Gannett Announces Second Quarter 2023 Results and Raises Full Year Outlook

  • Operating Income of $13.5 million; Net Loss Attributable to Gannett of $12.7 million
  • Adjusted EBITDA(1) of $71.2 million, up 40% Year-over-Year
  • Cash Provided by Operating Activities of $46.1 million, up 250% Year-over-Year, Free Cash Flow(1) of $38.4 million, up 189% Year-over-Year

Total Digital Revenues returned to growth in Q2; expect further improvement to digital growth trend in Q3

Improving Digital-only subscription monetization; Digital-only ARPU(2) up 6% Year-over-Year to $6.35

DMS achieved record high core platform revenues(3) and ARPU(2); sequential improvement to customer count(2)

MCLEAN, Va.–(BUSINESS WIRE)–Gannett Co., Inc. (“Gannett”, “we”, “us”, “our”, or the “Company”) (NYSE: GCI) today reported its financial results for the second quarter ended June 30, 2023.


“We are pleased to report strong operational and financial results for the quarter. In the second quarter, Adjusted EBITDA grew by 40% year-over-year, reflecting a margin of approximately 11%, a sizable increase compared to the prior year’s margin of about 7%. Additionally, free cash flow increased by 189% year-over-year, while our strategic initiatives drove ongoing sequential improvements in same-store revenue trends. As a result, our total digital revenues returned to growth in the second quarter and account for nearly 40% of total revenues, representing an all-time high. We believe we are making great progress on our strategy, and our results signify a notable turning point in our business trajectory,” said Michael Reed, Gannett Chairman and Chief Executive Officer.

“In the second quarter, our digital businesses continued to deliver solid results. Digital-only subscription revenues experienced growth of 17% year-over-year on a same store basis, while our digital marketing solutions business achieved record high core platform revenues and ARPU, and sustained strong Adjusted EBITDA margins. We also repaid $15 million of debt, and combined with our improving Adjusted EBITDA performance, we materially reduced our first lien net leverage to 2.26x, while maintaining a healthy liquidity position.”

“We continue to build on the strong foundation we laid over the past year and our focus persists on profitability, digital revenue growth and continuing to enhance our balance sheet. We believe that focus is evident in our results, enabling us to raise our full year guidance again this quarter. We expect sustained improvement in same store revenue trends throughout the second half of the year, alongside more substantial growth in our digital revenue trends. Our strong performance expected in the latter half of this year also extends to Adjusted EBITDA and free cash flow, reinforcing our confidence in achieving a first lien net leverage well below 2.0x by the end of 2023.”

Second Quarter 2023 Highlights:

  • Total revenues of $672.4 million decreased 10.2% compared to the second quarter of 2022

    • Same store revenues(1) decreased 8.6% compared to the second quarter of 2022, reflecting a sequential improvement of 70 basis points compared to the first quarter of 2023
  • Total digital revenues were $262.1 million, or 39.0% of total revenues, up 0.8% over the same period in the prior year on a same store(1) basis
  • Net loss attributable to Gannett of $12.7 million improved by $41.0 million versus the net loss attributable to Gannett of $53.7 million in the second quarter of 2022

    • Adjusted net loss attributable to Gannett(1) of $6.0 million
  • Adjusted EBITDA(1) totaled $71.2 million, an increase of 39.9% compared to the second quarter of 2022

    • Adjusted EBITDA margin(1) of 10.6% improved 380 basis points compared to the 6.8% Adjusted EBITDA margin(1) in the second quarter of 2022
  • Cash provided by operating activities of $46.1 million
  • Free cash flow(1) of $38.4 million, an increase of 188.8% compared to second quarter of 2022
  • Strengthened our executive leadership team through the strategic appointments of:

    • Chris Cho as President of Digital Marketing Solutions
    • Imtiaz Patel as Gannett Media Chief Consumer Officer
    • Kristin Roberts as Gannett Media Chief Content Officer
    • Jason Taylor as Gannett Media Chief Sales Officer
_________________________________
(1)

See “Use of Non-GAAP Information” below for information about these non-GAAP measures.

(2)

See “Key Performance Indicators” (“KPI”) below for information about our use of KPIs.

(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.

