Gannett Announces Third Quarter 2022 Results

MCLEAN, Va.–(BUSINESS WIRE)–Gannett Co., Inc. (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.

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.