares for publishers, including us.
Speaker Change: We think we're well positioned obviously because of our size and scale.
If the structural changes that are required to go to be made by Google's AD Tech stack.
Speaker Change: It should really benefit publishers as I said, so we should gain more control over our inventory, we should have a higher share price will back to us and.
Speaker Change: Overtime as these pricing dynamics shift we have the the unresolved is we have a much bigger opportunity to monetize our own.
Speaker Change: Advertising inventory.
Speaker Change: Inventory on our own platform, which we're excited about it.
Speaker Change: It's also worth noting the other side is just just our case, it's worth noting that the ruling.
Speaker Change: That Google violate any antitrust laws in the AD tech market place really sets precedent that supports many of our claims and our ongoing lawsuit against them. So we feel a much even stronger about our case as that moves forward.
Speaker Change: Beyond that just you know with regard to digital advertising, let me just take a moment to reiterate something we said on the call. We do see fundamentals in the business improving we saw that in March and we've seen that in early April our audience is continuing to grow and we're leveraging the tools and technologies that we have in new ways.
Speaker Change: To engage with consumers on a more personalized level so.
Speaker Change: Regardless of what happens with the Google remedies, we still see an improving marketplace. You know importantly, we saw stronger performance at the end of the quarter than we saw earlier in the quarter.
Speaker Change: We continue to add monetization opportunities to our platform from AI licensing deals subscription products and syndication syndication to our platform in.
Speaker Change: And Oh.
Speaker Change: So we remain really bullish and optimistic on the digital advertising opportunity for us, but the the Doj's case definitely gives us a much bigger opportunity over the long run.
Speaker Change: That's very helpful and then.
Speaker Change: If you can address it with the manual changes Google has made.
Speaker Change: Kind of how you're dumping affiliate revenue business and what are your expectations for growth there.
Speaker Change: Yeah, the manual changes Google made.
We're very very unfortunate and Oh.
Speaker Change: There's no doubt that the.
Speaker Change: Impacted the pace of the growth that we had with our affiliate business, but where we've worked really hard with each of our affiliate partners to kind of navigate to the best solution for each individual deal.
Speaker Change: In rare instances that meant canceled the contract starting over.
Speaker Change: That impacted our Q1 revenue that's part of what we mentioned is unique kind of one time items. We also mentioned that's behind us now.
Speaker Change: But in most cases with our affiliate partners what it really met Giuliano is leveraging our own content that we produce that our readers already engaged with that does support the affiliate partnership too to re energize or reaccelerate the.
Speaker Change: The revenue growth that we're getting in those from those affiliate partners. So like a gambling dot com for example.
Speaker Change: So we've had to lean further into our diversified monetization strategy too as a way to offset some of what Google did us and.
Speaker Change: Utilizing content that we're already producing to unlock new highly accretive revenue opportunities is something we're doing I mentioned that through a couple of licensing deals that we want to staff more of those.
Speaker Change: Syndication strategic partnerships. So our niche content has really become a recent focus for us in some of our licensing deals.
Speaker Change: And we believe there are actually a variety of use cases that will require a curated local and affinity content that we can offer.
Speaker Change: Partner at scale, which nobody else can so.
Speaker Change: You know a few of the recent deals that we've done are with Dow Jones, Microsoft and Amazon.
Speaker Change: And you know as I said, we'd like to staff more of these steel so we see a lot of potential here. So.
Speaker Change: The changes Google made were unfortunate and probably uncalled for but we're adjusting and rebuilding.
Speaker Change: Maybe a little bit.
Speaker Change: I want to ask question, but yes, the significant with Abbott for episodes, Google related topic for a second.
Speaker Change: Obviously.
Speaker Change: Sure it's great to see the.
Speaker Change: Yeah.
Speaker Change: Precedence here so.
Speaker Change: The Doj case.
Speaker Change: One thing I'd be curious about and I realize that you can't really talk about specific expectations in terms of what you'd want.
Speaker Change: The outcome to be in the items.
Speaker Change: I'm curious if there's any kind of rough ballpark of.
Speaker Change: Where you think your claim is from.
Speaker Change: From a dollar from a quantitative perspective against the wonder if theres anyway.
Speaker Change: And even though this is Joe.
Speaker Change: And just be curious, if there's any kind of sense of where what youre, saying.
Speaker Change: Yes.
Speaker Change: I realize that your claims.
Speaker Change: Probably not.
Speaker Change: Interest damages or settled outcome could look like but just curious where do you think your claims.
