Gannett reported declining revenue but an increase in paid digital subscriptions in the first quarter as the owner of USA TODAY and more than 100 other publications tries to fend off a hostile takeover attempt by a hedge fund-owned newspaper company.
The earnings report released Wednesday comes as Gannett is waging a fight with hedge fund Alden Global Capital’s MNG Enterprises over its future.
MNG, also known as Digital First Media, in January made an unsolicited offer to buy Gannett for $12 a share, saying it could run the company more efficiently and maximize profits.
Gannett rejected the offer, saying it was not credible and criticizing Alden’s track record of steep cuts at newspapers and its investments, including retailers Payless and Fred’s. Gannett says it is pursuing a digital transformation, quality journalism and responsible cost cuts that will benefit shareholders.
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Gannett shareholders will vote May 16 on eight board members, including the eight members that Gannett favors and the three nominees proposed by Alden.
Alden is opposing the reelection of three Gannett board nominees, including the two with the most direct journalism experience: Stephen Coll, the dean of the Columbia University Graduate School of Journalism and a two-time Pulitzer Prize winner; and Larry Kramer, who currently serves as chairman of business news service TheStreet and who formerly served as publisher of USA TODAY, and founder and CEO of MarketWatch.
The tug of war features disagreement over Gannett’s focus on building the digital revenue side of its business, which executives and analysts view as critical to the company’s future. MNG, which owns 7.5% of Gannett, has called for the McLean, Virginia-based company to halt digital acquisitions, saying it has wasted resources on them.
The decline of traditional print revenue, including ads and newspaper subscriptions, has undermined media industry finances as consumers look online for news and information.
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Media analysts view paid digital subscriptions as increasingly important to the news industry amid stiff competition against Google, Facebook and Amazon for digital ad dollars.
Gannett’s digital-only subscriptions rose 39% year-over-year to 538,000 in the first quarter.
Print revenue declines 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. Print advertising revenue fell 17.6% in the first three months of this year.
The media company reported a net loss of $11.9 million, which included $17.4 million in one-time costs that included restructuring expenses. A year earlier, Gannett had a net loss of $377,000. Analysts polled by S&P Global Market Intelligence had predicted a profit of $8 million.
Gannett had a net loss per share of 10 cents, compared with Wall Street expectations of a profit of 7 cents per share, according to S&P Global Market Intelligence.
Adjusted earnings before interest, taxes, depreciation, amortization (EBITDA) and other one-time costs totaled $63.3 million for the period, up 15%.
Gannett CEO Robert J. Dickey said in a statement that the company “had a solid start to 2019, with better than expected results across print advertising and circulation revenues” and has had “robust new client acquisition in March and April.”
Dickey is retiring in a week and the company has not named a replacement.
“Importantly, we are continuing to make progress on transitioning to a digitally-led product and revenue model, which we are confident will enhance growth and drive shareholder value,” Dickey said.
Gannett’s operating revenue totaled $663 million in the first quarter of 2019, down 8% compared with a year earlier. S&P Global Market Intelligence had projected revenue of $678 million for the period.
Digital revenue totaled $246 million, representing about 37% of the company’s revenue.
Of Gannett’s $179 million in digital advertising and marketing services revenue, 49% was digital.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.