Gannett (GCI) Q2 EPS Jumps 367%

Gannett (GCI 5.77%), the largest U.S. local news publisher and owner of USA TODAY, released its second quarter 2025 earnings on July 31, 2025. The results revealed a strong bottom-line beat, with earnings per share (EPS) of $0.42 (GAAP) compared to consensus GAAP EPS estimates of a $(0.06) loss. However, revenue (GAAP) fell to $584.9 million, missing GAAP revenue expectations of $593.1 million and marking an 8.6% year-over-year decline. The period saw sharp profit growth and margin expansion, even as top-line pressure persisted. Overall, the quarter showcased growth in profitability and successful cost controls, but ongoing declines in digital subscriptions and core platform customers signaled continued challenges for the business.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Strategic Focus

Gannett (GCI 5.77%) operates as a media and marketing company with a portfolio of local, national, and international news brands. Its holdings include USA TODAY and hundreds of local publications across the U.S. and the U.K. The company also runs a growing digital marketing services business known as Digital Marketing Solutions (DMS) under the LocaliQ brand.

Over the past several years, Gannett has focused on expanding digital revenue, diversifying revenue streams, and investing in technology-driven solutions. Growth in digital advertising, paid digital-only subscriptions, and digital marketing services remain critical to its long-term success. The company is also working to reduce debt and strengthen its balance sheet to enable reinvestment and sustainable growth.

Quarter in Review: Key Developments and Performance Drivers

The period was marked by a significant earnings surprise, sharply beating consensus. Net income attributable to Gannett (GAAP) grew to $78.4 million, rising substantially from $13.7 million a year earlier. Adjusted net income also jumped, reaching $84.5 million, up from $29.1 million for the same quarter in 2024.

Revenue continued a downward trend, driven by ongoing declines in both print and digital segments. Same store revenues dropped 6.4% year over year, while total revenue fell 8.6 % from the prior year. Despite falling sales, profitability improved. Adjusted EBITDA margin expanded to 11 %, up from 8.8 % in the prior quarter. Management attributed these gains to targeted expense reductions and a more flexible cost structure.

The business saw ongoing momentum in debt reduction efforts. Gannett repaid $23.4 million in debt, bringing total year-to-date repayments to $100 million for the first six months of 2025, and ended the quarter with $88.5 million in cash. First lien net leverage finished at 2.7 times, showing further progress in strengthening the capital structure. Capital expenditures increased as the company invested $15.1 million, mainly in technology to support digital growth and operational streamlining.

On the product and audience front, Gannett reported 181 million average monthly unique digital visitors, split between 129 million in the U.S. and 52 million in the U.K. New initiatives included the launch of Studio IX, a women’s sports digital content vertical, and fresh efforts to monetize content via AI licensing and partnerships. Recent deals, such as a content licensing agreement with AI startup Perplexity and an integration with Taboola’s generative AI engine on USA TODAY, highlighted the company’s focus on emerging digital channels and new forms of revenue.

In Digital Marketing Solutions, Core platform revenue fell 5% year over year to $116.9 million, and Core platform customer count declined by 6% year over year to 13,800. However, Average revenue per user for DMS rose 2% year over year to $2,830, and Segment EBITDA margin improved to 9.8%. Though overall customer churn remained a concern.

The Newsquest segment in the U.K. reported revenue of $61.3 million (GAAP).

Digital-only paid subscriptions, a key recurring revenue metric, dropped 15% to 1.723 million. Digital revenue as a whole dipped 4.6% year over year, and digital's contribution to total revenue remained below the 50% goal set for 2026. In print and commercial operations, revenue continued to decline, but the division remains a cash generator to support debt repayment and investment in core growth areas.

Looking Ahead: Guidance and Forward Considerations

For the rest of fiscal 2025, management expects digital revenue trends to improve, forecasting same store digital revenue growth of 3% to 5% in the second half of 2025. However, total company-wide revenue is projected to continue declining at a low single-digit rate on a same store basis for the full year. Adjusted EBITDA, a non-GAAP measure of core profitability, is anticipated to grow both in the back half and for the full year, supported by a new $100 million cost reduction program. Management also expects free cash flow (non-GAAP) in the second half to rise more than 100% compared to the prior year.

The company reiterated its longer-term target of digital revenue accounting for more than half of total revenue during 2026. Ambitions for digital and DMS revenue growth hinge on successful rollout of new digital products, improved retention in subscriptions, and additional AI content licensing partnerships. Investors are watching trends in digital subscription volumes and digital advertising closely, as well as the pace of debt reduction. Gannett does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.