MCLEAN, Va.–(BUSINESS WIRE)–Gannett Co., Inc. (NYSE: GCI) today reported its financial results for the second quarter ended June 30, 2022.
“Our second quarter results and updated full year outlook reflect industry-wide headwinds in digital advertising as well as rising costs and pressures on consumers which are impacting our near-term performance. During the quarter we experienced a rapidly tightening macroeconomic environment caused by rising inflation coupled with distribution labor shortages and price sensitive consumers which has affected our traditional print business. Despite these challenges, our investments in our key operating pillars are yielding impressive results. We continue to experience considerable progress in our digital transformation and finished the quarter with 1.87 million digital paid subscribers, growing 35% year-over-year. In addition, our Digital Marketing Solutions business generated its highest quarter of core platform revenue of $116 million, and its highest quarter of core platform customers of over 16 thousand, while maintaining double-digit Adjusted EBITDA margins,” said Michael Reed, Gannett Chairman and Chief Executive Officer.
“Our revised guidance reflects our outlook based on current economic conditions. We are not satisfied with our overall performance in the second quarter and have quickly responded to this rapidly deteriorating economic environment by implementing a significant cost reduction program that we believe will better position the Company to realize its long-term growth goals, with a lower and more variable cost structure. The changes and reductions to our cost structure are focused primarily on our legacy print business.”
“Along with strategic reductions to our cost structure, we have identified additional non-strategic and real estate assets to bring to market. We remain focused on repaying $150 million to $200 million of debt in 2022.”
“While the current operating environment is challenging, we believe we can achieve our longer-term transformational digital growth goals. This current downturn is pulling forward print revenue losses anticipated in future periods, and more quickly requiring changes to our operations and cost structure which we believe will benefit us over time.”
“We believe our subscription-led business model, robust balance sheet, and experienced management team put us in a solid position to weather this economic downturn and deliver long-term value to shareholders.”
Second Quarter 2022 Financial Highlights:
- Total revenues of $748.7 million decreased 6.9% compared to the second quarter of 2021
- Same store revenues(1) decreased 6.3% compared to the second quarter of 2021
- Total digital revenues were $261.8 million or 35% of total revenues, up 1.5% over the same period in the prior year on a same store(1) basis
- Net loss attributable to Gannett of $53.7 million, a margin loss of 7.2%
- Adjusted net loss attributable to Gannett(1) of $26.9 million
- Adjusted EBITDA(1) totaled $50.9 million, a decrease of 56.1% compared to the second quarter of 2021, with declines driven by legacy print revenue declines and inflationary pressures on labor, newsprint, distribution and fuel costs
- Adjusted EBITDA margin(1) of 6.8%
- Cash used for operating activities of $30.7 million
- Free cash flow(1) usage of $43.3 million, impacted by $34.4 million of cash interest, including the first interest payment on the 2026 Senior Notes, which is payable every six months on an ongoing basis
Additional Business Highlights:
- Digital-only paid subscribers of 1.87 million at the end of the second quarter of 2022, up 35% compared to same period in the prior year
- Digital-only circulation revenues of $32.5 million grew 35.3% year-over-year and increased 36.7% year-over-year on a same store basis(1)
- 165 million average monthly unique visitors in the second quarter of 2022 with 126 million average monthly unique visitors coming from our USA TODAY NETWORK (based on June 2022 Comscore Media Metrix®) and 39 million average monthly unique visitors resulting from our U.K. digital properties
- Digital Marketing Solutions segment revenues were $118.0 million, and on a same store basis(1) increased 8.2% in the second quarter of 2022 compared to the same period in the prior year
- Total core platform revenues(2) experienced a record high of $116.4 million in the second quarter of 2022, up 11.2% compared to the same quarter in the prior year
- Total core platform customers of 16,200 in the second quarter of 2022 was the highest customer count since core system integration and increased 6.2% compared to the second quarter of 2021
- Average revenue per user was $2,393 in the second quarter of 2022, increasing 4.8% compared to the second quarter of 2021
- Net income attributable to Gannett was $4.3 million in the second quarter and Net income attributable to Gannett margin within the segment was 3.6% in the second quarter of 2022 versus 4.5% in the same quarter of the prior year
- Adjusted EBITDA(1) within the segment was $14.3 million in the second quarter of 2022, increasing 14.2% compared to the same period in the prior year
- Adjusted EBITDA margin(1) within the segment increased to 12.1% in the second quarter of 2022 versus 11.4% in the same quarter of the prior year
- Total principal amount of debt outstanding as of June 30, 2022 was $1.344 billion and comprised of $855.2 million in first lien debt, which resulted in a First Lien Net Leverage(3) of 2.31x
- During the second quarter of 2022, the Company repaid $26.9 million of debt using the proceeds from real estate and other asset sales totaling $11.8 million and its scheduled quarterly amortization of $15.1 million
- The Company repurchased 800 thousand shares of common stock under the stock repurchase program for approximately $3.1 million, excluding commissions, during the second quarter
- As of June 30, 2022, the Company had cash and cash equivalents of $87.3 million
| (1) |
See “Use of Non-GAAP Information” below for information about this non-GAAP measure. |
|
| (2) |
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. |
|
| (3) |
As of June 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 Q2 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. |
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Financial Highlights
|
in thousands |
Second Quarter |
||
|
Revenues |
$ |
748,660 |
|
|
Net loss attributable to Gannett |
|
(53,688 |
) |
|
Adjusted EBITDA(4) (non-GAAP) |
|
50,851 |
|
|
Adjusted Net loss attributable to Gannett(4) (non-GAAP) |
|
(26,937 |
) |
|
Cash used for operating activities |
|
(30,741 |
) |
|
Free cash flow(4) (non-GAAP) |
|
(43,269 |
) |
|
(4) |
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
Based on current economic conditions, the Company is revising 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(5)(6) 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(5)(6)(7) (non-GAAP) |
$0 to $20M |
|
Adjusted EBITDA(5)(6) (non-GAAP) |
$270M to $300M |
|
Ending Digital-only subscribers |
2.0M to 2.2M |
|
(5) |
Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA, Adjusted Net income (loss) attributable to Gannett, Same-store total revenues, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure. |
|
|
(6) |
Refer to “Business Outlook” on Tables 11, 12 and 13 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures. |
|
|
(7) |
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 $60 million to $70 million in 2022. |
|
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.