Speaker Change: Yeah.
Speaker Change: So it's.
Giuliano Bologna: It's not it's not public at this point Giuliano, but it's it's very.
Speaker Change: Very significant I would say that that Google.
Speaker Change: Through this process.
Speaker Change: On an annual basis is made tens of billions of dollars and we're one of the biggest publishers playing in this arena so.
Speaker Change: Our our piece of that would probably be the biggest or one of the biggest so its a substantial amount of money and.
Speaker Change: We're anxious to kind of get get moving or see our case continue to move.
Speaker Change: That's helpful color I appreciate it.
Speaker Change: Switching gears.
Speaker Change: Yeah, we're obviously.
Speaker Change: I think most of the commentary that you're reiterating guidance for 2005 and I'm curious.
Speaker Change: Related to that to reiterate something that you guys aren't concerned.
Speaker Change: Curious young.
Speaker Change: Your confidence around that and kind of what the puts and takes are.
Speaker Change: Considering the macro backdrop and some of the uncertainty that's out there.
Speaker Change: Yeah, Hey, good morning, Giuliano. This is tricia yeah, we do feel really confident about our guidance. We entered this year and we knew it was gonna be a progressive build in our performance throughout the year and we always expected the second half to deliver the most meaningful progress. This year. So the guidance that we reaffirmed today it reflects what we.
Speaker Change: Now today it reflects what we're seeing in the marketplace right now we do have daily conversations with our advertisers and through those conversations were not seeing a material shift in the demand or in any buying behavior and I think even more importantly, we're starting to see improvements in the fundamentals of the business, we're seeing stronger retention.
Having a more diversified revenue base and we are seeing the operational efficiencies take hold and that gives us a lot of confidence and the assumptions and the trajectory that we're on.
Speaker Change: The year I take a look at print we've had a couple of quarters of sequential improvement in our trends based on the efforts we've put in to improve the subscriber experience. We expect that to continue for the rest of the year and then certainly for Q1.
Speaker Change: They are digital performance really is an outlier impacted by those items that we outlined on the call.
Speaker Change: At the end of the day.
Speaker Change: Audience is growing we're leveraging tools, we're leveraging technology, AI and new ways to engage our readers to inform them and to really fully monetize our platform and.
Speaker Change: And Mike mentioned this we saw stronger performance at the end of the quarter than we did at the beginning of the quarter, we keep adding new monetization opportunities star platform AI licensing and syndication new subscription products and then on the Dms fronts.
Speaker Change: Really encouraged by that customer budget stabilization that we saw were encouraged by the product development that we're doing both for dash and our core product suites. So the outlook that we gave today, it's grounded in the real time trends, it's grounded in our disciplined execution and it's going to take a steady build each quarter as we take.
Speaker Change: Advantage of all of these opportunities we've outlined today.
Speaker Change: That sounds kind of led into Arizona.
Speaker Change: There is a restructuring going on at <unk>.
Speaker Change: Oh, sorry.
Speaker Change: <unk> got what you're saying.
Speaker Change: And during that gives you confidence of GFS revenues.
Speaker Change: Growing from here.
Speaker Change: Yeah.
Speaker Change: Yeah, Julien, we actually expect pretty marked improvement from Q1 to Q2.
Speaker Change: Matter of fact in my remarks, I said I think the Tms revenue will be closer to flat in Q2 versus the decline. We saw in Q1, we are starting to see evidence of improving fundamentals in the quarter.
Speaker Change: The first indicator was really the uptick in our budget retention in Q1, which should impact positively revenues. In Q2. We're also starting to see the benefits of our SaaS product dash than that though and the impact that that's having on customer retention and while it's only a small percentage of.
Speaker Change: Our customers today that are optimizing dash, we do see the potential for greater penetration, leading to better engagement and retention across our broader customer base and.
Speaker Change: While das has been a product focus for the past year. We are really focused highly now on shoring up our investment in the core business, which does represent most of the revenue developments. So we mentioned on the on the call today developments like integrating CRM onto our platform that provides a better benefit to.
Speaker Change: The client, but also provides a stickier relationship. We're also adding new search capabilities, which is still an important product in the market you have to have that capability.
Speaker Change: And frankly, it's it's a it's a it's a very intensive high focus area for us and with the recent management changes that we've made there.
Speaker Change: We do have very good sales velocity and ensuring up our product suite, which work is already underway. It gives us a lot of confidence that we'll get close to flat in the second quarter that will actually returned to growth over the back half of the year. So a lot to be optimistic about with the Dms business as this year goes on.
