Gannett Announces Third Quarter 2022 Results and Reiterates Full Year Outlook

28.5% Digital-Only Paid Subscriber Growth Year-Over-Year to 1.98 million Paid Subscribers

Record High Digital Marketing Solutions Core Platform Revenues of $118.7 million

Repaid $24.3 million in Debt During the Quarter and $129.9 million of Debt Year-to-Date⁽¹⁾

Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the third quarter ended September 30, 2022.

“The Company continues to respond decisively to the ongoing macroeconomic volatility and inflationary pressures. We continue to execute on $200 million to $240 million in annualized cost savings through the implementation of temporary and permanent actions that are expected to give us near-term flexibility and allow us to continue forward towards the Company's digital transformation,” said Michael Reed, Gannett Chairman and Chief Executive Officer. “While these cost saving initiatives drove a sequential improvement to Adjusted EBITDA and Adjusted EBITDA margin in the third quarter, we expect to capture most of the benefits in the fourth quarter of 2022 and the full year of 2023."

"The results in our Digital-only and Digital Marketing Solutions businesses in the third quarter are evidence that our digital transformation is progressing well. We finished the third quarter with 1.98 million digital-only paid subscribers, growing 28.5% year-over-year, and during October, we accomplished an important milestone by surpassing 2.0 million digital-only paid subscribers. Also, our Digital Marketing Solutions business achieved record high core platform revenue during the third quarter, while maintaining double-digit Adjusted EBITDA margins for the sixth consecutive quarter."

“We also remain committed to continued optimization of our overall capital structure, in part through our continued debt reduction. During the third quarter we repaid $24.3 million in debt with an additional repayment of $30.7 million subsequent to the end of the third quarter. While we continue to navigate a difficult operating environment, we are confident in our belief that the actions we are taking are positioning Gannett on a path towards revenue and free cash flow growth as well as increased value for our shareholders over the long-term.”

Third Quarter 2022 Financial Highlights:

• Total revenues of $717.9 million decreased 10.3% compared to the third quarter of 2021
  • Same store revenues⁽²⁾ decreased 9.0% compared to the third quarter of 2021
• Total digital revenues were $256.4 million or 35.7% of total revenues, down 2.3% over the same period in the prior year on a same store⁽²⁾ basis mainly as a result of weakness in digital media year-over-year
• Net loss attributable to Gannett of $54.1 million, a loss margin of 7.5%
• Adjusted net income attributable to Gannett⁽²⁾ of $48.4 million
• Adjusted EBITDA⁽²⁾ totaled $51.9 million, a decrease of 49.1% compared to the third quarter of 2021
  • Sequential improvement of 2.1% compared to the second quarter of 2022
  • Adjusted EBITDA margin⁽²⁾ of 7.2%, representing sequential improvement of 40 basis points compared to the second quarter of 2022
• Cash provided by operating activities of $31.3 million
• Free cash flow⁽²⁾ of $18.6 million

⁽¹⁾ Reflects subsequent events occurring after the end of the third quarter and as of November 3, 2022.

⁽²⁾ See "Use of Non-GAAP Information" below for information about this non-GAAP measure.

Additional Business Highlights:

• Digital-only paid subscribers of 1.98 million at the end of the third quarter of 2022, up 28.5% compared to same period in the prior year
  • Digital-only circulation revenues of $34.5 million grew 35.4% year-over-year on a same store basis⁽²⁾ and increased 34.3% in the third quarter of 2022 compared to the same period in the prior year
• 178 million average monthly unique visitors in the third quarter of 2022 with 126 million average monthly unique visitors coming from our USA TODAY NETWORK (based on September 2022 Comscore Media Metrix®) and 52 million average monthly unique visitors resulting from our U.K. digital properties
• Digital Marketing Solutions segment revenues were $120.0 million, and on a same store basis⁽²⁾ increased 3.4% in the third quarter of 2022 compared to the same period in the prior year
  • Total core platform revenues⁽³⁾ experienced a record high of $118.7 million in the third quarter of 2022, up 5.3% compared to the same quarter in the prior year
  • Total core platform customers of 15,800 in the third quarter of 2022 up 2.6% compared to the third quarter of 2021
  • Average revenue per user⁽⁴⁾ was $2,511 in the third quarter of 2022, increasing 2.6% compared to the third quarter of 2021
  • Net income attributable to Gannett within the segment was $5.4 million in the third quarter and Net income attributable to Gannett margin within the segment was 4.5% in the third quarter of 2022 versus 4.3% in the same quarter of the prior year
  • Adjusted EBITDA⁽²⁾ within the segment of $15.7 million in the third quarter of 2022, increasing 4.4% compared to the same period in the prior year. Adjusted EBITDA margin⁽²⁾ within the segment increased to 13.1% in the third quarter of 2022 versus 12.9% in the same quarter of the prior year
• As of September 30, 2022, the Company had cash and cash equivalents of $124.9 million
• Total principal amount of debt outstanding as of September 30, 2022 was $1,319.5 million including $830.9 million in first lien debt, which resulted in a First Lien Net Leverage⁽⁵⁾ of 2.50x
• During the third quarter of 2022, the Company repaid $24.3 million of debt
  • The Company repurchased approximately $7.0 million of 2026 Senior Notes for approximately $5.5 million, representing a discount to par
  • The Company repaid $17.3 million of its five-year senior secured term loan facility (the “New Senior Secured Term Loan”) using the proceeds from real estate and other asset sales totaling $2.2 million and its scheduled quarterly amortization of $15.1 million
• Subsequent to September 30, 2022, the Company repaid approximately $30.7 million of debt from cash on hand
  • The Company repurchased approximately $17.8 million of the 2026 Senior Notes for approximately $14.4 million representing a discount to par
  • The Company repaid $12.8 million of its New Senior Secured Term Loan using the proceeds from real estate and other asset sales

⁽³⁾ Core platform revenues is defined as revenue derived from customers utilizing our proprietary digital marketing services platform that are sold by either our direct or local market teams.

⁽⁴⁾ Average revenue per user is defined as monthly revenue divided by average customer count within the given period.

⁽⁵⁾ As of September 30, 2022, the First Lien Net Leverage ratio was calculated by subtracting cash on the balance sheet from the sum of both our New Senior Secured Term Loan and 6% first lien notes due November 1, 2026 (the “2026 Senior Notes”) and dividing that by Q3 2022 LTM Adjusted EBITDA. Our 6% Senior Secured Convertible Notes due 2027 are second lien as of the completion of the New Senior Secured Term Loan refinancing in October 2021.

Financial Highlights

⁽⁶⁾ Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Adjusted Net income (loss) attributable to Gannett, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure.

Business Outlook

The Company reiterates its full year outlook. The Company's estimates do not factor in the impact of any future acquisitions or dispositions.

⁽⁷⁾ Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Same-store total revenues, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure.

⁽⁸⁾ Refer to "Business Outlook" on Tables 11, 12 and 13 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures.

⁽⁹⁾ Capital expenditures are assumed at $40 million to $45 million for full year 2022. Figure does not include asset disposition proceeds which we estimate will be approximately $65 million to $75 million in 2022.

Earnings Conference Call

Management will host a conference call on Thursday, November 3, 2022 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-877-451-6152 (from within the U.S.) or 1-201-389-0879 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Gannett Third Quarter Earnings Call" or access code "13724046". A simultaneous webcast of the conference call will be available to the public on a listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, November 17, 2022 by dialing 1-844-512-2921 (from within the U.S.) or 1-412-317-6671 (from outside of the U.S.); please reference access code "13724046".

About Gannett

Gannett Co., Inc. (NYSE: GCI) is a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. With an unmatched reach at the national and local level, Gannett touches the lives of millions with our Pulitzer Prize-winning content, consumer experiences and benefits, and advertiser products and services. Our current portfolio of media assets includes USA TODAY, local media organizations in 45 states in the U.S., and Newsquest, a wholly owned subsidiary operating in the United Kingdom with more than 150 local news media brands. Gannett also owns digital marketing services companies branded LocaliQ, and runs one of the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures. To connect with us, visit www.gannett.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, our Business Outlook, statements regarding our business outlook, digital revenue performance and growth, growth in our Digital Marketing Solutions segment, growth of and demand for our digital-only subscriptions and digital marketing and advertising services, expectations regarding our free cash flows, revenues, income attributable to Gannett, same-store revenues and cash flows, expectations regarding our growth rate and inflection point, including growth in revenues and Adjusted EBITDA, our ability to create long-term stockholder value, our expectations, in terms of both amount and timing, with respect to debt repayment, our expected capital expenditures, expectations regarding real estate and other asset sales, our strategy, our ability to achieve our operating priorities, our long-term opportunities, economic impacts, our cost reduction programs, our cost structure and future revenue trends and our ability to influence trends. Words such as "expect(s)", believes(s)", "will", "outlook", "target", "continue", "estimate(s)", "project(s)" and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s most recent Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Except to the extent required by law, the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. 

