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)

MCLEAN, Va.–(BUSINESS WIRE)–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

in thousands

Third Quarter 2022

Revenues

$

717,902

 

Net loss attributable to Gannett

 

(54,114

)

Adjusted EBITDA(6) (non-GAAP)

 

51,909

 

Adjusted Net income attributable to Gannett(6) (non-GAAP)

 

48,382

 

Cash provided by operating activities

 

31,294

 

Free cash flow(6) (non-GAAP)

 

18,643

 

(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.

 

FY 2022 Outlook

Revenues

$2.95B to $3.0B

Same-store total revenues(7)(8) Year-Over-Year

(7)% to (6)%

Net income (loss) attributable to Gannett

$(70)M to $(60)M

Cash provided by operating activities

$45M to $65M

Free cash flow(7)(8)(9) (non-GAAP)

$0 to $20M

Adjusted EBITDA(7)(8) (non-GAAP)

$270M to $300M

Ending Digital-only subscribers

2.0M to 2.2M

(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

Table No. 1

 

 

 

In thousands, except share data

September 30, 2022

 

December 31, 2021

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

124,867

 

 

$

130,756

 

Accounts receivable, net of allowance for doubtful accounts of $12,056 and $16,470 as of September 30, 2022 and December 31, 2021, respectively

 

270,440

 

 

 

328,733

 

Inventories

 

37,853

 

 

 

37,662

 

Prepaid expenses and other current assets

 

70,088

 

 

 

80,110

 

Total current assets

 

503,248

 

 

 

577,261

 

Property, plant and equipment, net of accumulated depreciation of $348,363 and $336,500 as of September 30, 2022 and December 31, 2021, respectively

 

328,607

 

 

 

415,384

 

Operating lease assets

 

243,096

 

 

 

271,935

 

Goodwill

 

537,898

 

 

 

533,709

 

Intangible assets, net

 

638,337

 

 

 

713,153

 

Deferred tax assets

 

 

 

 

32,399

 

Pension and other assets

 

230,466

 

 

 

284,228

 

Total assets

$

2,481,652

 

 

$

2,828,069

 

 

 

 

 

Liabilities and equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

342,815

 

 

$

357,014

 

Deferred revenue

 

161,585

 

 

 

184,838

 

Current portion of long-term debt

 

91,117

 

 

 

69,456

 

Other current liabilities

 

53,142

 

 

 

51,218

 

Total current liabilities

 

648,659

 

 

 

662,526

 

Long-term debt

 

708,970

 

 

 

769,446

 

Convertible debt

 

402,469

 

 

 

393,354

 

Deferred tax liabilities

 

7,161

 

 

 

28,812

 

Pension and other postretirement benefit obligations

 

65,911

 

 

 

71,937

 

Long-term operating lease liabilities

 

228,412

 

 

 

254,969

 

Other long-term liabilities

 

106,935

 

 

 

117,410

 

Total noncurrent liabilities

 

1,519,858

 

 

 

1,635,928

 

Total liabilities

 

2,168,517

 

 

 

2,298,454

 

Commitments and contingent liabilities

 

 

 

Equity

 

 

 

Preferred stock, $0.01 par value per share, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at September 30, 2022 and December 31, 2021

 

 

 

 

 

Common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 152,710,398 shares issued and 146,218,045 shares outstanding at September 30, 2022; 144,667,389 shares issued and 142,299,399 shares outstanding at December 31, 2021

 

1,527

 

 

 

1,446

 

Treasury stock, at cost, 6,492,353 shares and 2,367,990 shares at September 30, 2022 and December 31, 2021, respectively

 

(14,706

)

 

 

(8,151

)

Additional paid-in capital

 

1,406,556

 

 

 

1,400,206

 

Accumulated deficit

 

(1,032,168

)

 

 

(921,399

)

Accumulated other comprehensive (loss) income

 

(47,803

)

 

 

59,998

 

Total Gannett stockholders equity

 

313,406

 

 

 

532,100

 

Noncontrolling interests

 

(271

)

 

 

(2,485

)

Total equity

 

313,135

 

 

 

529,615

 

Total liabilities and equity

$

2,481,652

 

 

$

2,828,069

 

GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Table No. 2

Three months ended September 30,

In thousands, except per share amounts

 

2022

 

 

 

2021

 

Advertising and marketing services

$

361,847

 

 

$

412,020

 

Circulation

 

264,732

 

 

 

306,702

 

Other

 

91,323

 

 

 

81,463

 

Total operating revenues

 

717,902

 

 

 

800,185

 

Operating costs

 

459,343

 

 

 

480,289

 

Selling, general and administrative expenses

 

212,473

 

 

 

225,596

 

Depreciation and amortization

 

44,778

 

 

 

48,107

 

Integration and reorganization costs

 

33,311

 

 

 

13,619

 

Asset impairments

 

71

 

 

 

2,301

 

Gain on sale or disposal of assets, net

 

(7,180

)

 

 

(833

)