Speaker Change: But it sounds good.
Speaker Change: As a final one.
Speaker Change: I'm curious how you expect to improve the digital revenue growth trends.
Speaker Change: So it kind of like going into the back half of the year.
Speaker Change: Yeah, you know again, we certainly see our Q1 digital results as an outlier quarter had an unusual concentration of revenue reversals are both impacts from the manual actions that we mentioned to our partnership business and also the impacts to our digital subscription revenue.
Speaker Change: Other items and trends that we don't expect to repeat and we also had a small calendar headwind this quarter as we cycle against a leap day from last year. So none of those items are expected to repeat.
Speaker Change: And then I think more importantly, you know all of the items that we've mentioned the fundamentals of the business are moving in the right direction are the Dms retention is improving as we improve that product suite.
Speaker Change: We've built a good infrastructure around our partnership revenue and we expect that revenue to grow from where we are in Q1, we're adding new revenue streams from syndication and AI license in and those are starting to contribute and then Mike mentioned that broader industry shift in the advertising ecosystem.
Speaker Change: You know things like regulatory action the Doj as recent win puts us far more level, playing field and digital monetization and that may be longer term, but that could be a real tailwind for our business and really for publishers is much more broadly so on its face value Q1 isn't where we wanted it to be but it's not refer.
Speaker Change: It is a the fundamentals of the business and it's certainly not reflective of where we're headed so we've got a lot of confidence in the work that we're doing in that work that our teams are doing and our ability to return to revenue growth in digital revenue growth later in the year.
Speaker Change: That's very helpful. I appreciate it.
Speaker Change: It was on Brushy send I will jump back in the queue.
Julien: Thanks Julien.
Matt Condon: Your next question for today is from Matt Condon with citizens.
Matt Condon: Thank you so much for taking my questions. My first one is just on the digital subscription revenue that value over year. I was just wondering if you could give us any more color on a same store basis, because I know, it's probably impacted by the the Austin office sale and any help there just to understand the actual underlying trends in that segment of the business that would be helpful.
Matt Condon: Yeah.
Christian: Yeah, Hey, Matt. Thank you Christian do you want to take that one.
Speaker Change: Sure I'd be happy to and thanks for the question, Matt. So you asked about the same store basis on a same store basis, and we saw some growth in our digital subscription business, but it was at lower levels than we've historically driven and I think the decline was driven by higher than normal volume of revenue reversals in the quarter.
Christian: That.
Christian: That's all of the implementation of <unk>.
Christian: Several customer friendly policies last year, but we don't see the activity in the quarter as an indication of any reduced demand or of any ongoing performance issues, we remain confident.
Christian: And the growth potential of the digital subscription business. This year and then in the long term and what we see is frankly tremendous upside and bringing our content and consumer and product teams together and so when we think about this internally. We are looking at several initiatives that are going to help us.
Christian: Reaccelerate reaccelerate the growth in digital only and some of those are things like local engagement. It's re energizing that local consumer engagement effort in our top 25 markets. It's also lifecycle marketing it as it's building more relevant campaigns that not only acquire digital subscribers.
Christian: Acquire and then lead to activation and then lead to retention and that what that does is it turns high propensity readers and viewers into high value digital subscribers over a longer period of time, it's one of the other things that we're doing as well.
Christian: Around the adjacent opportunities right. So you heard some of that in the earnings call a few minutes ago around studio nine but there are other examples of that as well and all of it reflects our our commitment to leveraging what is.
Christian: Content collection to spin up segmented products and to drive subscription growth amongst our segmented user group to those segments had products. So think about things not only like studio nine, but like class and our new witness product and then the only thing I would just draw your attention to there Matt is automation.
Christian: We are speeding up the deployment of a number of tools that automate things such as paywall decisioning.
Christian: Stop saves personalized content all of this really helping us to build up what we see as compelling subscription products around high quality content that we're already producing we're creating more value for our readers and our viewers and our listeners and unlocking all of these new monetization.
Christian: Opportunities and that's what's central to our strategy and delivering the most relevant content maximizing the ways that we engage with our consumers and then monetizing that audience in multiple ways.
Speaker Change: That's very helpful. Maybe just for my second one I wanted to turn to the digital advertising business and understood. It at various trends are improving her improved into March and.
Speaker Change: And to April, but what within your control that you have that you can help aggregate budgets onto your platform what are the tools or other things that you guys can do to just bring more and more budgets on to your platform.