Second Quarter 2023 Gannett Media Highlights:

  • Digital-only subscription revenues of $37.9 million grew 16.6% year-over-year and increased 17.3% year-over-year on a same store basis(1)
  • Digital-only paid subscriptions(2) of 1.95 million at the end of the second quarter of 2023, up 4.6% compared to same period in the prior year
  • Digital-only average revenue per user(2) of $6.35 increased 6.2% year-over-year, reflecting the execution of our refined acquisition strategy with a heightened focus on profitability and digital-only average revenue per user(2)
  • 185 million average monthly unique visitors in the second quarter of 2023 with 134 million average monthly unique visitors coming from our USA TODAY NETWORK (based on June 2023 Comscore Media Metrix®) and 51 million average monthly unique visitors resulting from our U.K. digital properties(4)

Second Quarter 2023 Digital Marketing Solutions Highlights:

  • Digital Marketing Solutions segment revenues of $122.8 million grew 4.0% year-over year and increased 4.6% year-over-year on a same store basis(1)

    • Total core platform revenues(3) of $121.6 million in the second quarter of 2023, up 4.4% compared to the same quarter in the prior year
    • Total core platform average customer count(2) of 15.3 thousand increased sequentially by 4.1% compared to the first quarter of 2023
    • Core platform average revenue per user(2) was $2,642, a 10.4% increase year-over-year
    • Customer budget retention(5) was 95.6%, an increase of 70 basis points compared to the second quarter of 2022
  • Net income attributable to Gannett within the segment was $9.3 million in the second quarter of 2023 and Net income attributable to Gannett margin within the segment was 7.6% in the second quarter of 2023 versus 3.6% in the same quarter of the prior year
  • Adjusted EBITDA(1) within the segment of $15.5 million in the second quarter of 2023, increasing 8.1% compared to the same period in the prior year. Adjusted EBITDA margin(1) within the segment increased to 12.6% in the second quarter of 2023 versus 12.1% in the same quarter of the prior year

Second Quarter 2023 Capital Structure Highlights:

  • As of June 30, 2023, the Company had cash and cash equivalents of $106.6 million
  • Total principal amount of debt outstanding as of June 30, 2023 was $1,219.7 million including $731.1 million in first lien debt, which resulted in a First Lien Net Leverage(6) of 2.26x – a decline of 15.7% compared to 2.68x in the fourth quarter of 2022
  • During the second quarter of 2023, the Company repaid $15.1 million of debt through its scheduled quarterly amortization payment on its five-year senior secured term loan facility (the “New Senior Secured Term Loan”)
  • Subsequent to June 30, 2023, the Company repaid $8.2 million of its New Senior Secured Term Loan using the proceeds from real estate asset sales
___________________________________
(4)

Newsquest used Adobe Analytics to identify unique visitors in the second quarter of 2023.

(5)

Customer budget retention is calculated as 1 minus the average of churned budgets in a given month divided by starting budgets in the same period, averaged across the quarter.

(6)

As of June 30, 2023, the First Lien Net Leverage ratio was calculated by subtracting cash on the balance sheet from the sum of both our Senior Secured Term Loan and 6% first lien notes due November 1, 2026 (the “2026 Senior Notes”) and dividing that by Q2 2023 LTM Adjusted EBITDA. Our 6% Senior Secured Convertible Notes due 2027 are second lien as of the completion of the Senior Secured Term Loan refinancing in October 2021.

Financial Highlights

in thousands

Second Quarter 2023

Revenues

$

672,357

 

Net loss attributable to Gannett

 

(12,677

)

Adjusted EBITDA(7) (non-GAAP basis)

 

71,151

 

Adjusted Net loss attributable to Gannett(7) (non-GAAP basis)

 

(5,978

)

Cash provided by operating activities

 

46,068

 

Free cash flow (7) (non-GAAP basis)

 

38,418

 

(7)

Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA, Adjusted Net 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 is raising its 2023 full year outlook with respect to net income (loss) attributable to Gannett, cash provided by operating activities, free cash flow, and Adjusted EBITDA. The Company is reiterating its 2023 full year outlook with respect to revenues, same store total revenues year-over-year, and first lien net leverage. The Company’s estimates do not factor in the impact of any future acquisitions or dispositions.

 

Full Year 2023 Outlook

Prior Full Year 2023 Outlook(11)

Revenues

$2.75B to $2.80B

$2.75B to $2.80B

Same store total revenues(8)(9) Year-Over-Year (non-GAAP basis)

(5%) to (3%)

(5%) to (3%)

Net income (loss) attributable to Gannett

($10M) to $20M

($15M) to $15M

Cash provided by operating activities

$130M to $150M

$125M to $145M

Free cash flow(8)(9)(10) (non-GAAP basis)

$90M to $110M

$85M to $105M

Adjusted EBITDA(8)(9) (non-GAAP basis)

$290M to $310M

$285M to $305M

First lien net leverage

<2.0x

<2.0x

(8)

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.

(9)

Refer to “Business Outlook” on Tables 11, 12 and 13 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures.

(10)

Capital expenditures are assumed at $40 million for full year 2023. Figure does not include asset disposition proceeds which we estimate will be approximately $65 million to $75 million in 2023.

(11)

Projections were based on Company estimates as of May 4, 2023.

Earnings Conference Call

Management will host a conference call on Thursday, August 3, 2023 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 Second Quarter Earnings Call” or access code “13733335”. 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, August 17, 2023 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 “13733335”.