Other operating expenses

 

249

 

 

 

4

 

Total operating expenses

 

743,045

 

 

 

769,083

 

Operating income (loss)

 

(25,143

)

 

 

31,102

 

Interest expense

 

27,750

 

 

 

34,603

 

(Gain) loss on early extinguishment of debt

 

(1,228

)

 

 

3,761

 

Non-operating pension income

 

(14,990

)

 

 

(23,860

)

Other non-operating income, net

 

(651

)

 

 

(931

)

Non-operating expenses

 

10,881

 

 

 

13,573

 

Income (loss) before income taxes

 

(36,024

)

 

 

17,529

 

Provision for income taxes

 

18,098

 

 

 

2,984

 

Net income (loss)

 

(54,122

)

 

 

14,545

 

Net loss attributable to noncontrolling interests

 

(8

)

 

 

(142

)

Net income (loss) attributable to Gannett

$

(54,114

)

 

$

14,687

 

 

 

 

 

Interest adjustment to Net income (loss) attributable to Gannett to assumed conversions of the 2027 Notes, net of taxes

$

 

 

$

7,598

 

Net income (loss) attributable to Gannett for diluted earnings per share

$

(54,114

)

 

$

22,285

 

 

 

 

 

Income (loss) per share attributable to Gannett – basic

$

(0.39

)

 

$

0.11

 

Income (loss) per share attributable to Gannett – diluted

$

(0.39

)

 

$

0.09

 

GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Table No. 3

Nine months ended September 30,

In thousands

 

2022

 

 

 

2021

 

Operating activities

 

 

 

Net loss

$

(110,924

)

 

$

(113,447

)

Adjustments to reconcile net loss to operating cash flows:

 

 

 

Depreciation and amortization

 

142,091

 

 

 

154,452

 

Share-based compensation expense

 

13,277

 

 

 

13,804

 

Non-cash interest expense

 

15,954

 

 

 

18,719

 

(Gain) loss on sale or disposal of assets, net

 

(9,612

)

 

 

9,206

 

Loss on convertible notes derivative

 

 

 

 

126,600

 

Loss on early extinguishment of debt

 

2,264

 

 

 

25,996

 

Asset impairments

 

1,010

 

 

 

3,134

 

Pension and other postretirement benefit obligations

 

(71,640

)

 

 

(114,663

)

Change in other assets and liabilities, net

 

50,562

 

 

 

9,546

 

Cash provided by operating activities

 

32,982

 

 

 

133,347

 

Investing activities

 

 

 

Acquisitions, net of cash acquired

 

(15,432

)

 

 

 

Purchase of property, plant and equipment

 

(35,943

)

 

 

(27,265

)

Proceeds from sale of real estate and other assets

 

71,004

 

 

 

67,434

 

Change in other investing activities

 

(548

)

 

 

(933

)

Cash provided by investing activities

 

19,081

 

 

 

39,236

 

Financing activities

 

 

 

Payments of deferred financing costs

 

(957

)

 

 

(33,921

)

Borrowings under term loans

 

80,000

 

 

 

1,045,000

 

Repayments under term loans

 

(92,212

)

 

 

(1,220,751

)

Repayments of long-term debt

 

(35,355

)

 

 

 

Acquisition of noncontrolling interests

 

(2,050

)

 

 

 

Treasury stock

 

(6,529

)

 

 

(2,034

)

Changes in other financing activities

 

(941

)

 

 

(578

)

Cash used for financing activities

 

(58,044

)

 

 

(212,284

)

Effect of currency exchange rate change on cash

 

(1,447

)

 

 

389

 

Decrease in cash, cash equivalents and restricted cash

 

(7,428

)

 

 

(39,312

)

Cash, cash equivalents and restricted cash at beginning of period

 

143,619

 

 

 

206,726

 

Cash, cash equivalents and restricted cash at end of period

$

136,191

 

 

$

167,414

 

GANNETT CO., INC.

SEGMENT INFORMATION

(Unaudited)

Table No. 4

Three months ended September 30,

In thousands

 

2022

 

 

 

2021

 

Operating revenues:

 

 

 

Gannett Media

$

633,006

 

 

$

715,807

 

Digital Marketing Solutions

 

120,049

 

 

 

116,771

 

Corporate and Other

 

1,328

 

 

 

1,649

 

Intersegment eliminations

 

(36,481

)

 

 

(34,042

)

Total

$

717,902

 

 

$

800,185

 

 

 

 

 

Adjusted EBITDA:

 

 

 

Gannett Media

$

46,023

 

 

$

101,001

 

Digital Marketing Solutions

 

15,690

 

 

 

15,024

 

Corporate and Other

 

(9,804

)

 

 

(13,958

)

Total

$

51,909

 

 

$

102,067

 

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.

Contacts

For investor inquiries:
Trisha Gosser

Investor Relations

703-854-3000

investors@gannett.com

For media inquiries:
Lark-Marie Anton

Corporate Communications

646-906-4087

lark@gannett.com

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