GANNETT CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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GANNETT CO., INC.

SEGMENT INFORMATION

(Unaudited)

USE OF NON-GAAP INFORMATION

The Company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a U.S. GAAP basis. These non-GAAP financial measures, which may not be comparable to similarly titled measures reported by other companies, should not be considered in isolation from or as a substitute for the related U.S. GAAP measures and should be read together with financial information presented on a U.S. GAAP basis.

The Company defines its non-GAAP measures as follows:

• Adjusted EBITDA is a non-GAAP performance measure the Company believes offers a useful view of the overall and segment operations of our business. The Company defines Adjusted EBITDA as Net income (loss) attributable to Gannett before: (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income, (5) Loss on convertible notes derivative, (6) Depreciation and amortization, (7) Integration and reorganization costs, (8) Other operating expenses, including third-party debt expenses and acquisition costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation, and (13) certain other non-recurring charges. The most directly comparable U.S. GAAP measure is Net income (loss) attributable to Gannett.
• Adjusted EBITDA margin is a non-GAAP performance measure the Company believes offers a useful view of the overall and segment operations of our business. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total Operating revenues.
• Adjusted Net income (loss) attributable to Gannett is a non-GAAP performance measure the Company believes offers a useful view of the overall operations of our business and is useful to analysts and investors in evaluating the results of operations and operational trends. The Company defines Adjusted Net income (loss) attributable to Gannett before (1) Gains or losses on the early extinguishment of debt, (2) Loss on convertible notes derivative, (3) Integration and reorganization costs, (4) Other operating expenses, including third-party debt expenses and acquisition costs, (5) Asset impairments, (6) Goodwill and intangibles impairments, (7) Gains or losses on the sale or disposal of assets, (8) certain other non-recurring charges, and (9) the tax impact of the above items.
• Free cash flow is a non-GAAP liquidity measure that adjusts our reported U.S. GAAP results for items we believe are critical to the ongoing success of our business. The Company defines Free cash flow as Cash provided by operating activities as reported on the Consolidated Statement of Cash Flows less capital expenditures, which results in a figure representing Free cash flow available for use in operations, additional investments, debt obligations, and returns to stockholders. The most directly comparable U.S. GAAP financial measure is Cash provided by operating activities.
• Same store revenues is a non-GAAP performance measure based on GAAP revenues for Gannett for the current period, excluding (1) acquired revenues (2) currency impact, and (3) exited operations.

Management’s Use of Non-GAAP Measures

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues are not measurements of financial performance under U.S. GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), margin, revenues, cash flow provided by (used for) operating activities, or any other measure of performance or liquidity derived in accordance with U.S. GAAP. We believe these non-GAAP financial measures, as we have defined them, are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.

We use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues as measures of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results.

Limitations of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues

Each of our non-GAAP measures have limitations as analytical tools. They should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and Adjusted Net income (loss) attributable to Gannett using these non-GAAP financial measures as compared to U.S. GAAP net income (loss) include: the cash portion of interest / financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly affect our financial results.

Management believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues are not alternatives to net income, margin, income from operations, cash flows provided by (used for) operations or revenues as calculated and presented in accordance with U.S. GAAP. As such, they should not be considered or relied upon as substitutes or alternatives for any such U.S. GAAP financial measure. We strongly urge you to review the reconciliations of Net income (loss) attributable to Gannett to Adjusted EBITDA, Adjusted EBITDA margin, Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett, Cash provided by (used for) operations to Free cash flow and Revenues to Same Store revenues along with our Consolidated financial statements included elsewhere in this report. We also strongly urge you not to rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, the Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

Non-GAAP Outlook

Our 2022 outlook included in this release includes certain non-GAAP measures, including Same store revenues, Adjusted EBITDA and Free cash flow. The outlook for these items assumes no substantial pandemic-related business continuity issues in 2022 and does not factor in the impact of any further acquisitions or dispositions within 2022. We have provided these non-GAAP measures for future guidance for the same reasons that were outlined above for historical non-GAAP measures.