Speaker Change: Yeah, Yeah, Theres, a theres a number of things that we can do I think first it's leveraging the relationships that we have with our advertisers and really being able to offer them a full product portfolio a full funnel suite pairing it with our Dms business, that's a unique value prop for us.
Speaker Change: First party data is also another place that we have the right to win and we've been building out first party data and first party data solutions.
Speaker Change: For a number of years now are actively in market with them and have been in market with them for over a year and that's you know a unique benefit to us given the size of our audience and the scale of our reach I think those are two really important pieces that we can use to drive up the C. P. M. We're also very focused on video video.
Speaker Change: Content and video monetization you know the C. P M D.
Speaker Change: Video advertising is significantly higher than your standard display as we produce more video more relevant video.
Speaker Change: An opportunity to really increase our advertising monetization there as well.
Tricia: Great and then Tricia just shifting gears, maybe a little bit I know that the last thing we heard.
Tricia: Our real estate and on non strategic asset sales, we think we're getting to the end of that pipeline is that still the case today or is there any change there or just any commentary on where we are with that.
Tricia: Yeah, I think that's largely still the case, we had a small sale in Q1. In addition to often and we do expect to have a few additional minor to midsized sales throughout the year, but you're right. We've worked through the vast majority of our real estate portfolio at this point.
Tricia: The good news is we do expect substantial free cash flow generation. This year. So we don't feel the pressure to sell anything that's going to have a negative impact on our business, but Austin is a great example of the strength of our property and our willingness to consider an inbound offers should it come at a highly accretive multiple to where we're trading at so we're not actively marketing any.
Tricia: Of our strategic businesses are really happy with the size of our portfolio.
Tricia: And you know we have a few small things left on our pipeline, but I think our real estate pipeline.
Tricia: We're largely through it at this point.
Matt: Matt just a follow on for that one that one one point attrition because I think that's really important and then we forecasted this to her.
Matt: <unk> previewed this with everybody as we do expect a very high CAGR on free cash flow the substantial free cash flow growth this year, but for the next few years. So.
Matt: The Theres there are substantial free cash flow generation in the company that will help us really continue to significantly reduced.
Speaker Change: That's very helpful commentary. Thank you so much for taking the questions.
Matt: Thank you. Thank you.
Mike Reed: We have reached the end of the question and answer session and I will now turn the call over to Mike for closing remarks.
Mike Reed: Thank you so.
Speaker Change: Thanks, everybody for the time. This morning, let me leave you with a couple of thoughts I think while the macro environment. Obviously remains dynamic you know for everybody operating here in the U S. The underlying fundamentals of what we see in our business as we move into Q2, we really does reinforce our optimism for 2025 as we look ahead I want a highly.
Mike Reed: A few important points proof points from Q1 that are fueling our confidence that we're carrying into the second quarter.
Mike Reed: Number one we continue to have the largest digital media audience among content creators in the country and we are deepening engagement across that base through a variety of tools and technologies.
Mike Reed: We continue to add monetization opportunities through our platforms, both our Dms platform and argue that media segment.
Mike Reed: You heard a lot about those today, we delivered a significant improvement to our bottom line to net income this quarter, we generated solid year over year growth in free cash flow.
Mike Reed: We strengthened our capital structure by repaying approximately $75 million of debt and reducing our first lien net leverage further.
Mike Reed: Furthermore, in April we reduced future dilution to shareholders by approximately 3 million shares through the repurchase of $14 million of our 2027 convertible notes.
Mike Reed: Finally, the Doj when it gets Google because we've talked about in the AD Tech case validates and strengthens our case.
Mike Reed: Our growth in our digital transformation strategy, absolutely requires long term thinking even as we navigate short term volatility.
Mike Reed: To that end, it's important to take a moment.
Mike Reed: And really look at the progress we've made over the past three years, we have a slide in our supplement.
Mike Reed: You can look at to see that progress from 2022 to 2024, but most importantly, the reason I bring it up is we do expect to continue to make progress across all those categories of metrics in 2025 really important.
Mike Reed: Free cash flow is expanding earnings are improving debt leverage are decreasing and we believe we are approaching a revenue inflection point all of this translates to a stronger balance sheet and a growing company, providing a sustainable sustainable future for local journalism. So thanks for joining us today.
Mike Reed: Day, and we look forward to updating you again on our progress at the end of the second quarter. Thanks, everyone.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.