USA TODAY owner Gannett reported a net loss of about $437 million in the second quarter as businesses cut back on advertising amid the COVID-19 pandemic and significant accounting charges took a toll on the bottom line.
The company, which cut expenses aggressively during the quarter to offset a decline in revenue, said $393 million of the net loss was attributable to a "non-cash goodwill and intangible impairment" charge, while $66 million was attributable to depreciation and amortization.
Revenue fell 28% from a year earlier to $767 million, though the company said it posted an increase in revenue from month to month during the second quarter as business conditions gradually improved.
The media company, which owns more than 260 daily publications, reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $78 million, reflecting a profit margin of 10.2%.
"We see a clear path to significant upside over the next several years," Gannett CEO and Chairman Michael Reed said on an earnings call with analysts and investors.
He also hailed the company’s journalism during the second quarter, which included reports on the COVID-19 pandemic, economic distress and widespread protests of police brutality and racism.
"At no time in our history has the value of high quality journalism been as clear as it is right now at this intersection of a global pandemic and a nation in turmoil over systemic racism and inequality. Our journalists have worked tirelessly and doggedly to help keep our communities safe and informed, while exercising the crucial role of holding officials accountable,” Reed said in a statement.
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The company’s second-quarter earnings report reflects the combination of New Media Investment Group and Gannett after their merger in November, a deal that created the largest U.S. media company by print circulation and one of the largest by digital audience.
The journalism industry is grappling with a sharp reduction in advertising due to COVID-19, which has hurt key spenders like restaurants, stores and travel companies. The industry also continues to deal with the advertising shift from print to digital.
To offset a sudden drop in revenue from the coronavirus fallout, Gannett suspended its dividend on April 1, cut capital expenditures and implemented more than $125 million in second-quarter cost cuts in addition to previously planned savings tied to the merger.
The reductions have included furloughs, job cuts, pay cuts for senior managers and the suspension of nonessential travel and spending. The company also recently announced the suspension of its 401(k) match beginning later this month. Many other news outlets have taken similar steps.
Overall, operating expenses fell 26% for the period, compared with a year earlier.
Temporary cost cuts will be phased out after the third quarter and the company will be "replacing them with permanent cost reductions" due to the slumping economy, Reed said on the call.
Gannett’s print advertising revenue fell 45% to $188 million in the second quarter, compared with the same period a year earlier. Digital advertising and marketing services revenue was down 27% to $104 million. Circulation revenue declined 14% to $342 million.
Paid digital subscriptions rose 31% from a year earlier to 927,000. Online subscriptions are viewed as critical to the success of media companies in the digital age as newspaper dollars decline.
Gannett is obligated to pay off a five-year, $1.8 billion loan owed to Apollo Global Management, which helped finance the transaction between GateHouse Media parent company New Media and the “old” Gannett.
The company said it is “highly confident” in its ability to pay off the debt on schedule.
Following the merger, Gannett continues to cut overlapping costs. The company said it has already achieved more than $160 million in annualized savings due to the merger.
Reed said Gannett believes it will exceed its goal of $300 million in annualized savings by the end of 2021.
Gannett's stock was down 9.9% to $1.50 in early trading Thursday.
"We believe our company is undervalued right now," he said.
Gannett’s publications include the Arizona Republic, Detroit Free Press, Columbus Dispatch, Austin American-Statesman, Milwaukee Journal Sentinel, Louisville Courier Journal and hundreds of other daily and weekly news properties.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
This article originally appeared on USA TODAY: Gannett earnings: USA TODAY owner posts decline in revenue, expenses