We have not fully reconciled non-GAAP forward-looking Same store revenues, Adjusted EBITDA and Free cash flow to its most directly comparable GAAP measure because the Company is unable to predict with reasonable certainty those items that may affect such measures calculated and presented in accordance with GAAP without unreasonable effort. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, our comparable GAAP measures. For forward-looking Adjusted EBITDA and Same store revenues, the reconciliation is unavailable because it would include forward-looking financial statements in accordance with GAAP that are unavailable without unreasonable effort. For these reasons, we use a projected range of the aggregate amount of certain items in order to calculate our projected non-GAAP Adjusted EBITDA outlook (see Table 11 below), our projected non-GAAP Same Store revenues outlook (see Table 12 below) as well as our projected non-GAAP Free cash flow outlook (see Table 13 below). Accordingly, we are unable to provide a full reconciliation of these non-GAAP measures used in our outlook without unreasonable effort as certain information necessary to calculate such measures on a GAAP basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

ADJUSTED EBITDA

(Unaudited)

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO GANNETT

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GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

FREE CASH FLOW

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⁽¹⁾ For the three months ended September 30, 2022 and 2021 free cash flow was negatively impacted by integration and reorganization costs of $22.4 million and $18.5 million, respectively, and interest paid of $9.1 million and $30.3 million, respectively.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

SAME STORE REVENUES - CONSOLIDATED

(Unaudited)

*** Indicates a percentage change greater than 100.

⁽¹⁾ In 2022, exited operations include (i) businesses divested and (ii) the elimination of stand-alone print products discontinued within the publishing markets.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

SAME STORE REVENUES - DIGITAL REVENUES

(Unaudited)

*** Indicates a percentage change greater than 100.

⁽¹⁾ In 2022, exited operations include (i) businesses divested and (ii) the elimination of stand-alone print products discontinued within the publishing markets.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

SAME STORE REVENUES - DIGITAL MARKETING SOLUTIONS SEGMENT

(Unaudited)

*** Indicates a percentage change greater than 100.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

BUSINESS OUTLOOK - 2022 GUIDANCE⁽¹⁾⁽²⁾

ADJUSTED EBITDA

(Unaudited)

⁽¹⁾ Projections are based on Company estimates as of November 3, 2022 and are provided solely for illustrative purposes. Actual results may vary. The Company undertakes no obligation to update this information. Additionally, the Company's estimates do not factor in the impact of any future acquisitions or dispositions. The Company’s future financial results could differ materially from the Company’s current estimates.

⁽²⁾ For forward-looking Adjusted EBITDA, the reconciliation is unavailable without unreasonable effort. For this reason, we use a projected range of the aggregate amount of certain items in order to calculate our projected non-GAAP Adjusted EBITDA outlook.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

BUSINESS OUTLOOK - 2022 GUIDANCE⁽¹⁾⁽²⁾

SAME STORE REVENUES

(Unaudited)

⁽¹⁾ Projections are based on Company estimates as of November 3, 2022 and are provided solely for illustrative purposes. Actual results may vary. The Company undertakes no obligation to update this information. Additionally, the Company's estimates do not factor in the impact of any future acquisitions or dispositions. The Company’s future financial results could differ materially from the Company’s current estimates.

⁽²⁾ For forward-looking Same store revenues, the reconciliation is unavailable without unreasonable effort. For this reason, we use a projected range of the aggregate amount of certain items in order to calculate our projected non-GAAP Same store revenues outlook.

⁽³⁾ In 2022, exited operations include (i) businesses divested and (ii) the elimination of stand-alone print products discontinued within the publishing markets.

⁽⁴⁾ Total revenues as reported.

⁽⁵⁾ Estimated to reflect adjustments for operations expected to be exited during the same period in fiscal 2022 based on current expectations regarding exit timing and specific products and operations to be exited.

GANNETT CO., INC.

NON-GAAP FINANCIAL INFORMATION

BUSINESS OUTLOOK - 2022 GUIDANCE⁽¹⁾⁽²⁾

FREE CASH FLOW

(Unaudited)

⁽¹⁾ Projections are based on Company estimates as of November 3, 2022 and are provided solely for illustrative purposes. Actual results may vary. The Company undertakes no obligation to update this information. Additionally, the Company's estimates do not factor in the impact of any future acquisitions or dispositions. The Company’s future financial results could differ materially from the Company’s current estimates.

⁽²⁾ For forward-looking Free cash flow, the reconciliation is unavailable without unreasonable effort. For this reason, we use a projected range of the aggregate amount of certain items in order to calculate our projected non-GAAP Free cash flow outlook. 

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