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 the USA TODAY NETWORK, which includes USA TODAY, and local media organizations in 43 states in the United States, and Newsquest, a wholly-owned subsidiary operating in the United Kingdom. We also own digital marketing services companies under the brand LocaliQ, which provide a cloud-based platform of products to enable small and medium-sized businesses to accomplish their marketing goals. In addition, our portfolio includes what we believe is 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, net income (loss) attributable to Gannett, same-store revenues and cash flows, expectations regarding our long-term growth, expectations regarding 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 ability to navigate volatility, achieve our financial goals, optimize our capital structure and achieve optimal financial performance, our cost management programs, our cost structure and future revenue trends and our ability to influence trends. Words such as “expect(s)”, believe(s)”, “continue(s)”, “persist(s)”, “will”, “anticipate”, “outlook”, “making”, “target”, “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

 

Table No. 1

 

 

 

In thousands, except share data

June 30, 2023

 

December 31, 2022

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

106,633

 

 

$

94,255

 

Accounts receivable, net of allowance of $13,170 and $16,697 as of June 30, 2023 and December 31, 2022, respectively

 

250,164

 

 

 

289,415

 

Inventories

 

29,449

 

 

 

45,223

 

Prepaid expenses

 

51,846

 

 

 

46,205

 

Other current assets

 

43,693

 

 

 

32,679

 

Total current assets

 

481,785

 

 

 

507,777

 

Property, plant and equipment, net of accumulated depreciation of $387,919 and $360,522 as of June 30, 2023 and December 31, 2022, respectively

 

254,402

 

 

 

305,994

 

Operating lease assets

 

223,174

 

 

 

233,322

 

Goodwill

 

533,796

 

 

 

533,166

 

Intangible assets, net

 

569,757

 

 

 

613,358

 

Deferred tax assets

 

71,731

 

 

 

56,618

 

Pension and other assets

 

172,193

 

 

 

143,320

 

Total assets

$

2,306,838

 

 

$

2,393,555

 

 

 

 

 

Liabilities and equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

302,308

 

 

$

351,848

 

Deferred revenue

 

137,478

 

 

 

153,648

 

Current portion of long-term debt

 

63,752

 

 

 

60,452

 

Operating lease liabilities

 

46,556

 

 

 

44,872

 

Other current liabilities

 

5,606

 

 

 

6,218

 

Total current liabilities

 

555,700

 

 

 

617,038

 

Long-term debt

 

647,811

 

 

 

695,642

 

Convertible debt

 

408,992

 

 

 

405,681

 

Deferred tax liabilities

 

 

 

 

1,439

 

Pension and other postretirement benefit obligations

 

47,989

 

 

 

50,710

 

Long-term operating lease liabilities

 

205,753

 

 

 

219,109

 

Other long-term liabilities

 

113,696

 

 

 

108,563

 

Total noncurrent liabilities

 

1,424,241

 

 

 

1,481,144

 

Total liabilities

 

1,979,941

 

 

 

2,098,182

 

Commitments and contingent liabilities

 

 

 

Equity

 

 

 

Preferred stock, $0.01 par value per share, 300,000 shares authorized, of which 0 shares and 150,000 shares were designated as Series A Junior Participating Preferred Stock at June 30, 2023 and December 31, 2022, respectively, none of which were issued and outstanding at June 30, 2023 and December 31, 2022

 

 

 

 

 

Common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 158,436,428 shares issued and 149,125,668 shares outstanding at June 30, 2023; 153,286,104 shares issued and 146,223,179 shares outstanding at December 31, 2022

 

1,584

 

 

 

1,533

 

Treasury stock, at cost, 9,310,760 shares and 7,062,925 shares at June 30, 2023 and December 31, 2022, respectively

 

(17,370

)

 

 

(14,737

)

Additional paid-in capital

 

1,418,577

 

 

 

1,409,578

 

Accumulated deficit

 

(1,001,734

)

 

 

(999,401

)

Accumulated other comprehensive loss

 

(73,694

)

 

 

(101,231

)

Total Gannett stockholders’ equity

 

327,363

 

 

 

295,742

 

Noncontrolling interests

 

(466

)

 

 

(369

)

Total equity

 

326,897

 

 

 

295,373

 

Total liabilities and equity

$

2,306,838

 

 

$

2,393,555

 

GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Table No. 2

Three months ended June 30,

In thousands, except per share amounts

2023

 

2022

Advertising and marketing services

$

353,310

 

 

$

383,609

 

Circulation

 

233,612

 

 

 

274,624

 

Other

 

85,435

 

 

 

90,427

 

Total operating revenues

 

672,357

 

 

 

748,660

 

Operating costs

 

426,096

 

 

 

476,002

 

Selling, general and administrative expenses

 

184,127

 

 

 

227,836

 

Depreciation and amortization

 

39,784

 

 

 

49,530

 

Integration and reorganization costs

 

7,287

 

 

 

15,745

 

Asset impairments

 

1,177

 

 

 

85

 

Loss on sale or disposal of assets, net

 

146

 

 

 

372

 

Other operating expenses

 

229

 

 

 

314

 

Total operating expenses

 

658,846

 

 

 

769,884

 

Operating income (loss)

 

13,511

 

 

 

(21,224

)

Interest expense

 

28,559

 

 

 

26,084

 

Loss on early extinguishment of debt

 

 

 

 

749

 

Non-operating pension income

 

(2,263

)

 

 

(18,160

)

Other non-operating (income) expense, net

 

(1,428

)

 

 

1,645

 

Non-operating expenses

 

24,868

 

 

 

10,318

 

Loss before income taxes

 

(11,357

)

 

 

(31,542

)

Provision for income taxes

 

1,333

 

 

 

22,158

 

Net loss

 

(12,690

)

 

 

(53,700

)

Net loss attributable to noncontrolling interests

 

(13

)

 

 

(12

)

Net loss attributable to Gannett

$

(12,677

)

 

$

(53,688

)

 

 

 

 

Loss per share attributable to Gannett – basic

$

(0.09

)

 

$

(0.39

)

Loss per share attributable to Gannett – diluted

$

(0.09

)

 

$

(0.39

)

GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Table No. 3

Six months ended June 30,

In thousands

2023

 

2022

Operating activities

 

 

 

Net loss

$

(2,430

)

 

$

(56,802

)

Adjustments to reconcile net loss to operating cash flows:

 

 

 

Depreciation and amortization

 

83,482

 

 

 

97,313

 

Share-based compensation expense

 

8,783

 

 

 

8,778

 

Non-cash interest expense

 

10,567

 

 

 

10,641

 

Gain on sale or disposal of assets, net

 

(17,535

)

 

 

(2,432

)

(Gain) loss on early extinguishment of debt

 

(496

)

 

 

3,492

 

Asset impairments

 

1,182

 

 

 

939

 

Pension and other postretirement benefit obligations

 

(6,792

)

 

 

(51,353

)

Change in other assets and liabilities, net

 

(23,975

)

 

 

(8,888

)

Cash provided by operating activities

 

52,786

 

 

 

1,688

 

Investing activities

 

 

 

Acquisitions, net of cash acquired

 

 

 

 

(15,432

)

Purchase of property, plant and equipment

 

(16,448

)

 

 

(23,292

)

Proceeds from sale of real estate and other assets

 

31,465

 

 

 

29,623

 

Change in other investing activities

 

(12

)

 

 

(548

)

Cash provided by (used for) investing activities

 

15,005

 

 

 

(9,649

)

Financing activities

 

 

 

Payments of deferred financing costs

 

 

 

 

(957

)

Borrowings of long-term debt

 

 

 

 

80,000

 

Repayments of long-term debt

 

(51,291

)

 

 

(104,879

)

Acquisition of noncontrolling interests

 

 

 

 

(2,050

)

Treasury stock

 

(2,622

)

 

 

(6,529

)

Changes in other financing activities

 

(647

)

 

 

(632

)

Cash used for financing activities

 

(54,560

)

 

 

(35,047

)

Effect of currency exchange rate change on cash

 

98

 

 

 

(1,140

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

13,329

 

 

 

(44,148

)

Cash, cash equivalents and restricted cash at beginning of period

 

104,804

 

 

 

143,619

 

Cash, cash equivalents and restricted cash at end of period

$

118,133

 

 

$

99,471

 

GANNETT CO., INC.

SEGMENT INFORMATION

(Unaudited)

 

Table No. 4

Three months ended June 30,

In thousands

2023

 

2022

Operating revenues:

 

 

 

Gannett Media

$

585,803

 

 

$

664,844

 

Digital Marketing Solutions

 

122,789

 

 

 

118,013

 

Corporate and other

 

1,673

 

 

 

1,408

 

Intersegment eliminations

 

(37,908

)

 

 

(35,605

)

Total

$

672,357

 

 

$

748,660

 

 

 

 

 

Adjusted EBITDA(1) (non-GAAP basis):

 

 

 

Gannett Media

$

65,819

 

 

$

50,856

 

Digital Marketing Solutions

 

15,470

 

 

 

14,306

 

Corporate and other

 

(10,138

)

 

 

(14,311

)

Total

$

71,151

 

 

$

50,851

 

(1)

See “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA, and the reconciliation of such measure to the most comparable GAAP measure.

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.

Contacts

For investor inquiries, contact:
Matt Esposito

Investor Relations

703-854-3000

investors@gannett.com

For media inquiries, contact:
Lark-Marie Anton

Corporate Communications

646-906-4087

lark@gannett.com

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